Uber, Deliveroo, the Budget and holiday pay: should you reassess the status of your self-employed staff?
Back in October of last year, a tribunal dismissed as ‘faintly ridiculous’ Uber’s assertion that its drivers were self-employed, rather than workers. Uber appealed to the Employment Appeal Tribunal, but lost. Indications are that Uber intends to appeal to the Supreme Court.
Why does employment status matter?
Employees, workers and the self-employed have different levels of protection under UK employment law. Workers don’t benefit from the full spectrum of rights available to employees (in particular they can’t claim unfair dismissal); but workers have more rights than the self-employed. Information on the rights of employees, workers and the self-employed is available for Workbox users at Employment Status.
As workers, Uber drivers can, in particular, claim the national minimum wage and paid holidays. And the stakes, insofar as holiday pay is concerned, have just risen. The European Court of Justice has decided that Mr King, who was wrongly classed as self-employed by Sash Windows (and therefore denied paid holidays) can claim for untaken holidays stretching back the full 13 years to the start of the relationship. A potentially costly decision for Sash Windows and others like them.
When are Uber drivers actually working?
The drivers’ working time and minimum wage entitlements depend on when they are actually ‘working’.
The EAT was clear that they are working once they accept a trip from Uber. But, are they also working when they are merely ‘on-duty’ i.e. logged into the Uber app, within their authorised territory, and able and willing to accept trips?
This will depend on the facts. If the reality is that drivers cannot accept trips from other taxi firms during this time (perhaps because Uber penalises them for not accepting a high percentage of its trips) then they will be working. On the other hand, they will not be working for Uber at times when they are genuinely at the disposal of other operators.
What about our self-employed contractors, freelancers or consultants?
The Uber case is fact-sensitive. Both the tribunal and EAT were clear: Uber could have devised an alternative business model in which the drivers were self-employed; this was simply not the case here.
Uber is by no means alone in facing claims that its staff are workers, despite being labelled self-employed. Claims from couriers, plumbers and foster carers have all been widely reported.
It’s well known that simply labelling an individual as self-employed will not stand if it does not reflect the practical reality. But perhaps Deliveroo have cracked it. Since the Uber decision, the Central Arbitration Committee has decided that Deliveroo riders are self-employed. However, to make that possible, Deliveroo has to allow them an ‘almost unfettered’ right to substitute someone else to do their work. For other organisations, the risks of that approach could make it a non-starter. Moreover, this may not help Deliveroo escape liability for paid holidays, as arguably the EU ‘worker’ test that applies is wide enough to catch its riders.
But, even if you are confident in your current set-up, this isn’t a time for complacency.
The recent Taylor Review suggested that we need a clearer definition of workers, and that all workers should be taxed as employees. It also backed the equalisation of national insurance for the employed and self-employed, to remove incentives (for both individuals and companies) to use self-employment. The Work and Pensions Committee has championed having a presumed ‘worker’ status, which employers would have to disprove if they wanted to adopt a self-employment model.
In response to these calls, the UK Government has announced that it will publish a discussion paper exploring the options for clarifying the status tests for employment rights and tax.
The Government wants to ensure that individuals who effectively work as employees are taxed as such even if they choose to structure their work through a company. With this in mind, there was speculation before the Budget that the Chancellor might shift responsibility for determining whether IR35 applies (and, if it does, for paying tax and national insurance) from intermediaries to employers in the private sector. Doubtless, this is an attractive option for Mr Hammond given the indications that making the change in the public sector in April 2017 increased compliance. For now, there is to be a consultation, but change seems almost inevitable.
With all of this in mind, now is a good time to review the employment status of your workforce. Would self-employment designations stand up to scrutiny? What impact could potential changes have on your business?
Brodies’ employment and tax teams can work through any issues in your business and work with you to identify any risks and strategies for the future.
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