Gig economy in the spotlight: Time to review your employment practices?

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Employment rights are a high priority for many company leaders – but do finance directors and others taking the lead around employment practices need to work harder to stay ahead of the shifting dynamics in this space?

This week the government was again pressed by the Law Society to rethink how it enforces employment rights after a slump in tribunal cases.

The professional body argued that the government needs improved powers to decide whether ‘gig economy’ companies are wrongly denying workers their rights. Its argument rests on a wealth of recent evidence that the tribunal system is not working.

The organisation has submitted its proposals to Matthew Taylor, the man tasked by Theresa May to conduct an independent review of whether the law is keeping pace with the changing world of work.

“If workers cannot access the rights parliament has given them then it is questionable whether these rights truly exist,” the Law Society argues in its submission to the now-overdue Taylor review.

So what should FDs look to address?

If the basic concern is that some employers treat staff like employees but classify them as self-employed, allowing them to avoid employers’ tax and the minimum wage, under that headline is lots more nuance to unpick.

One issue with tribunals is the fee that since 2013 has attached to bringing a case. The government has concluded the fee isn’t a block, but the number of employment tribunals is still down by 70% in four years.

The tribunal process can also take years, the Law Society notes.

Alongside the growth of the ‘gig economy’ through the employment practices of the likes of Uber and Deliveroo, FDs active in different sectors need to understand what’s driving the employment status of all staff and contractors in their space.

Alongside any proactive moves by companies, the Law Society has called for the Gangmasters and Labour Abuse Authority (GLAA) to be given the responsibility to investigate whether individual companies or sectors are acting correctly.

Under the proposal, if a company or sector disagreed with a GLAA determination they could challenge it in a tribunal. The GLAA would also be able to force the company to abide by the tribunal’s decision – using the threat of unlimited fines or even a two-year custodial sentence. The Law Society has also called for tribunal fees to be abolished.

“Where there is a dispute, our law relies on individuals taking their employer to court … [That’s] a task that is simply beyond most people,” said Robert Bourns, the Law Society’s president. “An independent government inspector who can go into a business to ensure staff are being given their proper workplace rights will . . . put everyone on a fair and even playing field.”

A think-tank called the Social Market Foundation (SMF) has also proposed big policy changes in its submission to Taylor.

The SMF argues that employers are incentivised to misclassify workers as independent because they have to pay less tax when contracting with a self-employed person than when employing someone directly.

The SMF has suggested this could be alleviated through the introduction of “hirers’ national insurance contributions”. This charge on those who hire contractors would start low, at 2%, but gradually increase until the contributions are equal to “employers’ national insurance contributions” of 13.8%.

All in all, and ahead of the Taylor Review being published and its recommendations picked up by government, it looks like FDs have a window of opportunity to act and ensure the company’s employment practices are beyond reproach.

About Christian Annesley

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22nd Jun 2017 13:47

"One issue with tribunals is the fee that since 2013 has attached to bringing a case. The government has concluded the fee isn’t a block"

LMAO. Its the main reason! They are now very expensive for employees to undertake. Only very wealthy employees are likely to take the risk, when previously it was "worth a punt" as the cost was small and the downside risk small.

Stepped NI sounds horrific in practice and is likely to lead to employers "hiring and firing" to instability for low skilled workers. Very bad idea.

What is needed is for HMRC to have some cash in their pocket and the motivation to go and enforce existing laws.

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By Eric T
23rd Jun 2017 09:17

Isn't that what the changes made in 2013 were supposed to achieve? The argument back then was that there were too many "trivial" cases being brought before the Tribunal.

Now that the policy is working - they are trying to deny its success.

I'm not talking about whether it is the correct policy, of course. As the article says, the denial of access to justice means that justice itself is denied.

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By Oppco
23rd Jun 2017 10:53

the second paragraph gave me a chuckle; lawyers worried about their fees ....

