Change law to protect gig economy workers, MPs' report urges

The government is under pressure to change the law to tackle bogus self-employment and protect workers in the gig economy after a report published on Monday by two influential parliamentary committees.

The work and pensions select committee and the business, energy and industrial strategy (BEIS) committee have prepared draft legislation intended to close the loopholes that allow “irresponsible companies to underpay workers”.

Frank Field, the Labour MP who chairs the work and pensions committee, called on the prime minister to “fulfil the promise she made on the steps of Downing Street on her first day in office” by backing a draft bill “that would end the mass exploitation of ordinary, hard-working people in the gig economy”.

About 5 million people – 15% of the workforce – are self-employed, with about 1.6 million of those thought to work for the likes of Uber, Deliveroo and other gig economy employers who rely on people who sign up for work on a daily basis.

The rise of other insecure forms of work, with about 900,000 on zero-hours contracts and 1.6 million on temporary or agency contracts, has raised fears that employment law is struggling to protect those working in the modern economy.

“The bill would put good business on a level playing field, not being undercut by bad business. It is time to close the loopholes that allow irresponsible companies to underpay workers, avoid taxes and free ride on our welfare system,” Field said.

Rachel Reeves, the chair of the BEIS committee, added: “Uber, Deliveroo and others like to bang the drum for the benefits of flexibility for their workforce but currently all the burden of this flexibility is picked up by taxpayers and workers. This must change.”

The Labour-led committees have supported a large number of the recommendations of the government-backed Matthew Taylor review into modern employment and gig economy working. The government said it would respond to Taylor’s report by the end of this year, but some employment rights activists had feared it would fall off the agenda as parliament became overcome with Brexit matters.

Taylor said: “This excellent report shows that whatever concerns the government has about my recommendations, parliamentary support is no longer a reason not to pursue them.”

The MPs’ draft bill aims to clarify the definitions of employment status and enshrine the presumption that those working for companies over a certain size are all classed as workers, with rights to the minimum wage and holiday pay. The new legislation would put the onus on the company to prove self-employed status, in a dispute, rather than on the worker to do so through the courts.

MPs also proposed that companies be legally obliged to provide all workers and employees with a clear written statement of their employment status, laying out their rights and entitlements, on their first day at work.

Unions said the reforms should go further. Jason Moyer-Lee, the general secretary of the Independent Workers Union of Great Britain (IWGB), said the report did not “call for extending more basic employment rights – such as statutory sick pay or right to claim unfair dismissal – to workers.”

The GMB’s general secretary, Tim Roache, said the plans “may make a small difference”. “However, the fact remains that without real investment in HMRC and a political will to get tough on rogue employers who are cheating the British taxpayer out of millions and reaping profits out of worker exploitation, then there will be no significant change,” he said.

Employers’ body, the CBI, though, said companies would be concerned. “Based on a very limited review of the evidence, the committees have brought forward proposals that close off flexibility for firms to grow and create jobs, when the issues that have been raised can be addressed by more effective enforcement action and more targeted changes to the law,” said Neil Carberry, the CBI managing director for people and infrastructure.

The bill also includes changes to the law to make it easier for workers to be consulted and informed about business changes that affect their employment and also help casual workers get support in raising legitimate concerns with their employer.

The report recommends enabling class actions by groups of workers to establish employment status, making it more difficult for companies to suggest rulings only apply to individuals. It also suggests“punitive fines” for those who have previously been found to have broken employment law and “naming and shaming” for non-accidental breaches by businesses and supply chains.

MPs also called for higher fines for firms found to have paid below the national minimum wage, for example, to help increase resources for labour market watchdogs.

The bill proposes asking the Low Pay Commission to test the idea of offering premium pay, above the legal minimum wage, to workers who do not have guaranteed hours. It also proposes ditching the Swedish derogation, a loophole which allows agency workers placed with companies to be paid less than direct employees, provided the agency agrees to continue paying them for at least four weeks at times when it is unable to find them work.

A BEIS spokesperson said the government would respond fully at a later date, but added: “We have record numbers of people in work thanks to our flexible labour market, benefitting both workers and business. But we recognise that the labour market is not working for everyone which is why we commissioned Matthew Taylor to review modern working practices to ensure our employment rules and rights keep up to date.