Gig economy companies are free-riding on the welfare state, says a new report.
Published by the Work and Pensions Committee, the report urges the UK government to close the loopholes that are currently allowing “bogus” self-employment practises.
Frank Field MP, chair of the Committee, commented on the findings: “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.
The MP went on to note the inquiry had convinced him of the need to offer “worker” status to the drivers who work for companies operating within the gig economy.
“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”.
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“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,” he added.
Additionally, the report notes that companies relying on self-employed workforces frequently promote the idea that flexible employment is contingent on self-employed status. However, the Committee says this is a fiction. Firms in the space, however, argue this model enables workers to gain more flexibility and greater control over their working hours.
The report highlights why MPs reject this argument: “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 increases the strain on the welfare state.
“Designating workers as self-employed because their contract offers none of the benefits of employment puts 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,” it notes.
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Finally, the Committee said the Department of Work and Pensions was seeking to support entrepreneurship without subsidising unprofitable self-employment.
The existing Minimum Income Floor (MIF) in Universal Credit (UC), it said, does not achieve the right balance 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,” it concludes.