What sort of contract will I need if I want to employ staff on a flexible basis?

The employment landscape of the UK is changing rapidly. The rise of the gig economy, powered by companies such as Uber, Hermes, Deliveroo, and TaskRabbit, combined with an increase in the number of companies placing employees on zero-hour contracts, has created a great amount of uncertainty for many employees.

According to the Office for National Statistics, there is an estimated 2.9 per cent of the UK workforce on zero-hour contracts, while figures from the Chartered Institute for Personnel Development (CIPD) suggest a further 1.9 per cent are classed as gig economy workers. The numbers may not yet represent a huge percentage of the workforce, but they are increasing and fuelling many stories in the national press.

Since 2010, there has been increased scrutiny around companies that have forced employees onto zero-hour contracts. The gig economy, too, has gone from being seen as a possible future for employment, to one that companies are facing a negative backlash from due to media scrutiny and an enhanced focus on legal action.

While full-time or part-time employees still make up the majority of UK employees, the change in the number of people working in the gig economy, or being shifted to zero-hour contracts, has led to some companies being accused of not fully looking out for the people working for them.

The headline-grabbing nature of zero hours and the gig economy has led to the government and other campaigners taking steps to protect employees.

In April 2017, the Work and Pensions Committee published contracts it received in its inquiry into self-employment and the gig economy. The Committee found some worrying trends, in particular that the industry seems to have been offering ‘sham’ contracts for quite some time. The contracts supplied to the committee contained clauses which, when signed, would mean that anyone who ‘worked’ for the companies would never be able to dispute claims and put people off challenging their employment status. Much of this has now been rectified, but the high-profile nature of the companies involved has led to the government recently making some changes to employment laws.

In the UK, there are three main categories of worker.

  • Employee: Employees are workers that have extra employment rights and responsibilities that don’t apply to workers who aren’t employees. Being an employee comes with the most amount of guaranteed entitlements and protections, including statutory minimum level of paid holidays, rest breaks, sick pay, parental leave and pay, and notice periods if employment ends.
  • Worker: A worker is any individual who works for an employer, whether under a contract of employment or any other contract, where an individual undertakes to do or perform personally any work or services.
  • Self-employed: A person is self-employed if they run their business for themselves and take responsibility for its success or failure.

When it comes to the gig economy, many companies are trying to move people from being employees or workers, to being self-employed. While self-employment can work well for higher skilled professionals who choose to freelance, at the lower end of the pay spectrum it can often leave people without protection.

Many workers in the ‘gig economy’ are classed as self-employed by their employers. This means employers aren’t required to provide their staff with entitlements such as the national minimum wage and holiday pay. A key point of the review was that employees’ lack of entitlements isn’t necessarily offset by the increased flexibility of self-employed contracts.

The Taylor Review, published in 2017, has sought to deliver more protection for people who find themselves in the gig economy. As the report highlighted: ‘Employers must not use flexible working models simply to reduce costs and must consider the impact on their workforce in terms of increased sickness rates and reduced productivity.’

Recommendations for zero-hour contracts

The government issued its response in February 2018, with the following recommendations to help both those in the gig economy and workers on zero-hour contracts:

  • Stricter enforcement of holiday pay and sick pay for all workers.
  • A list of rights, including holiday and sick-pay entitlements, and a new right to a payslip for all workers, including those on casual or zero-hour contracts.
  • All workers able to request a more stable contract, providing more financial security for those on flexible contracts.
  • The Low Pay Commission considering a higher minimum wage for people on zero-hour contracts.
  • Consideration given to repealing laws allowing agencies to employ workers on cheaper rates.
  • Bigger fines for companies that are repeat offenders at using people in bogus self-employment.

With the Taylor Review, companies will need to be more focused on being seen as good employers who are looking out for employees. The increased focus on what are seen as bogus, or hard-to-understand contracts that stop employees from being able to take any action, also mean companies need to consider the reputational damage of any issues.

This article was updated by Deputy on March 19th, 2018. 

Further reading on the Taylor Review

Ben Lobel

Ben Lobel

Ben Lobel was the editor of SmallBusiness.co.uk from 2010 to 2018. He specialises in writing for start-up and scale-up companies in the areas of finance, marketing and HR.

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