UK politicians just slammed the ‘gig economy’

Uber, Deliveroo, Amazon Flex – in the past few years they’ve gone from being basically completely unknown (OK, maybe not Amazon, but everyone else) to being some of the most recognizable businesses around.

But a big new report by UK politicians could force these companies to change the way they operate. The people behind it interviewed lots of people who work for these companies for evidence on how they are as employers. Their conclusion was pretty damning.

The report, created by a group of MPs, says the way these companies operate fails to protect their workers from exploitation, costs the UK loads of money in taxes, and could increase the amount of money the government has to spend on welfare. Ouch.

OK, let’s recap – how do these companies work?

By using technology What's this? to connect people who need a service (like a cab) directly with someone who wants to provide that service (like a cab driver), companies like Uber have pretty much revolutionized the way people work. It’s like cutting out the middle-man, Uber says – the app allows the cab drivers to work for themselves, so they no longer need to be employed by cab companies.

Uber argues this system is great for their workers. You can be your own boss, work when and where you like and take on work on top of other jobs to earn more money if you want to. They’re classifying their workers as self-employed – like a freelancer, or a guy selling mai tais on the beach somewhere.

And for lots of people, self employment does just suit better than a 9 to 5. It’s safe to say the guy who’s working from a beach with a mai tai right now has probably got it pretty good.

What's got these politicians so worked up?

Companies do a lot behind the scenes to protect workers – and self-employed people don’t get any of those perks. There are pretty important employment laws which cover things like making sure you get paid if you’re sick, and have a pension set aside for when you get older – a whole host of things that people who work for themselves don’t get.

But firms like Uber and Amazon Flex and Deliveroo are using a ‘loophole’ in the law to say their workers are self-employed, when actually it’s a little foggy whether they are or aren’t. Politicians in the report basically say that the way these companies are describing self-employment is a myth. Think about it – what is Uber if not a cab company...with staff?

Why won't 'gig economy' companies just treat their workers as employees?

Listing their workers as self-employed lets these companies get around all the employment law obligations which cost them money and time. They also have to pay a hell of a lot less tax. For every person a company employs and pays a salary to, it also pays National Insurance to the government. Seeing as all their workers are self-employed, these firms don’t have to pay that tax – which costs the government a lot.

“They’re motivated by profit and profit only,” said Frank Field, the head of the committee that published the report. “The companies get all the benefits, while workers take on all the risks, and the state will be expected to pick up the tab.”

What happens now?

The report says governments should close the ‘loophole’ and just classify people as ‘workers’ automatically, giving them all the protections any other UK worker would have. If a company really wants to use a different model, they’ll have to prove that it needs to and that it’s fair.

These are only recommendations so it’s not like the companies have to change, but it’s pretty clear this group of MPs thinks they should.

If the government does make the changes into legal obligations, firms working in this way will they’d have to pretty radically change the way they operate. For now, the gloves are off, so we can only wait and see whether the companies respond, or whether it’ll be right back to business as usual.