Employers Undermining Social Welfare to Line Their Own Pockets

A Deliveroo driver treks into a construction site. Those working for Deliveroo and other gig economy companies like Uber and Amazon should be classified as workers, says a report by the Work and Pensions Committee.
jon crel/flickr (creative commons)

A May 2017 report by the Work and Pensions Select Committee of the House of Commons highlighted the dishonest practice by some employers of relying on “self-employed” workers as a way to save money and undermine workers rights. Many of these workers do not contract with businesses in the way that most would think of as self-employed — they neither fulfil discreet contracts nor do they have autonomy over the work they carry out nor choice in the way it is carried out. In other words, they do not resemble what most would think of as “self-employed” workers. This not only undermines workers, but it also undermines the tax base and the whole basis of the welfare state. The Committee concluded that many working in the “gig economy” should be classified as workers rather than self-employed, given the nature of the work they do and their relationships with major corporations like Amazon, Uber, Hermes and Deliveroo.

As Frank Field, Chair of the Committee put it:

Companies in the gig economy are freeriding on the welfare state, avoiding all their responsibilities to profit from this bogus ‘self-employed’ designation while ordinary taxpayers pick up the tab. This inquiry has convinced me of the need to offer “worker” status to the drivers who work with those companies as the default option. This status would be a much fairer reflection of the work they undertake which seems to fall between what most of us would think of as ‘self-employed’ or ’employed’.

The committee further points out in its report that “flexible employment is not contingent on self-employed status,” since it is a fact that many employees undertake work on a flexible basis.

The committee suggests that companies are in effect “propagating a myth of self-employment” that would not hold up in court. However, current practice puts the onus on the worker to prove this. The committee suggests that instead, those working for such companies should be hired by default as workers, and the burden of proof to demonstrate self-employment should be on the company.

The current arrangement, while it saves both workers and the businesses that employ them money, deprives workers of rights, benefits, and a safety net, and undermines government revenues by eliminating contributions that would be made by these companies if those working for them were classified as workers or employees (as well as the NI contributions that would otherwise be made through PAYE).

The IFS has estimated recently, drawing on OBR (Office for Budgetary Responsibility) data, that the burgeoning number of self-employed is set to cost around £3.5bn per year by 2020.

Designating gig economy worker as workers would help to reduce the numbers of those who are forced to register as self-employed by companies such as Uber, charging drivers for sickness cover. The alternative is to allow employers to undermine social welfare and abuse the rules to capture more corporate welfare for themselves.

To read the full report by the committee click here: https://www.parliament.uk/business/committees/committees-a-z/commons-select/work-and-pensions-committee/news-parliament-2015/gig-economy-report-published-16-17/