Self-Employment and the gig Economy: A Paradigm Shift?

27th February 2017

Simon Pitkeathley

A summary of the contribution to Rachel Reeves’ ‘Working it Out’.


The gig economy be empowering for start-up companies who benefit from a fairer playing field, at the same time as creating a less secure working environment for the self-employed. It must therefore foster the security that workers value, for the benefits to be felt by all.

A start-up’s success and growth is constrained by team size and location. Extra staff members are expensive and risky at an early stage, and generous salaries are needed to attract professionals away from the more established firms. Full time employees bring with them requirements for paid holiday, tax obligations and paid sick leave.

The gig economy offers an opportunity to take on more staff without the expense and risk of hiring full-timers. It introduces a company to a wider pool of talent that isn’t restricted by international borders, and when revenue is less steady, a start-up can pay for work only as and when it is needed. On the flip side, businesses may find it more difficult to manage performance and workers can feel detached from the business and its goals.37 CHS Working in Hub 007

The real issue is the difference in how a worker’s status might be interpreted. Are they self-employed, or employed by the business?

Resultant court cases could be fatal for a young business. The confusion may lead to accusations of false categorisation for tax purposes. And the effect on reputation could be disastrous (Uber’s case on this matter had them painted as greedy and exploitative).

Yes, businesses may exploit the gig economy for their own gain. But it could also be easy to misinterpret the status of workers, and the results could be disastrous for small businesses.

The gig economy represents a general trend towards making work less secure for self-employed individuals. It is synonymous with tying people to zero-hour contracts, a lack of collective bargaining power and increased competition for more secure jobs. Therefore, as the gig economy develops, the rights of workers must be reinforced and the relationship with their employer should not be depersonalised.

We have an opportunity to develop a new paradigm – robust policies that protect both the business and the individual. A Hamilton Project think tank in the US suggests a new classification of the ‘independent worker’. They are distinguished from full time employees due to a lack of dependence on the company, and from independent contractors due to their lack of collective bargaining over compensation.

The Government should bring forward a range of options for consultation with the business community. A package of ‘Flexibility Contract’ policies can combine worker security with economic dynamism, giving both companies and individuals the chance to share the changing nature of employment.

It’s the 21st century and the gig economy is going nowhere. The UK should embrace it as a boon for start-ups – with a new, robust model in place, these SMEs can seize the opportunities it holds whilst operating legally and fairly.

 

Read the full version in Chapter 2 of Working it Out.