What is the gig economy?
According to a report conducted by the Department for Business, Energy and IndustrialStrategy, the gig economy ‘…involves the exchange of labour for money betweenindividuals or companies via digital platforms that actively facilitatematching between providers and customers, on a short-term and payment by taskbasis’.
Put simply, workers in the gigeconomy get paid for the ‘gigs’ they do such as food delivery or taxi services.
The report estimates that 2.8 million people have worked in the gig economyin the last 12 months in Great Britain.
What are the benefits of the gig economy?
- Flexibility: workers in the gig economycan choose the amount of ‘work’ hours, enabling them to prioritise othercommitments. The classic example would be a student working for Deliveroo whohas to stop working due to exams.
- Profitability for businesses: byoutsourcing workers, companies can see an overall growth of profitability asthere will be no need to contribute to employment benefits or extra costs ofkeeping staff in the office. Furthermore, outsourcing secretaries or paralegalscan enable employees to work much more efficiently.
- Parliamentary scrutiny:the Work and Pensions Committee are launching an inquiry into the gig economyto see how the Government can ensure workers are entitled to legal employmentrights.
What are the consequences of the gig economy?
- Job insecurity:hours are not guaranteed and are purely based on employer demand. Furthermore,workers who do not have a fixed contract will not receive the same benefits asemployees including sick pay, holiday pay, or a contribution to their pensionpot. Jeremy Corbyn, the leader of the Labour Party, defines the gig economy asa ‘…more rapacious and exploitative form of capitalism’.
- National Insurance:as well as not receiving employee benefits, employers do not need to payemployer national insurance contributions. The Office for Budget Responsibilityestimated that this will cost the Treasury £3.5bn in 2020-21.
- Poor wages: individuals working in the gigeconomy are not compensated for their overhead costs. For an Uber driver theseinclude car insurance, fuel, car rental, maintenance etc.
- Frustration among workers:levels of discontent in the gig economy has lead to Uber drivers strikingin London over pay and conditions. This can have adverse effects onemployers in the gig economy as workers may take legal action, as we have seenwith Uber, CitySprint and eCourier.