What’s the gig with the 'gig economy'?


One of the starkest changes in 21st century Britain has been the rise of the gig economy with its new working patterns.

More than one million workers in the UK no longer get a reliable wage but get paid for “gigs”. These gigs include driving mini cabs or delivering parcels for courier firms or food for delivery companies which are springing up in the new digital economy; gigs are often advertised and applied for through smartphone apps.

There is usually no guarantee of work, sickness, holiday pay, or job security but such contracts can offer huge flexibility, enabling people to study or look after older parents or children.

For employers, the whole area of benefits has become more complex since the Uber Employment Tribunal decision on 28 October 2016 and Citysprint Employment Tribunal decision on 5 January 2017 concluded gig workers have employment rights – as the verdicts may have an impact on pensions too.

Auto-enrolment and defining a 'worker'

Since 2012 employers have been required by law to auto-enrol workers into a pension scheme.

Groups currently excluded from auto-enrolment include the self-employed, even if they work full time for one employer, low earners, and people with multiple jobs who do not earn more than £10,000 in any one job.

Currently, it is a very tricky legal decision deciding on who is a ‘worker’ and therefore must be auto-enrolled as employment status has become much more fluid. For employers involved in the gig economy, it is an area full of minefields. And it would be dangerous to assume you are eligible for an opt-out from the law, particularly as the Pensions Regulator has taken a much tougher line recently in enforcing compliance with the auto-enrolment regime.

What the Pensions Regulator says

The Pensions Regulator provides guidance on its website on ‘worker’ status for auto-enrolment purposes. It says, “Employers should not rely solely on a person’s tax status when assessing whether they are a worker. An individual considered by HM Revenue & Customs (HMRC) as self-employed for tax purposes may still be classed as a ‘worker’ under the new employer duties legislation, if they are in fact working under a contract to perform work or services personally, other than as part of a separate business of their own.”

In fact, one of the few times an employer is allowed not to auto-enrol workers, otherwise eligible for a pension, is where he or she is a member of limited liability partnership (LLP).

The law has not kept up with changes in employment in, one of the fastest growing sectors of the economy where many workers face low and irregular pay. Experts believe a new balance must be struck to enable flexible working, but not at the cost of the workplace protections and benefits most people view as essential.

Modern workplace practices

The Taylor review of modern workplace practices – published by the government in July 2017 – suggested a new definition of a dependent contractor which could help to clarify the situation with a clearer categorisation of workers, employees and the self-employed. This would make it easier for everyone to understand what workplace rights have to be provided.

In the UK, pension provision is largely delivered through the workplace, via auto-enrolment, so the self-employed, including gig-economy workers, are excluded. Giving ‘dependent contractors’ the rights to workplace benefits such as holiday pay and sick leave is a welcome move, but without the right to a workplace pension, which could turn out to be the most valuable benefit of them all, is short-sighted.

Some people mistakenly believe that all gig economy workers are students and have more pressing concerns than saving for a pension.

This assumption is quite wrong, and it’s essential that flexible working becomes more accepted and that the associated pension provision is not overlooked. A right to a valuable employer pension contribution should be carved in stone for those who want to start saving, and this has the power to kick start savings habits.

Employers should take action now to do more than the bare minimum required by law for it will pay dividends in staff retention and job satisfaction with a pension often being voted as the top employee perk of all. After all, happy workers are likely to be more productive and could ultimately result in bigger profits for their employers. Definitely a winning combination!