Tag: Self employment

“Gig economy” companies exploit workers and are free-riding on the welfare state

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Deliveroo couriers plan legal action against the food delivery firm to claim better employment rights including the minimum wage, sick pay and holiday.

The 20 delivery riders say they are employees and not, as the company argues, self-employed contractors. In the latest challenge to employment conditions in the gig economy, they are seeking compensation for not receiving holiday pay and for being paid wages below the legal minimum for employees.

The Deliveroo worker’s move follows successful employment tribunal cases brought by cycle couriers at CitySprint, Excel and drivers for taxi app Uber. All three cases found the riders were workers, meaning they are entitled to basic employment rights including holiday pay and the minimum wage, rather than self-employed contractors with no employment rights. 

Uber claimed that its 40,000 drivers in the UK are self-employed, and therefore not entitled to pensions, holiday pay, or other basic employment rights. An employment tribunal in London disagreed, calling Uber’s argument that it was simply a technology company “ridiculous”, and they were relying on “fictions and twisted arguments.”

HMRC is investigating delivery giant Hermes for paying workers less than the minimum wage. Staff receive no holiday or sick pay, and risk losing work if they can’t make their rounds due to illness or lack of childcare.

Some 78 couriers working for Hermes, a company that describes itself as “the UK’s largest nationwide network of self employed couriers”, have subsequently made complaints to Frank Field, the chairman of the House of Commons work and pensions select committee.

It is estimated that falsely classifying workers as self-employed is costing the UK up to £314m per year in lost tax and national insurance contributions. 

A recent study has found that the average self-employed contractor is now paid less than in 1995

The Resolution Foundation – a think tank that aims to improve pay for families – partly has blamed the changing nature of the self-employed workforce. Their report says: “With the introduction and growth of the [so-called] New Living Wage, by 2020 more than 1 in 7 are expected to be paid at or only just above the legal minimum. This increases the need for employers and government to provide personal progression opportunities to get people beyond the wage floor.”

Currently, the government expects individuals to make in-work progression without support, or face financial penalties (sanctions) to their top up Universal Credit. This draconian approach forces unreasonable responsibility onto individuals and their familes, because the problem of low pay is one of exploitative employers and government policy rather than of individual behaviour.

Employers are responsible for setting pay levels and terms. The problem is more broadly one of the key features of neoliberalism, which has led to increasing employment precarity, characterised by insecure, exploitative forms of work. Meanwhile, the organisation of labour and collective bargaining by trade unions are being portrayed as “market distortions” by a government (and a party) that has legislated mercilessly to undermine the basic rights and fair levels of pay for employees.

The Labour party have pledged to reverse the Conservative’s anti-union laws if they are elected June.

The political logrolling of the profit incentive presents us with the most unedifying and hard face of neoliberalism, in which human need is profoundly devalued; the employee is merely availed of as an object of value extraction. The Conservatives certainly don’t value the idea of “a fair day’s wage for a fair day’s work”, despite all their rhetoric about “making work pay”. Over the past six years, we learned that this slogan was only a semantic decoy: a cover for the dismantling of our welfare state by a creeping, unremitting stealth.

The report went on to say that many more people had taken up lower-paid jobs in the so-called “gig economy, essentially self-employed workers taking on a variety of different roles, while the proportion of self-employed business owners with their own staff had fallen. The number of hours worked by the self-employed had also declined.

The foundation said this had limited wage growth before the financial crash, but that pay had been “squeezed” in real terms more recently, falling £100 a week by 2013-14.

Last year, TUC general secretary Frances O’Grady said: “Britain’s new generation of self-employed workers are not all the budding entrepreneurs ministers like to talk about.

“While some choose self-employment, many are forced into it because there is no alternative work. Self-employment today too often means low pay and fewer rights at work.”