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23rd Jun 2017 11:15

Since the advent of fees a lot of cases are dealt with at mediation by ACAS, which was part of what the fee was all about, as tribunals were dealing with cases that could easily have been settled out of court.
Next problem is that HMRC should not be allowed to get involved with employment status. It is not a tax issue. It is a market force issue. That's why IR35 didn't, doesn't and will never work.

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By RogerMT
23rd Jun 2017 12:16

The gig economy is symptomatic of the UK's race to the bottom, post Brexit, as we strive to become a European Philippines.
And how is it that your average Uber driver or similar is determined against his/her will to be "self employed", where they plainly are not, and their "employers" get away with it, while contractors who have far more SE badges are in a permanent state of worry over the dreaded IR35?
This country isn't going to the dogs, it's already chasing its tail with a daft grin on its face.

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to RogerMT
23rd Jun 2017 12:47

I don't think it's a case of a "race to the bottom", Roger, more of an awareness of Employers not being able to afford employers NI, AE, RTI etc. etc. With a lot of the money going into the EU coffers so that some countries can have loan after loan after loan.
If Gordon Brown had kept his nose out of "employment status" we wouldn't be in this mess. Perhaps we should send him back to India to claim a percentage of the rise in gold prices since he sold it to them.

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By RogerMT
to johnjenkins
23rd Jun 2017 13:06

I sense this may get political, and this isn't the place...ok, I started it! You can't deny that the booming gig economy, loaded as it is with injustice for the "little man" is certainly a sign of things getting worse for those at the bottom.
And I simply do not understand how Uber and their grubby like can get away with claiming their workers are self-employed when they plainly are not. No sympathy for the "employer" in those circumstances, at all.

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to RogerMT
23rd Jun 2017 13:32

RogerMT wrote:

I sense this may get political, and this isn't the place...ok, I started it! You can't deny that the booming gig economy, loaded as it is with injustice for the "little man" is certainly a sign of things getting worse for those at the bottom.
And I simply do not understand how Uber and their grubby like can get away with claiming their workers are self-employed when they plainly are not. No sympathy for the "employer" in those circumstances, at all.

This is happening all over the world, not just the UK, so blamingit on Brexit (when we only voted 1 year ago today) seems to be...reaching a bit.

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to RogerMT
23rd Jun 2017 14:00

Roger, I really understand where you're coming from, but the "employment status" of working surely is between the work giver and the worker not HMRC.
There is no law governing self-employed, only guidlines which have been interpreted over the years by tribunal.
Ask customers how they rate the service Uber give and if it's value for money?
IR35? Taking away Limited Company status just so HMRC get more money.

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to RogerMT
23rd Jun 2017 14:15

Roger:

Surreal, but I met one of my clients earlier today. She is a contract pharmacist classed as self-employed. (Government are presently trying to saddle contract pharmacist with IR35, for the record).

The pharmacy at which she has worked for some years has been sold and the new owner (A noted local venal barsteward!) immediately tried to reduce her hourly rate by £3/hour!

Nice gesture!

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to Michael C Feltham
23rd Jun 2017 14:30

Michael, he wouldn't have got away with it if your client was a plasterer.

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23rd Jun 2017 13:13

Forgive me, but I suspect the Law Society's motivation is given away in the first sentence. A slump in cases means less fee income for lawyers. I would agree with others who comment that that the answer is to step up enforcement of current legislation. Employers who abuse employees are breaking the law and it is incumbent in Regulatory Agencies to put a stop to it. To be honest, my anecodotal impression is that employers are now much more aware of their responsibilities and the "slump" reflects this.

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23rd Jun 2017 13:24

The original vision of Employment Tribunals was a sort of "Peoples" facility, where aggrieved and unfairly treated employees could have access to an equitable platform to try and right wrongs.

As is invariably the case, the process was hijacked by the venal legal profession and became hugely adversarial. Identical, in fact to the much missed IR Tribunals, where lay people comprised the tribunal.

Lord Wolf's "Access to Justice" were intended to provide precisely what the title stated.

http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2230.1996.tb02694.x/pdf

As is the UK way, both the Industrial Court and Civil Court simply became a Tom Tiddler's ground for the legal profession.

