You might have imagined that an advantage of being self-employed would be that after a major health trauma – a heart attack, say – you would be able to reduce your hours without having to beg for the boss’s permission. After all, the boss is you, right? But the case of Gary Smith reveals how outdated such assumptions are in today’s workforce. As the Court of Appeal’s ruling last week confirmed, the economic reality of Smith’s relationship with Pimlico Plumbers (working five days a week for a single firm from whom he leased a branded van) was that he was a worker rather than a self-employed contractor.
This is not the first case where the courts have found for the “self-employed” over employers in such disputes. But Pimlico’s behaviour towards Smith feels like a watershed moment since it stands out in its unreasonableness. It would not be surprising if many gig economy toilers who feel they have all the obligations of full-time workers but none of the employment rights responded to the Smith ruling by calling their lawyers.
Even after this latest legal setback, firms are unlikely to roll over. Some have business models that appear to be essentially based on avoiding the costs of conventional employment, such as paid holiday leave and the necessity of paying the minimum wage, rather than any other kind of genuine competitive edge. Yet the smarter ones, and the ones who genuinely do things better than the competition, could do themselves a big favour by recognising which way the wind is blowing and facing up to the fact that they have obligations to their workforce, even if that workforce is not technically made up of regular employees.
The Government is preparing to act in any case. An independent review into modern employment practices – specifically the burgeoning gig economy – will report in the summer and will likely make a range of policy recommendations for new regulation.
However, tax may be as important as regulation. As the Institute for Fiscal Studies pointed out last week in its Green Budget, the national insurance system makes it less costly for firms to take on self-employed contractors than new regular employees. In that sense it’s not terribly surprising that almost half of all the jobs created since the financial crisis a decade ago have been self-employed. Faced with a marginal hire in a still uncertain wider market, most firms will naturally play it safe (or rather cheap), particularly if competitors are doing the same.
This story has a macroeconomic dimension. As the gig economy employers frequently point out, no one is forced to work for the likes of Uber, Deliveroo, CitySprint or even Pimlico Plumbers. The fact that many do so, while apparently being unhappy with their pay and harsh conditions, suggest they have little choice; that there is not, in fact, somewhere else for them to go.
The headline unemployment rate might be close to a record low, but the rise of gigging, the explosion of zero hours contracts and chronically weak pay growth, gives this the feel of a market still very much skewed towards the buyer of labour rather than the worker. And this, in turn, suggests that there remains disinflationary slack in the economy.
Libertarian evangelisers for the gig economy pour scorn on the idea that we are witnessing the creation a new “precariat” class of exploited workers and cite surveys suggesting that most self-employed contractors are content with their status and have no particular desire to be treated any differently. In this view of the world, the complainers, such as Smith, constitute a tiny awkward squad in a sea of happy contractors.
To really test this view what is needed is a high pressure and high demand economy where workers indisputably have the greater market power. If the low pay and ultra flexible gigging boom survives that environment the evangelists will have a strong case. But until then the rest of us can justifiably remain sceptical of the proposition that self-employed gigging really does represent the modern worker’s free choice.
This article appeared in The Independent on 12/02/17