The Resolution Foundation’s most recent briefing looks at the final quarter of labour market data for 2016. It says: “Most importantly, inflation has risen rapidly in recent months, weighing heavily on real pay growth – though published pay statistics will take some time to fully reflect this. Well over a third of the workforce are experiencing shrinking pay packets according to the latest figures, in sectors ranging from accommodation to finance and the public sector. Many more will join them in the coming months as inflation continues to rise, with pay across the economy as a whole set to have fallen in the first three months of 2017.

Indeed, our ‘Spotlight’ article notes that real pay in the public sector has likely now begun a fall that could well last for several years. Conversely, private sector pay growth will continue to outpace the headline average earnings figures.”

A Department for Business spokesperson said the government was “committed to building an economy that works for everyone”.

Last year, Damian Green said, in a speech at the Resolution Foundation, that the private sector and voluntary sector “should be more involved in the provision of welfare services”. Green’s endorsement of the “exciting” gig economy and the “huge potential” that it offered came just the month after an employment tribunal found that drivers for the Uber car service should in fact get the minimum wage and paid holiday. 

Green also said: “The Government is a necessary, but not sufficient provider of welfare.” 

Shadow Digital Economy minister Louise Haigh tabled an amendment to the Government’s Digital Economy Bill, New Clause 24, following the tribunal ruling against Uber. 

She said there was still a danger that despite the ruling, Silicon Valley multinationals and other employers could use “loopholes” to break the rules and get around workers’ protections. 

Haigh said: “This is a landmark ruling for workers in the digital economy, and a great victory for the GMB and its members.

“The digital economy was supposed to promise choice and flexibility, but the reality for too many in the sector is that they are overworked, underpaid and exploited by bosses they never meet and who do not even fulfil their basic duties as an employer.

The Work and Pensions Committee report

In a new report the Work and Pensions Committee also concluded that the government must close the loopholes that are currently allowing “bogus” self-employment practices, which are potentially creating an extra burden on the welfare state while simultaneously reducing the tax contributions that sustain it. Increasingly, some companies are using self-employed workforces as cheap labour, excusing themselves from both responsibilities towards their workers and from substantial National Insurance liabilities, pension auto-enrolment responsibilities and the Apprenticeship Levy. 

In an inquiry that has had to be curtailed because of the election, the Committee heard from “gig economy” companies like Uber, Amazon, Hermes and Deliveroo, and from drivers who work with them. The evidence taken painted starkly contrasting pictures of the effect and impact of “self-employment” by these companies.

Companies utlilising self-employed workforces frequently promote the idea that flexible employment is contingent on self-employed status, but the Committee says this is a fiction.

The report

The Committee says:

  • The apparent freedom companies enjoy to deny workers the rights that come with “employee” or “worker” status fails to protect workers from exploitation and poor working conditions. It also leads to substantial tax losses to the public purse, and potentially places increased strain on the welfare state.
  • Designating workers as self-employed because their contract offers none of the benefits of employment puts the cart before horse. It is clear, though, that this logic has taken hold, enabling companies to propagate a myth of self-employment. This myth frequently fails to stand up in court, but individuals face huge risks in challenging their employment status that way.
  • Where there are tax advantages to both workers and businesses in opting for a self-employed contractor arrangement, there is little to stand in the way.
  • An assumption of the employment status of “worker” by default, rather than “self-employed” by default, would protect both those workers and the public purse. It would put the onus on companies to provide basic safety net standards of rights and benefits to their workers, and make the requisite contributions to the social safety net. Companies wishing to deviate from this model would need to present the case for doing so, shifting the burden of proof of employment status onto the better resourced company. 
  • Self-employed people and employees receive almost equal access to all of the services funded by National Insurance, especially with the introduction of the new state Pension, yet the self-employed contribute far less. The incoming government should set out a roadmap for equalising employee and self-employed National Insurance Contributions.
  • The Department for Work and Pensions (DWP) needs to ensure that its programmes and resources reflect the positive contribution that self-employment can make to society and the economy. This may require an expansion of specialist support in JobCentre Plus.
  • The DWP is seeking to support entrepreneurship without subsidising unprofitable self-employment. The existing Minimum Income Floor (MIF) in Universal Credit (UC) does not get this balance right and risks stifling viable new businesses. The incoming Government should urgently review the MIF with a view to improving its sensitivity to the realities of self-employment. Until this is complete, the MIF should not apply to self-employed UC claimants.

