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Employment

What is the gig economy and why is it controversial?

The gig economy is touted by some as key to workers’ freedom, but many of those workers say it’s eroding their rights. This is what you need to know about the work model

Gig economy work is frequently placed under the spotlight as workers demand improvements to their working conditions.

Drivers working for Deliveroo, Uber and Amazon are all part of the gig economy. 

Working in the gig economy can allow more freedom for both the company and the worker – in theory, a person only has to work when they like – but are well-documented as eroding employee rights and contributing to UK poverty.

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The size of the gig economy workforce has tripled over the past five years, according to recent research conducted by union TUC, finding that three in 20 adults in England and Wales now work via gig economy platforms at least once a week, compared to around one in 20 in 2016. 

Yet research by think-tank Fairwork found that only two of the 11 UK gig economy platforms approached demonstrated that staff were guaranteed to be paid the minimum wage after costs. As a result, more and more gig economy workers are uniting against the companies built on their labour. 

Here is what you need to know about the so-called gig economy and what it means for workers in practice.

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What is the gig economy?

Gig economy workers tend to be on zero-hour contracts or short-term, freelance contracts rather than permanent jobs with a set number of hours. They are otherwise known as independent contractors.

The name comes from them earning money for each task, or “gig” they complete – like a delivery or a car journey – rather than hourly or daily for the time they have worked. Many people in the gig economy work for more than one company at the same time.

That means they often technically set their own hours, but it can also result in them receiving no hours or shifts.

Which companies use workers in the gig economy?

Deliveroo, Uber and Pimlico Plumbers are well known for using workers in the gig economy to carry out their business.

People working for Addison Lee taxis, Amazon, DPD and Ocado are in the gig economy too.

But many of these companies have faced strike action and legal challenges from workers who want more protection.

Are gig economy workers employees?

There has been much debate and even legal action around the employment status of workers in the gig economy. 

Many workers say they should count as employees, meaning they would be entitled to things like sick pay, the national living wage, redundancy pay and paid holidays, while employers tend to say they should not.

In February, Uber was overruled in a Supreme Court battle over the protection of its drivers and told it must classify people as “workers” rather than self-employed contractors.

That meant the drivers became entitled to rights such as the national living wage and sick pay.

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The six justices said Uber would have to consider its drivers to be workers between the time they log on to the app and log off. Previously, drivers were only considered to be working when driving a passenger. 

A similar ruling was made against Pimlico Plumbers in 2018 when justices said a tradesman was entitled to basic employee protections.

In contrast to the Uber case, Deliveroo drivers were classified as self-employed by the UK Court of Appeal in June, confirming that the case did not set a precedent for the future of the gig economy.

How much are gig economy workers paid?

A quarter of people working in the gig economy were earning less than minimum wage (since rebranded as the national living wage) in 2018, according to NatCen Social Research analysis.

The same year, a government report showed nearly 90 per cent of gig economy workers were paid less than £10,000 per year.

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That hardship is likely to have continued into the Covid-19 crisis, with Citizens Advice warning gig economy workers were facing higher levels of pandemic poverty compared to the rest of the working population. Some were found to be earning as little as £2 an hour.

What are the benefits of the gig economy?

A gig economy model can be beneficial for companies that do not want to commit to employee contracts that would make them pay their workers regardless of productivity. By paying workers per gig or by their output, employers can have the flexibility to increase or decrease their workforce according to market demands. 

People working in the gig economy often say they enjoy the flexibility it affords them, as they usually don’t have to commit to a certain number of working hours or schedule. It can allow them to work around studying, childcare or other work.

Are gig economy workers unionised and can they strike?

While many who work in the gig economy enjoy the flexibility it provides to allow them to balance other commitments, this seems to come with a hefty price tag. 

Many people in the gig economy have taken strike action against the companies for low pay, lack of sick or holiday pay, fire and rehire tactics, or safety issues.

Food delivery drivers, including those who delivered for Just Eat, staged the longest ever gig economy strike in the history of the UK with the IWGB. 

Drivers employed by courier company Stuart – which is sub-contracted by JustEat – switched off their apps to protest a reported 25 per cent cut to most delivery fee payments, according to the IWGB. 

Members of the union demanded an increase, plus mileage and paid waiting times after 10 minutes.

In May this year, union GMB struch a landmark deal with Deliveroo which will see the food delivery company formally recognise GMB members’ rights to collective bargaining on pay, and consultation rights on health and safety.

Deliveroo employs more than 90,000 self-employed riders in the UK. Until now it has refused to negotiate with a union on pay or working conditions – called union recognition.

However the deal was criticised for sidelining grassroots union the IWGB that had previously been denied formal union recognition despite representing some Deliveroo riders for years. 

Last year, Deliveroo riders took to the streets across the UK to demonstrate against low pay and poor conditions, organised by the IWGB

They were making the case to the delivery company that they should be recognised as employees and given basic rights such as sick pay.

As well as improving pay, riders went on strike to demand greater safety measures to report harassment or abuse received on the job, a transparent termination process, and to be classed as dependent contractors.

Deliveroo responded to the strike organised by the Independent Workers Union of Great Britain by stating that the action only amounted to a small proportion of its 50,000 UK riders, and that the majority valued the “total flexibility” of their work and the ability to “earn over £13 an hour”.

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