Uber & Self Employment - Was this inevitable?

Friday 19th Feb 2021 the Supreme Court ruled in a final appeal that Uber drivers are workers and not self employed in the UK. The ruling was not really that surprising for me having worked in the ‘gig economy’ since I graduated in 2004.

This decision was the culmination of an appeal by Uber based on the initial tribunal in 2016 and whilst reports suggest that most drivers would prefer to remain self employed, it is legislation and further government regulation that dictates an employment status.

Though not really new, the headline of Uber here may have shaken up a lot of employers to get onboard with updated legislation and may well require an upheaval in processes and procedures for many companies. Many companies may also still be operating as Uber did oblivious to the implications. I urge anyone who engages Self Employed contractors to read the below. The below is my opinion and it is important that anyone unsure on where they stand seeks professional advice. 

With IR35 and updates to agency legislation in recent years, there is more of a focus than ever on the direction of employment status. With hefty fines in place for employers failing to adhere to legislation and retrospective liabilities if not managed correctly. It is imperative that anyone engaging self employed contractors is aware of the implications.

In many ways I commend the regulation and government intervention which will implicate tax, it also should add benefits to individuals in the form of employment rights and will add more implications to employers too. It will also add more funds to the public purse which lets face it is going to need reimbursing moving forward. In 2015 Citizens Advice estimated some £314m lost in tax and national insurance from ‘Bogus Self employment’.

These interventions In recent years have come through amendments to agency legislation in 2014, IR35 and the Taylor Review of Modern Working Practices initiated by former Prime Minister Theresa May. These reforms and reviews do offer more security, protection & benefits to gig workers, they will reduce (my opinion) the number of people who operate in a self employed status and in theory place more funds in the public purse via tax deductions at source rather than offset against expenses via a self assessment at the end of the year.

I have worked on both sides of the fence; as a self employed contractor and as someone who has contracted self employed contractors. I have also employed ‘workers’ in recent years on Zero Hour Contracts and see the benefits that Zero Hour Contracts if managed correctly can have on ‘Workers’. I have also worked closely with HMRC and my wonderful accountants AGL Associates over the years to establish employment status within my company and to help us ensure our processes are aligned with the HMRC Employment Manual & Agency Legislation. All of this at the same time enabling us to work smarter through investing in technology to help us achieve compliance. 

Today, these years of experience, process and understanding can be found wrapped up in a tech platform I began creating in 2014. In 2020 it enabled us to support our temporary event workforce during the pandemic by furloughing some 345 Zero Hour Contract workers who had worked with us on events across the UK and who historically some may have been considered Self Employed. Had they been self employed they would not have had this support, albeit a different support was on offer based on their self assessment. However, there is also a different mentality to tax that I have observed across both employment statuses and with tax deducted at source, it enables a far easier tax management system for the individual & HMRC and less opportunity for a tax debt at the end of the year for the individual that I have seen regularly.

Originally, Coalition Live was built for the Event industry, based on an altruistic quest to help make the searching, booking and paying as simple, secure and stress free as possible for clients, freelancers and our in house team. With the update in agency legislation we implemented our own payroll tech to create a fully integrated searching, booking, scheduling and payment system all accessible from a mobile phone. Today, in 2021 we have continued to develop the system to cross industries which we have now called iZero - see www.iZero.work - a platform for any business large or small to find, book and pay easily zero hour staff with a fully integrated payroll system.

The aim is to enable any business large or small to be able to book temporary staff and to quickly scale their workforce as demand and trends dictate, at the same time offering flexibility, security and personal development to workers in the gig economy enabling them to feel less isolated and part of a community.

For example, a bar needing extra staff on a Friday night, a car dealership whose busiest periods are weekends, a retail shop needing extra help during Christmas or a temporary event.

Why is the Uber ruling not surprising? 

Gig work is not new. However, the terminology has evolved in recent years after advances in technology the past decade or so along with a quest for more flexibility being more of a priority for people in their work. This has all led to significant rises in the number of gig workers year on year.