Chair’s comments

Frank Field MP, Chair of the Committee, said;

“Companies in the gig economy are free-riding on the welfare state, avoiding all their responsibilities to profit from this bogus “self-employed” designation while ordinary tax-payers pick up the tab. This inquiry has convinced me of the need to offer “worker” status to the drivers who work with those companies as the default option. This status would be a much fairer reflection of the work they undertake which seems to fall between what most of us would think of as “self-employed” or “employed”. 

It would also protect them from some of the appalling practices that have been reported to the Committee in this inquiry. Uber’s recent announcement that it will soon charge its drivers for sickness cover is just another way of pushing costs onto the workforce, to reinforce the impression that those workers are self-employed.

Self-employment can be genuinely flexible and rewarding for many, but “workers” and “employees” can and do work flexibly. Flexibility is not the preserve of poorly paid, unstable contractors, nor does the brand of “flexibility” on offer from these gig economy companies seem reciprocal. It is clearly profit and profit only that is the motive for designating workers as self-employed. The companies get all the benefits, while workers take on all the risks and the state will be expected to pick up the tab, with little contribution from the companies involved.

It is up to Government to close the loopholes that are currently being exploited by these companies, as part of a necessary and wide ranging reform to the regulation of corporate behaviour.”

Uber


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A brief view of the budget

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He’s not very bright our chancellor, is he? Self-employed people face an increase in their National Insurance (NI) contributions as the Chancellor says he wants to “tackle the unfair burden on people in employment”. Presumably he means self employed people are not in employment. Yet they certainly aren’t included in unemployment figures, either. Last time I checked, employment means “the state of having paid work.”

That’s yet another broken manifesto pledge.

Gutto Bebb, Conservative Welsh minister, hit out at the proposals and called on the Government to “apologise.” Iain Duncan Smith added his voice to calls for a rethink of proposed changes to the National Insurance contributions after Hammond suggested that Brexit is responsible for the Government’s tax raid – conveniently mentioning Brexit for the first time regarding his budget. But he later denied that self-employed workers were paying the price for Brexit. Hard to keep up with what passes as the Conservative brand of reasoning and justification. It certainly makes me feel dizzy and nauseous, that’s for sure.

Hammond could have simply reduced the rate of NI that employees pay instead. He’s a bit of a wally. We did have a period of economic growth last year, second to only Germany, apparently. Good old Tories, eh?  Hurrah!

But I wonder who will benefit from that, assuming it’s really a growth in the economy? It won’t be disabled people claiming Personal Independence Payment (PIP) with severe psychological distress who can’t leave the house, that’s for sure. Or those suffering epilepsy, both types of diabetes and blackouts who need support with managing their treatments and monitoring their health conditions.

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A period of Orwellian growth. The economy is currently being propped up by increasing personal debt.  

All of these conditions in fact: Diabetes mellitus (category unknown), Diabetes mellitus Type 1 (insulin dependent), Diabetes mellitus Type 2 (non-insulin dependent), Diabetic neuropathy, Diabetic retinopathy, Disturbances of consciousness – Nonepileptic – Other / type not known, Drop attacks, Generalised seizures (with status epilepticus in last 12 months), Generalised seizures, (without status epilepticus in last 12 months), Narcolepsy, Non epileptic Attack disorder (pseudoseizures), Partial seizures (with status epilepticus in last 12 months), Partial seizures (without status epilepticus in last 12 months), Seizures – unclassified Dizziness – cause not specified, Stokes Adams attacks (cardiovascular syncope), Syncope – Other / type not known.

