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Articles 10.1.17

The Gig Economy

Articles 10.01.2017

The term ‘gig economy’ has been attracting substantial publicity over the last couple of years and rightly so.

Most recently, Uber drivers won their trailblazing tribunal case, claiming that Uber drivers were not self-employed but actually workers. Uber drivers may now be entitled to national living wage, holiday & sick pay and paid breaks. This is significant when you consider that Uber ‘employs’ over 40,000 drivers in England and Wales. Uber are appealing the decision.

The freelance economy, in which workers support themselves with a variety of part-time jobs that do not provide traditional benefits such as healthcare.

(Source: Financial Times definition)

Customers need only use simple mobile apps to get something delivered or a small job completed. The gig economy has changed the way that customer demands are met and the nature of working relationships between a company and its employees. The rise of unicorn companies such as Uber and AirBnB has added a new dimension to traditional recruitment and employment.

A unicorn company: A private technology company valued at more than $1 billion.

(Source: Financial Times definition)

The gig economy, whilst exciting and innovative, introduces a new dimension of employment and commercial issues. Only last November the UK government announced that they had established a team of four experts who will be dedicated to reviewing the impact of the gig economy on workers’ rights. Their remit will be broad and focus on issues including job security, pensions and annual leave entitlement. Hilary Clinton referred to the gig economy during a speech whilst she was a presidential candidate, acknowledging that the gig economy was ‘unleashing innovation’ but expressed concerns that some employees may be denied basic protection rights.

The autumn statement raised the point that the increase in self-employed workers and casual workers had made monitoring taxation harder. The gig economy is live and companies need to be prepared for change.

The benefits of the gig economy

“The gig economy rewards hustle.”

(Source: Harvard Business Review, October 2016)

This gives an indication of how a company can strive in a gig economy. The gig economy encourages entrepreneurship, technological advancement and innovation. It boosts development by getting businesses to modernise. Consequently, the gig economy tends to suit those that are not intimidated by autonomy and uncertainty. Workers are more in control of their income streams and promoting their own personal brand.

It has allowed stay at home parents, retired individuals and students (to name just a few) to earn extra income. For example, with AirBnB a retired couple can rent out a spare room. A student can deliver food for Deliveroo when they are not attending classes. Opportunities may emerge that enable people to possibly follow a dream and have a work/life balance too. The stress of a typical 9-5 job is removed.

There can be no doubt as to the convenience that customers experience when using mobile apps such as Deliveroo. Orders are brought to the customer when required, making it a cost-effective way to meet customer demand.

The gig economy brings with it more casual workers, freelancers and self-employed workers. Businesses can call on workers as and when the business requires. The workforce can expand and contract according to demand. Non-permanent employees do not require permanent desks or equipment and this helps to save on overhead costs.

The potential pitfalls

Companies need to be wary when taking on individuals for work and look at the actual work that they will be carrying out. Will the individual use their own equipment? Will they need to cover the costs of unsatisfactory work during their own time? We recommend that employers seek advice when unsure of the employment status of an individual. Our HR team can assist with this.

Similarly, if it is determined that individuals are actually employees then cost implications for the provision of benefits has to be factored into budgets. This could have a significant impact on overhead costs.

As previously mentioned, the size of the workforce can change frequently. Demand for a service may mean a company has to recruit workers quickly and employers still need to ensure that adequate checks (e.g. eligibility to work in the UK) are carried out. Organisations may be open to risk when taking on staff at short notice. Our HR team can assist with pre-employment checks and zero hours contracts.

When employees are in the office regularly then it is easier to set and monitor goals for them. Performance management issues may become harder to identify and manage with a ‘fluid’ workforce unless clear processes are set in place to monitor the performance of all staff.

Whilst the gig economy attracts entrepreneurs who are comfortable with uncertainty, it won’t suit those ‘solid’ employees who prefer the status quo. Organisations may lose employees if they do not consider retention factors for everyone.

The gig economy does open companies up to risks. For example, individuals may simultaneously take on different projects with different companies. This could pose a conflict of interest threat in terms of confidentiality and intellectual property.

Let our team of HR experts draft robust contract clauses to protect your company.

PWC predicts that the gig economy will be worth $63 billion by 2020, £2 billion in the UK alone. Companies need to work closely with HR professionals to determine talent strategies for the ‘fluid’ workforce. HR strategy will need to consider training, appraisals and benefits for all individuals whatever their employment status. Policies and procedures will need to be revised. Benefit packages could be adapted to ensure more flexibility that will suit all people and their circumstances.

Companies should be encouraged to build alumni networks as you never know when you may need to tap into someone’s network or knowledge. The gig economy is only going to expand and companies need to adapt their businesses accordingly.