Labour’s New Deal for workers: a triple threat to the gig economy? 

June, 2024 - Shoosmiths LLP

The gig economy was created out of a desire for services to be on demand with limitless flexibility. If elected, Labour has pledged to provide greater job security and remove the distinction between worker and employee – are the two in conflict?

The gig economy is a term that describes a labour market where workers are hired to perform tasks on a short-term, flexible basis, rather than into permanent or full-time jobs. These tasks, also known as gigs, most commonly involve delivering food and driving passengers but might also include designing logos, writing articles and teaching languages. Workers in the gig economy, also known as gig workers, freelancers, or independent contractors, typically use online platforms or apps to connect with those who require their services. 

The gig economy has been growing rapidly in recent years, as technology has enabled more people to access and offer services online, and as more people seek alternative or supplementary sources of income, flexibility, and autonomy in their work. As a result, more organisations are looking to offer the necessary platforms or apps and the gig economy represents an important element in the technology sector. However, the gig economy also poses many challenges and risks for workers, such as lack of job security and typical benefits. In addition, and of concern to many, the gig economy raises many legal, ethical, and social questions about the nature, quality, and regulation of work in the 21st century.

In its document titled: Labour’s Plan to Make Work Pay – Delivering a New Deal for Working People, the Labour Party has set out its plans for the UK labour market, should it win the general election, which includes several proposals that could have significant consequences for organisations within the gig economy as well as other businesses operating within the wider technology sector.

Top of the list is the proposal to reduce the current three tiers of status (self-employed, worker and employee) to two – employee and self-employed. It is well known that in recent years the battle ground has shifted from distinguishing between an employee and a worker to separating workers from those who are genuinely self-employed. The reason is simple; an individual who has been categorised as a self-employed contractor by those engaging them only has to satisfy an employment tribunal that they are a worker (a much lower threshold than the employment test) to benefit from minimum benefits such as holiday pay, national minimum wage and sick pay. The problem for the gig economy is that any move that essentially eliminates the status of worker, will presumably mean that everyone who is not genuinely self-employed is an employee and if that is the case, they would be entitled to additional protections, including the right not to be unfairly dismissed. For business models that rely on being able to call upon individuals at short notice and, just as importantly, have no commitments to provide work to those individuals, the measures which the New Deal anticipates will be challenging.

One obvious solution to the change in status would be to employ individuals on zero hours contracts and retain them on an as and when needed basis. However, a second point to consider is that Labour’s New Deal proposes the abolishment of zero-hours contracts in order to remove the uncertainty and ‘one-sided flexibility’ that such arrangements provide. The combined removal of worker status and zero hours contracts would undoubtedly present those organisations operating within the tech/gig economy with significant challenges.

The third measure which would impact this sector of the economy in particular, is the proposal to ensure that all employees have protection against unfair dismissal from day one of their employment. Currently, an employee must work for a continuous period of two years before obtaining such general protection, but the New Deal would see basic employment rights applying from the first day of employment. The proposal confirms that employers would still be able to dismiss fairly for the usual reasons of capability, redundancy and conduct but also specifically mentions probationary periods. It will be interesting to see how this develops but it is clear that employers will be required to undertake a more robust and transparent process before dismissing someone with limited service than might currently be the case.

The New Deal seeks to implement numerous items that were identified in the 2017 Taylor Review into modern working practices, and which have been the subject of public consultation and political debate for many years.

Whilst Labour's plans if they win the election are clearly designed to protect those working in the gig economy who can be vulnerable to exploitation, the proposals present a serious challenge to organisations operation in the gig economy and the tech sector that rely on flexible and low-cost labour. By reducing the worker status options to either employee or self-employed, abolishing zero-hours contracts, and granting unfair dismissal protection from day one, the New Deal would likely require a radical overhaul of the current business models and practices of many employers. The New Deal aims to provide more security and fairness for workers, but it also raises questions about the viability and sustainability of the gig economy in the future.


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