Could the minimum wage end the gig economy?

Friday 13 October 2017

Recent questions surrounding the so-called 'gig economy' - the system of on-demand work popularised by firms such as Uber and Deliveroo - have been controversial. Much of this has stemmed from the idea that the companies are incorrectly defining their employees as self-employed, meaning they should be eligible for the minimum wage and other benefits such as holiday and maternity pay.

However, a recent question and answer session from Matthew Taylor - chair of the Review of Modern Employment, which produced its 'Good Work' report in July - has brought up an issue with this way of thinking. Mr Taylor made the prediction that if a minimum wage was introduced for these workers, it would destroy the gig economy.

He said that a guaranteed minimum wage could lead to workers for a company like Uber signing on to work in the middle of the night, when there isn't much work for them to do. They would then still get paid the same amount, even though they hadn't earned it. Mr Taylor commented that if this happens, "we will probably have to end on-demand work".

This all stems from a lack of clarity over what counts as being self-employed. Many people believe those participating in the gig economy should be classed as workers, employed by the companies like Uber that provide the platforms they use.

Instead, Mr Taylor suggests that these firms simply prove that they are offering genuine self-employment. According to the Good Work report, this would involve companies not having to pay the minimum wage if they could prove that their average worker received 1.2 times that.

The businesses would also have to prove the people using their platforms had freedom to work when they wanted, as well as being provided with details of how much they could earn if they logged into work at any particular moment.

The Association of Independent Professionals and the Self Employed (IPSE) has responded to the question and answer session, praising Mr Taylor for calling for a more thoughtful approach to taxing the self-employed than had initially been published in the Good Work report.

Simon McVicker, IPSE's director of policy, said: "Taylor is also right that we urgently need to address the thorny issue of employment status. The current confusion leaves vulnerable workers too open to exploitation by unscrupulous employers. At IPSE, we’ve been arguing for some time that the best way to clear the confusion is to introduce a statutory definition of self-employment."

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By Victoria McDonnell

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