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‘Exploitation’ of gig economy workers hitting pensions by £182m

New legislation was proposed today to crackdown on companies using the excuse of self-employed status to avoid providing workers with basic rights and benefits.

The law must change to end the “mass exploitation” of workers by companies who use bogus self-employment to avoid granting basic rights like holiday pay and the minimum wage, MPs have said. In a draft bill published on Monday the Work and Pensions select committee and the Business, Energy and Industrial Strategy (BEIS) committee said personnel should be considered workers by default, with the onus on the companies using their services to prove otherwise.

A joint report from the two House of Commons select committees argues giving employees presumed ‘worker by default’ status would help ensure firms are not exploiting staff for cheap labour. This would require them to prove their workers are self-employed, reducing the number of staff enduring the “unacceptable burden” of expensive and risky court cases to obtain their rights.

In addition, estimates by NOW: Pensions reveal the new legislation could require employers to provide £182m in contributions to workers’ pension pots every year from April 2019.

The Work and Pensions, and Business, Energy and Industrial Strategy committees’ report also calls for a loophole allowing agency workers to be paid less than permanent employees to be closed.

In addition, the government should rule out introducing any legislation that would undermine the national minimum wage, with the committees arguing those on zero-hour contracts should be paid more. Enforcement bodies would be given the power to issue fines for noncompliance under the proposals, inspecting labour practices more frequently, and ensuring the risks of being caught outweigh the potential gains.

The proposals come as gig economy firms face a series of legal battles over how they treat those that work for them. Earlier this month, Uber lost its appeal againsta landmark ruling ordering it to treat its drivers as workers. The company has vowed to launch a further appeal, insisting its drivers are self-employed and that they appreciate the flexibility that the status affords them. Last week, takeaway service Deliveroo won a case at the Central Arbitration Committee, which ruled that the food delivery app's couriers are self-employed, rather than workers. The CAC said it made the decision because Deliveroo’s riders have the right to put forward a substitute to do their work in place of them.

Employment lawyers delivered a mixed reaction to the draft bill put forward on Monday. Crowley Woodford, an employment partner at Ashurst said that, if enacted, the proposals would “take a major step towards destroying the flexibility currently enjoyed by the gig economy”. The current self-employed model would not survive, he said.


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