What the Deliveroo case means for the future of self-employment
The city centre food delivery company Deliveroo has been told by the government that it must pay its workers the minimum wage unless they are ruled as genuinely self-employed by a court or HMRC.
The warning came after Deliveroo cyclists staged a protest in London over a proposed new wage deal. Instead of receiving a fixed wage of £7 per hour plus an extra pound per delivery, new deal would see riders paid £3.75 per delivery. Riders claim that this new deal, which is already being trialled in parts of London, reduces their income.
The debate over new contracts was essentially closed down by the newly formed department for Business Energy and Industrial Strategy, which insisted that workers must be paid the national living wage of £7.20 per hour unless they were defined as self-employed by a court of HMRC.
A spokesperson for BEIS said: “The government is determined to build an economy that works for all – that includes ensuring everyone gets a decent wage. An individual’s employment status is determined by the reality of the working relationship and not the type of contract they have signed.”
Here, the government is sending a strong signal that workers aren’t self-employed just because their contract says so. But this is exactly what some companies - particularly ‘new-age’ companies like Uber and Deliveroo – have been doing.
The dividing lines between ‘employee,’ ‘worker’ and ‘self-employed’ have been blurred and there is a real lack of clarity over what determines employment status.
In line with the BEIS statement on Deliveroo, the self-employment decision will ultimately have to be made by a court (most likely an employment tribunal) or the HMRC. But there are some indicators that can be used to determine whether or not someone is genuinely self-employed.
If a worker can reasonably send another person to ‘fill in’ and carry out the work in their place instead of showing up to do the job themselves, then they are likely to be deemed self-employed.
Conversely, if there is a ‘mutuality of obligation’ insofar as there is an expectation that an organisation will provide work, and an understanding that the individual won’t turn that work down then the person is likely to be classified as an employee or a worker. Genuinely self-employed people have the right to turn work down.
Finally, the nature of the everyday working relationship is important too. The employment status classification will depend to a large degree on the degree of control that the organisation has over the individual when they are carrying out a job.
Neil Armitage, Operations Director at Umbrella.co.uk, said: “New technology and business trends are upending the traditional models of working and it’s important that the government and tax authorities keep up with the changes.
“It may well be that the government needs to introduce a new ‘third way’ employment category affords flexibility to businesses and individuals, while also guaranteeing some basic employment rights. The truth usually lies somewhere in the middle with these things and we would welcome the opportunity to work with authorities to try and find it.”