And these:  Mood disorders – Other / type not known, Psychotic disorders – Other / type not known, Schizophrenia, Schizoaffective disorder, Phobia – Social Panic disorder, Learning disability – Other / type not known, Generalized anxiety disorder, Agoraphobia, Alcohol misuse, Anxiety and depressive disorders – mixed Anxiety disorders – Other / type not known, Autism, Bipolar affective disorder (Hypomania / Mania), Cognitive disorder due to stroke, Cognitive disorders – Other / type not known, Dementia, Depressive disorder, Drug misuse, Stress reaction disorders – Other / type not known, Post-traumatic stress disorder (PTSD), Phobia – Specific Personality disorder, Obsessive compulsive disorder (OCD).

What kind of government cuts support for those needing help to manage medication, monitor a health condition, or both?

What kind of government cuts mobility support for people who can’t leave the house alone?

It seems that most people who are actually ill won’t be eligible for PIP. I wonder which people the government have in mind when they say “those in greatest need”?

Oh, it’s the millionaires again. Phew! Silly me.

From the Equality Trust:

pie wealth

The poorest people lose out from the budget yet again, of course. The distribution of wealth won’t change, with many households in the lowest deciles being worse off. The graph above does not show the full extent of the difference between the richest and the rest of society. This is because the top 1% have incomes substantially higher than the rest of those in the top 10%. In 2012, the top 1% had an average income of £253,927 and the top 0.1% had an average income of £919,882.

If you earn a few hundred thousand, you are set to do rather well yet again from another Tory budget. It’s remarkable how those need it least always get the financial “incentive” isn’t it?  Carrots for the fat cats.  It’s the delux model of “incentives”.

Meanwhile those who need it most pay for those who need it least. Poor people get the budget premium “incentive”, which includes standing on the naughty step, and thinking about what you have not done.

The Tories like wielding a stout stick and giving out a good thrashing for those who dare to fall ill. 

And just to clarify, social justice, equality and inclusion are NOT the same thing as work. They should exist independently of someone’s employment status. Otherwise, “inclusion” takes an Orwellian turn to the far right. We know from history that work doesn’t really set us free. People “enjoying the security and dignity of work” does not entail ensuring those who can’t work or who lost their job are utterly insecure, hungry or destitute. 

The government’s “pledge” to increase adult social care funding is being paid for by increases in council tax, some of which will be paid by those previously exempted from council tax because they are sick, disabled or unemployed. Social security was originally calculated to meet only the cost of fuel and food on the assumption that people needing support would be exempt from rent and council tax. That no longer is the case.

The rises due to come into force from April will not be sufficient to avoid strapped for cash councils having to make deep cuts to essential services, including road repair, parks, children’s centres, leisure centres and libraries. All of this in a time of “economic growth”. It looks like austerity is to be a permanent feature of Conservative neoliberal policy-making.

For many families who are just about managing, the withdrawal of state support for those who are in low paid work is hardly an incentive to “make work pay”. Of course Hammond has ignored the scandal of in-work poverty. This is one of the other austerity measures that he has chosen to keep. Introducing sanctions for those claiming social security because their employers don’t pay them enough to live on is simply a big bully’s stick, which would be better aimed at exploitative and miserly big business employers. Fancy punishing people because profit driven businesses pay as little as possible. 

It’s all the same peevish and spiteful mentality as “making work pay.” Instead of ensuring workers get a decent rate of pay, like you’d think from the Tory claim, the truly nasty party cut benefits and decided to impose punishing conditions on people who need state support indiscriminately, regardless of the reason, instead.

That’s pure upper class prejudice and malice.

And greed. 

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Meet Brexit, by the way, he’s the big elephant in the room, Mr Hammond


 

I don’t make any money from my work. I am disabled because of illness  and have a very limited income. The budget didn’t do me any favours at all.

But you can help by making a donation to help me continue to research and write informative, insightful and independent articles, and to provide support to others. The smallest amount is much appreciated – thank you.

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