Scottish expert advisory panel on the collaborative economy: evidence paper

4. Workers’ rights

The second evidence session of the Scottish Expert Advisory Panel on the Collaborative Economy in July 2017 also focused on the rights of individuals accessing work through collaborative economy platforms. Agenda and minutes of the meeting, as well as any submissions received, are available online ^[24] .

a. Background

Over the last five years, the trend of using collaborative platforms to procure on-demand jobs has accelerated, and shows little sign of slowing down. This is often referred to as the ‘gig economy’ – so called because workers have multiple jobs or ‘gigs’ and often work within the collaborative economy but may also work outwith it.

Employment law, including the definition of employment status, is reserved to the UK Government. In October 2016, the UK Government commissioned Matthew Taylor, the Chief Executive of the Royal Society of Arts ( RSA), to look at how employment practices need to change in order to keep pace with modern business models. The review has been examining the implications of new forms of work on workers’ rights and responsibilities – as well as on employer freedoms and obligations.

The Taylor Review sets three key conditions:

• platform to prove that the average worker earns at least 120 per cent of the minimum wage;
• to give workers freedom about when to work; and
• to provide accurate real-time data about how much someone would earn at a particular time.

In the largest survey undertaken on Britain’s gig economy, the RSA found that nearly 8 million people in Britain would consider some form of gig work in future; young people (aged 16 to 30) are particularly attracted to the idea of gig work – one in four expressed interest in working in the gig economy. Major sectors in the gig economy include transport and courier services, storage, property, finance and marketing.

PwC estimate that the gig economy will be worth £2 billion by 2020. The Taylor Review estimates that there are five million gig economy workers in the UK. The Chief Economist to the Bank of England has claimed that the emergence of the gig economy is in part responsible for wage growth sitting at only 2% ^[25] .

The issue of how the collaborative economy is changing the world of work has been the topic of much research, debate and exploration over the last year. A sub-set of the collaborative economy, the ‘gig economy’ describes the use of digital platforms for people to access casual work and is dominated by platforms offering lower-skilled labour, such as cleaning and driving.

The Scottish Government’s Fair Work Framework may be a useful lens through which to view the gig economy, determining recommendations that genuinely tackle the challenges it poses today and understanding how its future growth in Scotland can be shaped.

Among the key principles introduced by the Fair Work Framework are:

• Effective Voice. The ability to speak, individually or collectively, and to be listened to, is closely linked to the development of respectful and reciprocal workplace relationships.
• Opportunity. Fair opportunity allows people to access and progress in work and employment and is a crucial dimension of fair work.
• Security. Security of employment, work and income are important foundations of a successful life. This can be achieved through building stability in to contractual arrangements, adopting at least the Living Wage, giving opportunities for hours of work that can align with family life and caring commitments.
• Fulfilment. Fair work is work in which people are respected and treated respectfully, whatever their role and status.

b. Scottish specific data

Respondents to the call for evidence provided a wide range of arguments in relation to workers’ rights in the collaborative economy, but there still is a lack of relevant data and statistics on the gig economy in Scotland.

In their submission, Close the Gap noted that “ self-employment accounted for almost half of overall employment growth over the past decade and over 80% of the growth in the number of businesses in Scotland” and that “ in Scotland, women accounted for 70% of the growth in the number of self-employed people”.

Looking forward, research by the RSA found that “ 21 per cent of people in Scotland would consider gig work in future”.

c. Opportunities and benefits

Opportunities identified by respondents in relation to workers’ rights focus primarily around the potential for collaborative platforms to create new employment opportunities and routes to market for workers, including:

• Potential for a greater diversity of more flexible employment that may suit those with parenting or caring responsibilities, those in rural areas, as well as disabled or disadvantaged individuals. This could ultimately lead to a more flexible labour market that becomes a key competitive advantage for Scotland. For example, Deliveroo claimed that their riders can “ choose when they ride, work with other companies – including competitors – at the same time as they are riding with Deliveroo, and decide how often they work”.
• Potential to provide self-employed and small businesses access to new markets and to improve business start-up rates in Scotland.
• Higher levels of self-employment can have benefits both for the wellbeing of individuals and local economies. Government research shows that the majority of the self-employed are content ^[26] .
• Opportunities for promoting self-organisation, co-operatives and bargaining for workers. The Scottish Government could seek to strengthen the institutional framework and create new mechanisms to support worker participation and self-organisation.

d. Challenges and barriers

Employment status. The most common concerns are around the extent to which the classification of providers as self-employed accurately reflects their status, and the extent to which providers are subject to substantial control from collaborative platforms, while lacking the benefits associated with employment. Respondents suggested that there have been long-standing uncertainties around the employment status of the self-employed, including the lack of a statutory definition of self-employment. In 2016, an employment tribunal deliberated that providers contracted by Uber are workers, rather than self-employed.

