Self-employment loopholes must be closed, says Work and Pensions Committee

Government must close the loopholes that allow “gig economy” companies to engage people on a supposedly “self-employed” basis, a committee of MPs has said.

In a report published yesterday, 1 May 2017, the Work and Pensions Committee said the Government must stop “bogus” self-employment practices, which are potentially creating an extra burden on the welfare state while also reducing tax contributions.

The inquiry, Self-employment and the gig economy, which has been curtailed for the general election, heard from gig economy companies such as Uber, Amazon and Deliveroo, and from drivers who carry out their work.

The MPs described as “fiction” the idea frequently promoted by gig economy companies that flexible employment is contingent on self-employed status.

Frank Field, chair of the committee, said: “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 committee said:

• designating workers as self-employed because their contract offers none of the benefits of employment puts “cart before horse”.Companies propagate the myth of self-employment, one which frequently fails to stand up in court;
• 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;
• an assumption of the employment status of “worker” by default, rather than “self-employed” by default, would protect both those workers and the public purse;
• the self-employed and employees receive almost equal access to services funded by national insurance (NI), yet the self-employed contribute far less. The incoming Government should develop a roadmap to equalise employee and self-employed NI contributions;
• the Department for Work and Pensions needs to ensure that its resources reflect the positive contribution that self-employment can make to society and the economy. This may require an expansion of specialist support in job centres.

Field added: “Self-employment can be genuinely flexible and rewarding for many, but ‘workers’ and ‘employees’ can and do work flexibly. Flexibility is not the preserve of poorly-paid, unstable contractors, nor does the brand of ‘flexibility’ on offer from these gig economy companies seem reciprocal. 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.”

Numerous reports have been published recently into self-employment and worker status, in the light of the poor treatment of workers in the gig economy, and the management practices at companies such as Sports Direct.

Perhaps the most influential of those, an independent inquiry into modern working practices led by former adviser to Tony Blair, Matthew Taylor, is expected to report in the summer.

Sean Nesbitt, partner at law firm Taylor Wessing, said: “The report concludes rights don’t inhibit flexibility. Indeed, they may support new, sustainable, evolutions of work. Matthew Taylor will likely support and clarify the status of “worker”, perhaps relabelling it and working on the presumption that that is what staff are, with rights to contracts, and some workplace information and discussion.”

Uber has been given leave to appeal its case concerning worker status – follow the progress of that appeal here.