I fought an appeal in the Industrial Court for clients quite a few years ago: the employer retained a QC and the "Tribunal" comprised just two (Tribune means three).

The chair of the "Tribunal" was a high court judge......

I fought a lower tier Tax Tribunal (VAT) for a client a few years ago: precisely the same.

My own defined cynical perspective of UK Law is now, "A process where the well-heeled villain can gain victory over the little guy when they are happy to spend significant sums of money."

Since Thatcher, Government, whatever its supposed political stripe, has driven down the employed to the level of simple ciphers.

Most interestingly, prior to the hearing, I had sought advice from one Cherie Booth, an employment law specialist barrister (Then in Sir Gordon Borrie's chambers) when BLiar was in opposition; and Cherie stated "When we are in power we're going to change all this!"

And, naturally, NuLab didn't...

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to Michael C Feltham
23rd Jun 2017 14:12

I wonder if Cherie got her knowledge from her dad's debates with Alf Garnet.

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to johnjenkins
23rd Jun 2017 16:37

When I met her in chambers, John (1996) she was a wholly different person. Petite, feminine and slim.

Undoubtedly, Cherie was the brains behind BLiar; he was simply a vaunting ego attached to a motormouth with delusion of competence.

I doubt Cherie's obvious ability came from Tony (Booth).

Unless it was about bottles containing alcoholic liquids!

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to Michael C Feltham
26th Jun 2017 11:01

Can you imagine being a fly on the wall when he said to her he was going into Iraq?

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26th Jun 2017 10:47

so one way forward would be to ban lawyers from a low level tribunal. Just as they are from tax tribunals.

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to pauljohnston
26th Jun 2017 13:43

I'd probably ban accountants as well!! Any profession that has a separate language that's totally incomprehensible to the lay man (lawyers, accountants etc) is normally trying to boost their fee income rather than obtain "justice" for their client...

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By Eric T
to rememberscarborough
26th Jun 2017 14:02

rememberscarborough wrote:

I'd probably ban accountants as well!! Any profession that has a separate language that's totally incomprehensible to the lay man (lawyers, accountants etc) is normally trying to boost their fee income rather than obtain "justice" for their client...

I think HMRC is working on that principle as well. What good are accountants really?

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to Eric T
26th Jun 2017 14:14

Eric, we are very good at debating crap on this site. Seriously if you want to see how good Accountants really are then you should go to the Practice Excellence awards.

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By Eric T
to johnjenkins
26th Jun 2017 14:33

I was being tongue in cheek. My comment was in reference to HMRC's apparent move in the direction of trying to exclude accountants from the submission process - which seems to me to be what they want under Making Tax Digital.

As a practising accountant, I'm very much aware of what skills we can bring to our clients.

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By Eric T
to johnjenkins
26th Jun 2017 14:35

Double post in error.

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to johnjenkins
26th Jun 2017 15:34

I did pick up on that, Eric.
However I do agree that HMRC want rid of us.

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26th Jun 2017 11:06

'the basic concern is that some employers treat staff like employees but classify them as self-employed, allowing them to avoid employers’ tax and the minimum wage'

Yes, i think there is going to be a lot more of this, there could even be more zero hours contracts.

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to AndrewV12
26th Jun 2017 11:23

Do you expect anything different when employers are forced to pay a tax on employing people (ers nic) and HAVE to pay into a pension scheme.
As you say, Andrew there will be a lot more of this.
A couple of my clients have stopped employing people and are just working on a commission basis by passing work on.

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to johnjenkins
27th Jun 2017 11:39

Or if a large enough employer, shift the whole process to such as Manpower; with much reduced benefits.

Then the whole contract cost can be offset against revenue...

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to Michael C Feltham
27th Jun 2017 12:10

The building industry already do this, although HMRC are trying to crack down on it. It will be interesting to see what HMRC do about Uber and Deliveroo. I can actually see a partial collapse of the PAYE system.

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