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Taylor Review turns the spotlight on the gig economy

  1. gig economy
    Francois Badenhorst

    Francois Badenhorst Business Editor, UKBF & AWEB Staff Member

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    The government’s response to the Taylor Review of modern working practices will shake-up the UK's future labour market.

    The Taylor Review was an inquiry into the issues and consequences of flexible working – the so-called gig economy – on Britain’s workers. The review culminated in a report entitled ‘Good Work’, which made 53 recommendations.

    The government has accepted all but one of these recommendations in its response. The rejected proposal being a rehash of the Chancellor’s swiftly abandoned plan to reduce the difference between the National Insurance contributions of employees and the self-employed.

    Changes afoot

    But self-employment remains under the microscope. The government wrote in its response that “It should be easier for individuals and businesses to determine whether someone is an employee, a worker, or self-employed” and it “is committed to improving clarity and certainty in this area”.

    The government announced it will now consult on the best way to offer clarity on classifying employment status. Specifically, the Taylor Review is centred on a clearer definition of who is and isn’t self-employed since that’s where the heart of the gig economy labour dispute lies.

    Of course, the confusion over employment status isn’t new. “This confusion has existed for a hundred bloody years,” as RSM’s head of employer tax Bill Longe explains. But the gig economy has added a sense of urgency to this old dilemma.

    The gig economy has spurred the number of self-employed workers in the UK, who now number around five million people. Platforms like Deliveroo, Uber and DPD ran under a model where ostensibly self-employed people use their technology to do jobs.

    Since these people are ‘self-employed’, these gig economy firms say they don’t have to offer benefits: no holiday pay, minimum wage,  or sick leave. It didn’t take long for this to spiral into numerous labour disputes as gig economy workers argued they were, in fact, employed (and therefore entitled to employment rights).

    The Taylor Review’s solution was to alter the third employment category of worker, changing it to ‘dependent contractor’. As the Good Work report states: “Government should retain the current three-tier approach to employment status as it remains relevant in the modern labour market, but rename as ‘dependent contractors’ the category of people who are eligible for worker rights but who are not employees.”

    What’s your status?

    The emphasis is to demarcate clear boundaries between the three employment categories. That means a new test will have to be developed for dependent contractors. The government is consulting on it but they have said: “In developing the test for the new ‘dependent contractor’ status, control should be of greater importance, with less emphasis placed on the requirement to perform work personally.”

    The worry is that in its attempt to tackle “false self-employment”, as the Taylor Review terms it, this new test will make it tougher for those who are genuinely and happily self-employed. “Effectively, to not be an employee or a worker, to be considered self-employed, you’d have to pass this statutory test,” says Alastair Kendrick, an employment tax adviser.

    “If you look at the stats, there’s massive growth in the number of self-employed people. This test is effectively to curb that number back and put it back into proportion.”

    It’s an assertion that RSM’s Longe backs. “If you remember the Chancellor’s plan to increase the NI paid by the self-employed, for which he was firmly put back and the measure was dropped before the election,” says Longe.

    “They do say in that booklet they’ve got no intention to change the way the self-employed are taxed; what they don’t say is whether the dependent contractor would be taxed in the same way as an employee. They are perhaps trying to get to the same result they tried to reach a few years ago, but doing so in a slightly different way.

    As Kendrick points out, the Chancellor’s attempted land grab in 2016 only succeeded in encouraging the formation of private service companies. “We had people anticipating going back on payroll being encouraged by agencies and third parties to set up limited companies,” he said.

    “Unless they squeeze that with the same test they have in the public sector, people will just go that route. It’s like a pincer effect. Otherwise when you try and squeeze people into employment, they’ll find some other route that’s attractive to them or their agency.”

    The impact on the bottom line

    The new dependent contractor comes with another big consideration: cost. “While there may be benefits in terms of greater clarity, these changes will inevitably result in increased costs and an increase in administrative burdens, despite government assurances to the contrary,” says Longe.

    The fact is if a self-employed person is reclassified as a dependent contractor, the cost of engaging the person is increased. “That’s going to be an add-on cost that you’ll need to factor into your finance model,” Kendrick says.

    “If I’m forced to take these people on as employees because of the status test, I’ve got to pay them their employment rights and I’ve also got to pay employers NI at 13.8%. That’s an add-on cost at or around 25% of their current base. And that’s a conservative 25%.”


    ÜZEYİR UKBF Newcomer Free Member

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    thank you
    Posted: Jan 25, 2019 By: ÜZEYİR Member since: Jan 25, 2019