Call for ‘worker’ status in gig economy

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The work and pensions committee wants the next government to introduce an employment status of ‘worker’ and a roadmap for equalising the National Insurance contributions (NICs) made by employees and the self-employed in a bid to address ‘bogus’ self employment practices which it says are reducing the tax take and inflating the benefits bill

The recommendations are from the committee’s inquiry into ‘gig economy’ companies like Uber, Amazon, Hermes and Deliveroo, and from drivers who work with them, which has had to be curtailed because of the election.

However, it has published a report which says it wants the next government to tackle loopholes around what it terms ‘a myth of self-employment’. MPs argue that the gig economy companies promote the idea that that flexible employment is contingent on self-employed status, but this ‘is a fiction’.

The report says where there are tax advantages to both workers and businesses in opting for a self-employed contractor arrangement, there is little to stand in the way of this view, but warns that workers are at risk from exploitation and poor working conditions. It also leads to substantial tax losses to the public purse, and potentially increases the strain on the welfare state.

Frank Field, chair of the work and pensions committee, said: ‘It is clearly profit and profit only that is the motive for designating workers as self-employed. The companies get all the benefits, while workers take on all the risks and the state will be expected to pick up the tab, with little contribution from the companies involved.

‘It is up to government to close the loopholes that are currently being exploited by these companies, as part of a necessary and wide ranging reform to the regulation of corporate behaviour.’

The committee wants a future government to adopt an assumption of the employment status of ‘worker’ by default, rather than ‘self-employed’, saying this would put the onus on companies to provide basic safety net standards of rights and benefits to their workers, and make the requisite contributions to the social safety net. Companies wishing to deviate from this model would need to present the case for doing so, shifting the burden of proof of employment status onto the better resourced company rather than the individual.

Self-employed people and employees receive almost equal access to all of the services funded by NI, especially with the introduction of the new state pension, yet the self-employed contribute far less. The incoming government should set out a roadmap for equalising employee and self-employed NICs.

Field said: ‘Companies in the gig economy are free-riding on the welfare state, avoiding all their responsibilities to profit from this bogus "self-employed" designation while ordinary tax-payers pick up the tab.

‘This inquiry has convinced me of the need to offer "worker" status to the drivers who work with those companies as the default option. This status would be a much fairer reflection of the work they undertake which seems to fall between what most of us would think of as "self-employed" or "employed".’

The work and pensions committee report, Self-employment and the gig economy, is here.

Pat Sweet | Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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