Deliveroo recognised that the fact that their riders are classified as self-employed “ gives them full flexibility – but the quid pro quo is that they are not entitled to certain benefits”.

A need for greater clarity around employment status (and associated rights and taxation) was identified for those working in the collaborative economy, to ensure equality of opportunity across the economy, to prevent providers from being exploited, and to provide certainty to collaborative economy businesses.

Close the Gap expressed concern that “ workers may find that flexibility is demanded of them by their platform, but there is no reciprocity”. Similarly, STUC noted that “ exploitation dressed up as flexibility is incompatible with fair work principles”.

Respondents also referred to potential risks for individuals’ health and wellbeing, for example as a result of the blurring of the distinction between work and leisure time. Close the Gap suggested that “ juggling a number of micro-jobs to make ends meet has a significant impact on mental and physical health”.

The issue of self-employment status might also impact on the potential for the collaborative economy to support delivery of public services, as there are concerns that the flexibility and autonomy of self-employment might not be appropriate for the delivery of essential services.

IPSE has created a framework/matrix to determine whether an individual should be classified a self-employed or not, based on a predefined set of criteria:

• Autonomy: lack of mutuality of obligation, right of substitution, use of a substitute, and lack of exclusivity.
• Control of process and working environment: control of tasks (“what is done”), control of method (“how it is done”), and control of hours.
• Business risk: pay per job/task, number of clients, entrepreneurial activity, and rate of pay.
• Level of integration in client business: representation and equipment and tools.

The tax implications of uncertainty regarding employment status are also relevant.

Other working arrangements. A number of other concerns were raised in relation to working arrangements in the collaborative economy, such as providers earning below the minimum wage after deduction of costs; a lack of control over charges levied by collaborative platforms; and providers facing substantial charges if they are unable to secure sick cover. Overall, Close the Gap referred to a “ transfer of risk from employer to employee”.

The diversity of business models across the collaborative economy can lead to a range of different working arrangements, with individuals potentially using more than one employment status. The increasing number of individuals with multiple jobs may in itself impact on the protection of workers’ rights.

Protection of contributors. A range of concerns were raised in relation to insufficient protections for providers, including:

• Absence of limits on numbers of contractors and implications for providers’ ability to secure sufficient work;
• Lack of control over how much providers will be paid for a job/task, leading to individuals earning below the minimum wage and bearing sometimes substantial costs associated with the provision of services;
• Lack of control over charges levied by collaborative platforms;
• Potential for ratings systems to have an unfair influence on providers’ ability to earn;
• Providers facing substantial charges if they are unable to secure sick cover;
• Extensive use of zero hours contracts (and growing number of people in insecure work); and
• Use of agency workers as a permanent culture in some workplaces.

STUC noted that exploitative practices allow firms who employ these practices to reduce their costs below those of more responsible competitors, giving them a competitive advantage. This in turn is likely to put pressure on competitors to follow suit and also adopt these practices. STUC noted that “ the more these practices are used, the more they will be used, unless their growth is prevented either through regulation or collective bargain or a mixture of the two”.

Uber indicated that they have taken steps to address some of the issues and concerns described above:

• They have partnered with IPSE and given drivers access to a range of benefits and protections, including illness and injury cover.
• They have partnered with online investment provider Moneyfarm to offer discounted ISAs and pension products.
• They will pay for drivers to complete one qualification on online learning platform FutureLearn.
• They are offering free and optional language courses for drivers.
• They have created a set of Community Guidelines, providing drivers with clear and simple expectations of behaviour.

Job displacement. Other potential issues involve the risk of job displacement, including due to increasing automation. There are concerns that increasing automation could further exacerbate what is seen by some as a race to the bottom for wages, terms and conditions.

Other concerns raised in relation to workers’ rights in the collaborative economy were:

• potential for platforms to develop monopolies;
• lack of transparency of how platforms allocate work;
• insufficient resources to enforcement protection of workers’ rights;
• growing proportion of those in insecure work doing so on an involuntary basis;
• negative impacts of uncertain work on workers’ ability to access credit;
• lack of employee voice and representation – Close the Gap suggested that “ workers’ indivisibility and isolation is a barrier to organising and bargaining”;
• cost of appealing to an Employment Tribunal (over £1,200), as noted by STUC; and
• lack of investment in skills and training, and shortage of skilled workers across parts of the collaborative economy.