More than a year after the Taylor Review promised to make gig economy work fairer, has anything changed for the UK’s growing army of freelancers, contractors and the self-employed?
Over the past few years, stories about poor working conditions and unethical practices at some of the country’s biggest companies have become a staple of newspapers’ business pages. From underpaid agency workers at a Sports Direct warehouse to Uber fighting (and losing) a legal battle over whether to treat its drivers as workers with a right to holiday pay and other benefits, the cases have been mounting up.
Employment tribunals have also taken a close look at conditions at firms like Addison Lee, Deliveroo and Hermes and often found them wanting. These companies and their workers are at the heart of the ‘gig economy’, in which jobs are on offer for those willing to accept few rights, with work generally paid on a piece rate and allocated via an app.
To its advocates, such flexible conditions are one of the UK economy’s key strengths, keeping unemployment low while enabling companies to be agile and workers to gain autonomy. But clearly some people are losing out and the benefits are not always fairly distributed. The ranks of the self-employed in the UK is steadily swelling, from 3.3 million people in 2001 to 4.8 million in 2017. But these people have less job security, save less for old age and tend to earn less while they are working – the most common income for self-employed people is around £240 a week, against £400 a week for their employed counterparts, according to the Office for National Statistics (ONS).
In an effort to make sense of where the country’s jobs market was heading, and what ought to be done about it, the government asked Matthew Taylor, the current chief executive of Royal Society of Arts (RSA), to conduct a review into this area in October 2016. After a cross-country roadshow to gather evidence, his report was published in July 2017, advocating a new emphasis on the quality of work rather than just the quantity.
His report – Good work: The Taylor Review of Modern Working Practices – included a string of 53 recommendations about workers and their rights. Among them was a call for greater clarity to decide whether someone should be considered an employee, a worker or self-employed; the creation of a new category of “dependent contractors” who would be eligible for workers’ rights; more consistent taxation of the employed and self-employed; higher minimum wages and other benefits for those on zero-hours contracts.
But, more than a year on from the report being published, has anything much changed for freelancers and others trying to work in the gig economy?
The initial reaction from some corners was less than positive. The Independent Workers’ Union of Great Britain (IWGB), which represents predominantly low-paid migrant workers, workers in the “gig economy” and others, expressed its “profound dismay” with the report and dismissed many of the recommendations as bland and devoid of substance and detail. It argued there was no need for a new status of worker, merely that existing rights needed to be properly enforced.
Others were more generous. Charlotte Zealley, research analyst at the Institute for Employment Studies (IES) said the review “successfully balanced the interests of employers, employees, and the self-employed” and added that “The recommendations acknowledged the benefits of self-employment while also emphasising the need to introduce policy changes to reduce false self-employment.”
One problem is that the Taylor Review’s many recommendations were only ever advisory and the government was under no obligation to implement any of them. Even so, it took its time to draw up a formal response, releasing it in February this year, some seven months after the report was published.
Under its Good Work Plan, the government said it accepted the aim for work to be fair and decent and set out some measures it said would move things in that direction. It backed the idea of making it easier for individuals and businesses to figure out whether someone was an employee, a worker or self-employed. It also promised action to improve transparency for agency workers’ pay and to add greater clarity and fairness to contracts.
Taylor, a former head of the Number 10 Policy Unit under Tony Blair, initially welcomed the government’s response, describing it as “comprehensive and substantive” and welcomed the “specific commitments to improve the protections and rights of workers” while also warning “there is more work to be done to encourage the government to be bold in living up to its commitment to good work for all.”
Since then, he appears to have reconsidered his position, telling a British Chambers of Commerce conference in March this year that “In terms of my review, I would give the government four out of 10 on their response so far.”
Some observers claim to have detected some positive changes in working conditions since the report was published. Jordan Marshall, policy development manager at the Association of Independent Professionals and the Self-Employed (IPSE), says there has been “a much greater focus on the quality of work across the economy” although he acknowledges “There still does remain a great deal of uncertainty around employment status. We continue to see tribunal cases coming before the courts with predictable regularity.”
There are certainly examples of better working conditions at some companies that optimists can to point to, with the likes of Deliveroo and Uber offering their riders and drivers insurance coverage for example. But it’s not clear that positive change has come about as a consequence of the Taylor Review, the government’s response, the accumulated weight of all those employment tribunal judgements or other reasons.
For some the most fundamental problem has not changed, which is less to do with how people are hired and more about how companies treat those people. “There is a running theme underlying such [tribunal] cases,” says Julia Kermode, chief executive of the Freelancer and Contractor Services Association (FCSA). “Whilst employment status is complex, the problem doesn’t lie in how people are engaged, the problem lies in how they are treated. There is nothing wrong with engaging a self-employed workforce, providing that the workers are treated appropriately and not exploited.”
A less generous view of the government’s response is that it has been keen to kick tricky problems down the road and avoid taking any decisions which might cost it more money. Widespread calls to abolish fees for employment tribunals, for example, have been ignored. And despite waiting six months to officially respond, the government’s answer still included proposals for a series of further consultations on areas such as employment rights, taxation and agency workers.
Those consultations could yet lead to some more substantive changes, such as ensuring everyone who is entitled to it receives holiday pay, that everyone receives a statement of key facts when they start a job and full transparency around how pay is calculated. “There could be any number of changes imminent that aim to improve awareness,” says Kermode. “We could see lots of changes being implemented with the aim of preventing people from being exploited.”
Against all those positive moves, however, is the risk of one less welcome reform. In April 2017, the government introduced a rule that put the onus on public sector employers to determine whether they had to deduct tax and national insurance contributions at the source for anyone they hired. This change – usually referred to as IR35 – has had a detrimental impact.
Transport for London, for example, reported in October 2017 that “a significant number of critical weld project employees left TfL as a result of IR35” and that, as a result, at least one project was delayed by several months. A study earlier this year by IPSE and the Chartered Institute of Personnel and Development (CIPD) found that 51% of public sector hiring managers had lost skilled contractors because of the IR35 regulations, 71% were struggling to hold on to their contractors and 75% found it harder to recruit new contractors.
“The changes to IR35 in the public sector have been nothing short of disastrous,” says Marshall. “They have led to skills shortages in the NHS and other government departments. Contractors are choosing to leave the public sector after being forced to pay tax like employees but with no employment rights.”
Despite all this, the government has proposed extending the IR35 rule to the private sector and seems disinclined to listen to those arguing against that. “I am deeply concerned about the potential impact of rolling out the change to the private sector,” says Kermode.
The doomsday scenario is that the extension of IR35 will undermine Britain’s flexible labour market, increase employment costs, reduce tax receipts by delaying major projects and make it harder for contractors to secure work. “Any move for a private sector roll-out of IR35 will serve to unsettle the UK economy and the many hard-working, genuine self-employed freelancers and contractors,” adds Kermode.
Whether or not the government pushes ahead with the IR35 rollout, the wider issues are likely to remain around the growing number of people with non-traditional forms of employment, whether as contractors, workers or some other as-yet-undefined category. But whether there is a need for wholesale changes to cope with this is itself still a matter of debate. Commentators as diverse as the IWGB and The Economist have said many of the problems around exploitation in the labour market could be solved by enforcing existing laws properly rather than introducing wholesale reforms.
“Regulating the gig economy out of existence will help nobody in the long run,” says Marshall.