The boom in digital platforms, such as Uber and Deliveroo, has sparked a revolution in the world of work, but unfortunately workers’ rights have failed to keep pace with the dismantling of the traditional nine-to-five working week for growing numbers of people.
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In the gig economy, individuals are no longer classed as “employees” by the companies who employ them. As effectively self-employed taxpayers, gig economy workers currently enjoy a status that may give them some apparent tax benefits. But they also have huge compliance responsibilities, receive no employment protection and may receive significant tax bills at the end of the financial year that could plunge them into debt. All of this makes it harder for them to manage their finances and acquire things like mortgages.
Of course, some companies can be seduced by the apparent attractions of classifying workers as self-employed. Why? Because they are not subject to a lot of employment laws, including minimum wage laws, employee rights and benefits, which have to be paid on top of their earnings. They might have to be paid for the time they sit idle waiting for a ride. Employment taxes would also have to be paid on top of their wages.
Take Uber for example who are apparently trying to establish a new category for their drivers, namely, to classify them as “independent workers”.
Uber’s justification for this new category is that their drivers do not have the usual attributes of an employee as they may be doing other jobs when they are on a call and may have multiple apps for gigs open at the same time – making it hard to assign their “active” work hours to a single employer beyond the gigs, or jobs, accepted.
However, the central issue with using the label of ‘independent workers’, is that Uber does not take any responsibility to provide protection and reasonable pay to their employees. Arguably it’s a get out of jail free card.
But just how independent are the independent workers? When we researched this further, we found that Uber actively controls its drivers, even during ‘idle’ time, as they are expected to accept a ride within 15 seconds without knowing exact location or fee, and face a risk of being let go otherwise.
We consider the reasoning in support of granting companies like uber this new category of ‘independent worker’ logically flawed and dishonest and would expect a negative effect on society. Mainly because the proposed category undermines the post-war established ideal of an employment relationship with support and protection for workers.
In fact, we believe that if this new category becomes institutionalised in jurisdictions around the world, it will not only directly harm individual workers, but would create a new precariat class of workers who have no job security, poor pay, and whose material and psychological welfare is seriously compromised.
Companies such as Uber also ensure that their language is consistent with this category of employment and appear to suggest that it is very much already an institutionalized fixture. Similar businesses, such as Deliveroo and Foodora, for example, meticulously scrutinize any elements of their description that may ‘mistakenly’ have them categorized as traditional food-delivery employers.
And while these classic gig economy companies embrace the lingo, other companies that traditionally classified their personnel as employees are now also joining the movement and switching to the ‘independent worker’ label to reap the same kind of crass economic benefit.
These broader developments in the economy should be more than enough encouragement for everyone, including policy makers, legislators and researchers, to become involved in defining the appropriate organisational and employment categories for Uber and other sharing economy companies. This entails labelling the people who work for them as contracted employees, rather than independent workers. We feel that it is it the right and just thing to do for both individuals and companies alike.
Written by Magdalena Cholakova, Associate Professor of Strategy & Entrepreneurship and Joep Cornelissen, Professor of Corporate Communication and Management at RSM.