The key reason for me to consider the ruling not that surprising is that in 2014 there was a significant amendment to Agency Legislation that stated for those engaging self-employed individuals - where they fall under the supervision, direction or control (SDC) of the end client - those workers will need to be treated as employees for tax purposes and placed on the agency’s payroll. It’s this addition that helps make clearer the decision of employment status of an individual for an employer. It is also important to understand HMRC’s Employment Status Manual published 7 March 2016 which offers further guidance and understanding. Again, I would recommend professional advice to clarify any interpretation of your understanding. I have to say for me the benefits this clarification brings is a positive step for the worker who maintains flexibility but gains security in Pension, NI, Holiday Pay and deductions of tax at source.

With the ‘Gig economy’ growing exponentially year on year, in 2017 Matthew Taylor, Chief Executive of the Royal Society of the Arts published ‘The Taylor Review of Modern Working Practices’. He was appointed to publish this review by then Prime Minister Theresa May a year prior Oct 1 2016, a similar time that Uber lost their original employment tribunal. 

The review was based on the single overriding ambition that ‘All work in the UK economy should be fair and decent with realistic scope for development and fulfilment. Good Work matters’. A noble and brilliant ambition I’d say. 51 of the 53 recommendations from the review were accepted by the government who labelled its proposals the largest upgrade to workers rights in a generation. Many of the core recommendations are yet to be implemented. We still await the ‘Employment Bill’ announced by Boris Johnson in Dec 2019 

Life as a gig worker

I began life as a ‘gig worker’ straight out of University in 2004 and I didn’t even know it at the time. For me it was working around other passions and offered me greater flexibility. 

In my 20’s & early 30’s I worked on events all over the world, I had an absolutely fantastic time, hard work but extremely rewarding. I also worked in other roles when not on an event. Being self employed through it meant I didn’t have the same rights or benefits as many of the people who were employed by the same company. That was my choice, I wanted the flexibility and the variety Self Employment offered and I got both in droves which allowed me to freely travel in my free time and work on passion projects which was my prerogative. I also hasten to add that I was still treated well by the companies I worked for and always felt as though I was one of the team forging some fine friendships with the permanent staff but I had no pension, no holiday pay, no security, this was all leveraged by me for a desire to have flexibility and freedom which really worked for me back then as a young man in his 20’s with no responsibility nor dependants. Of course everyone has different circumstances but it has always been about personal choice, security is not really a true attribute of the gig economy and many prefer flexibility over security with this being the case for many Uber drivers who would prefer to be Self Employed.

‘London’s Uber drivers have higher levels of life satisfaction compared to other London workers, the majority prefer the flexibility they have according to recent study.’

Oxford University’s Oxford Martin School published a report in 2018 entitled ‘Uber Happy? Work and Well-being in the ‘Gig Economy’. The report found that a resounding majority of drivers said they value flexibility with Uber and want to retain their self employment status. It’s not just Uber too; there are oodles of reports citing that more people want flexibility from their work. Jobs for life seldom exist, people are retiring later, switching careers and variety is indeed the spice of life. On the reverse the report found that the minority who wanted more fixed hours and security in work demonstrated higher anxiety levels, two polarising camps.

Can flexibility and security be achieved in the gig economy? 

I think so. Being freelance and only having yourself to look after is one thing but for those who have families to support have further struggles, everyone who is self employed has the added responsibility each year for a tax return and a potential bill at the end of each year some may not be prepared for or can face a perpetual tax debt year on year. Many self employed people face the challenge of managing their finances, invoicing clients, personal tax management, sourcing work and don’t understand the impact it may be having on their mental well being striving to find contracts regularly, not saving for tax payments or later in life not having an adequate pension or the implication on their credit circumstances if they wish to obtain a mortgage for example. I must note that all of these facets can and regularly are countered by very Self Employed people who manage all of this accordingly I’m sure. Of course there are plenty of Self Employed people who put tax allowance away after each invoice and live very successfully as Self Employed Contractors, paying significant amounts of tax and would like to stay Self Employed, unfortunately for them it looks as though self employment as we have known it is very much at the final furlong of significant and maybe once in a generation change that has been happening for the last decade, hopefully it is for the betterment of everyone, time will of course tell.