Retail and the “gig” economy

What is the “gig” economy?
With new tech-driven business models overtaking more traditional ones, it is clear that the business world is changing. The so-called “gig economy” is helping to fuel these new models and represents a move away from traditional employment models towards the use of self-employed contractors or “freelancers” to carry out short term or fixed projects known as “gigs”. A key feature of the gig economy is often the use of digital platforms to create market places that connect individual service providers with customers. It is driven by an increasingly mobile workforce and its key perk is the flexibility that it affords to all parties.

The gig economy has recently hit the headlines in relation to lower-skilled workers, like taxi drivers and cycle couriers, who have been gigging purportedly on a self-employed basis, but who are now claiming rights as “workers”. For example, last month a tribunal found that a bicycle courier with logistics firm City Sprint should be classed as a worker rather than self-employed.

How is the gig economy relevant to the retail sector?
Many retailers (particularly traditional retailers) are not involved in the gig economy, but rely on services provided by related industries which are invested in the gig economy, such as logistics and delivery services. However some retailers are directly involved in the gig economy. For example, Amazon offers “Amazon Flex” which allows individuals with some time to deliver Amazon parcels.

Freelancers can also provide an “on the ground” presence for retailers e.g. by facilitating delivery in local areas or providing a local face for the brand. Equally, the gig economy can help retailers deal with seasonal fluctuations in demand – for example those experienced over Christmas and Black Friday – by obtaining logistics services from companies like City Sprint.

However, it is crucial that retailers are aware of the employment law issues that arise when using freelancers.

Why is employment status a particular issue?
Employment status dictates both an individual’s employment rights and the proper tax treatment of their income.

Retailers wishing to take advantage of the gig economy should ensure that they correctly structure their relationship with freelancers. In practice however, it’s not always clear cut when a self-employed individual becomes a worker (or even an employee). This has led to several claims in recent years, both in the UK and elsewhere, in which individuals working in the gig economy allege that they have been incorrectly labelled as self-employed and should instead be considered workers and benefit from the employment rights and protections afforded to workers. For example, Uber recently paid $84 million to 385,000 drivers to settle their claims that they are in fact employees.

What’s next for employment law treatment in the gig economy?
In October 2016, Theresa May commissioned Matthew Taylor, the CEO of the Royal Society of Arts, to review how employment laws and practices need to change in order to keep pace with modern business models. The review, which will take six months, will address six key themes, including:
• To what extent do emerging business practices such as the gig economy and new forms of employment affect individuals’ security, pay and benefits, and legal rights?
• Do current definitions of employment status need to be updated to reflect new forms of working created by emerging business models such as on-demand platforms?

Also in October 2016, the Business, Energy and Industrial Strategy Committee launched an inquiry into the future world of work, including the status and rights of agency workers, the self-employed, and those working in the gig economy. Its terms of reference include:
• Is the term “worker” defined sufficiently clearly in law at present?
• What should be the status and rights of agency workers, the self-employed, and those working in the gig economy?
• Do gig economy workers receive appropriate benefits?
It will be interesting to see if any employment law changes are proposed as a result of the review and inquiry.

What’s the practical advice for retailers while we await further developments?
• Keep an eye out for the outcomes of the various ongoing reviews into modern ways of working.
• Review arrangements with anyone who is not an employee and consider providing training for your recruitment and HR teams so they fully understand and are alive to the legal and tax-risks of miss-categorising staff.
• Get your hiring documentation in order, but always bear in mind that the Courts and HMRC will look behind it at the reality of the working arrangement.
• Assess any risks in your supply chain arising from your suppliers’ use of the gig economy.
• Weigh up the pros and cons of accessing the gig economy and take advantage of any opportunities it affords your business.

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