The increase in ‘on demand’ relationships between commercial enterprises and individuals wanting to provide their labour in an informal and flexible way for short-term engagement opportunities poses a significant challenge to employment legislation and Her Majesty’s Revenue & Customs (HMRC).
The emergence of the so called “gig economy” defies traditional definitions of labour relationships as it is based largely around the use of technology platforms, often the mobile phone, to connect suppliers and users.
Prime examples are Uber, Airbnb and City Couriers.
If these engagements can be defined as employer/employee relationships, then current employment and taxation legislation will apply with the inevitable result of increased cost to commercial enterprises and increased protection for those supplying labour. The potential loss of revenue and absence of protection is leading to greater scrutiny of worker relationships in the ‘gig economy’ and in more traditional industries such as logistics, transport and construction where there is a practice of treating labour suppliers as self-employed.
Both Uber and City Couriers have been the subject of successful legal challenges to the self-employed status brought by labourers. There also appears to be an increase in the number of HMRC investigations conducted into employment status. The current uncertainty around a precise definition of “employee” that can be universally adopted by the legislature, commercial enterprises and individuals is certainly a cause for concern. Currently, UK law recognises three broad categories of labour provision; ‘employee’, ‘self-employed’ and ‘worker’ each carrying different rights and obligations
It appears that nowadays one approach that may be adopted by the courts to deal with thorny relationships that defy easy definition is to say, ‘you know it when you see it.’ Arguably such an approach inevitably leads to an increase in cases to determine employment status coming before the courts.
Historically, the courts have endorsed a list of questions, the answers to which assisted in determining whether the person or persons undertaking activities for a business was an employee, a worker or alternatively in business on their own account.
By way of example could an individual send someone else in their place to carry out the work instead of doing it themselves, were they entitled to paid holiday, did they have an opportunity to make a profit or run the risk of making a loss in carrying out the work, and could they turn the work down if it was given or were they legally obliged to do it? The answers to these questions were very often indicative of the type of relationship that existed. It appears that the weight given to these indicators by the courts has lessened if recent decisions are anything to go by. In the meantime, business owners should take heed, the label that the parties attach to the labour supply relationship will carry far less certainty without careful navigation through a number of signposts.
If you engage any labour on a self-employed basis and would like assistance in reviewing your current contractual relationships, contact a member of the team at FG Solicitors on 01604 871143.