Gig economy nearly triples in size, encompassing 15% of workforce

Businesses advised to consider employment status in light of a booming gig economy

Research has revealed that the number of people working in the gig economy has nearly trebled in just five years, with around 15% of adults in England and Wales now paid by on-demand platforms, up from 6% in 2016 and 12% in 2019. 

This study, carried out by the University of Hertfordshire and consultancy BritainThinks, focused on the rise of gig working and insecure working practices – issues that have led to a number of high profile employment status cases in recent years, including Uber, Addison Lee and Hermes. 

It found that since 2016, the proportion of the working population carrying out work for digital platforms at least once a week has more than quadrupled in delivery and driving and more than doubled in household services. Those running ‘errands’ for people have grown nearly three times in size. 

The insight, published in The Guardian, also claimed that the “overwhelming majority” of people use this work to supplement other forms of income, with these workers “likely to patch together a living from multiple different sources.”

What’s more, Professor Neil Spencer, who co-authored the research, said he expects the gig economy to grow further, pointing towards “a major structural shift in the labour market.”

So what does this mean for businesses that engage self-employed workers, regardless of whether they’re delivery drivers, couriers, tradespeople or hospitality staff? In this article we’ll look at why the rapid growth of the gig economy is something that businesses should be aware of. 
 

Costly employment status cases are mounting up

The number of employment status tribunals involving gig economy workers has increased hand-in-hand with the rise of this sector. Uber drivers’ landmark victory at the Supreme Court in February 2021 has paved the way for Addison Lee and Hermes couriers to successfully change their employment status from self-employed to ‘worker’ status, meaning they qualify for employment rights. 

Amazon also faces a similar issue, with a number of self-employed drivers working for the digital giant also of the view that they deserve employment benefits – an issue that could cost Jeff Bezos’ company in the region of £140m, as detailed here.

Confusion over employment status isn’t limited to the gig economy, though. Given, in theory, any self-employed person could claim for these (the Pimlico Plumber Supreme Court decision in 2018 springs to mind) it’s vital that businesses are confident they have engaged any worker under the correct employment status from the word go. And if, over time, the nature of the relationship changes, it’s in a company’s best interests to reassess employment status. 
 

HMRC will be watching on, monitoring compliance 

Along with the potential cost of employment tribunals and compensating workers, the risk of engaging self-employed individuals (irrespective of industry) under the wrong employment status can have big tax implications. 

While many gig economy workers have now had their employment status changed from ‘self-employed’ to ‘worker’, these tribunals could just as easily have decided that the engagement reflected employment. In this scenario, HMRC can demand missing employment taxes from the hiring business, owed as a result of facilitating what is commonly known as ‘false self-employment’. 

Given some businesses engage large numbers of self-employed workers, who each work under identical contracts and have similar working practices, the cost of non-compliance can mount up considerably. This tax risk is another reason to carry out well-informed employment status assessments on all self-employed workers.

Qdos are leading tax compliance experts offering a range of specialist insurances. Take a look at our employment status services webpage here or get in contact with a member of the team today to discuss your options.