Self-employment can be challenging

As the number of self-employed people in the UK soars, giving rise to what has been dubbed the ‘gig economy’, HM Revenue and Customs (HMRC) has been asked to investigate the practice of firms using self-employed contractors (SECs) in a test case in the transport industry.

This is after there were allegations concerning food delivery company Deliveroo that some of the delivery people labelled self-employed were actually employees, who have the worst of both worlds, lacking both the benefits of employment and self-employment.

For example, staff complained that they were unable to turn down work, or had to work while sick, for fear of their deliveries being reduced, and that because they were paid per delivery, their average hourly earnings were below the national minimum wage (NMW) once business expenses and unpredictable delivery times were taken into account.

However, using SECs to make deliveries is popular with businesses, partly because they do not have to be paid the NMW. Employers also do not have to provide pensions, sick pay, holiday pay or parental leave. In effect, the work model transfers risk from the employer to the workforce.

That said, firms cannot subject SECs to a formal disciplinary procedure or sack them for gross misconduct and may want to check the circumstances that would allow the arrangements to be terminated immediately, such as in cases that would otherwise be gross misconduct.

In addition, if a firm tries to subject SECs to company policies, this would suggest an element of control and could expose it to an employee status claim. Conversely, however, businesses may also want to consider that not being able to apply company policies to SECs makes it harder to ensure their welfare.