MPs call for default 'worker' status for gig economy workforce

The Work and Pensions Committee has also recommended that the next government publish plans to equalise National Insurance contributions (NICs) for employees and those who are self-employed. Its inquiry into self-employment and the gig economy was cut short by the government's decision to call an early general election.

Committee chair Frank Field said that default 'worker' 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'".

"Self-employment can be genuinely flexible and rewarding for many, but 'workers' and 'employees' can and do work flexibly ... 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," he said.

'Worker' status is not the same as that of employee, and does not carry the same redundancy or unfair dismissal rights. However, workers do have the right to the national minimum wage under the National Minimum Wage Act and paid holiday leave under the Working Time Regulations.

Late last year, an employment tribunal in London upheld the claims of two Uber drivers who had argued that they were workers. Uber, which has appealed the decision, has argued that the drivers were in fact self-employed. The tribunal based its decision on the drivers having no contractual relationship with the ultimate customer, and very limited control over how they carried out work and what could be charged while working for Uber.

Self-employment is not currently defined by UK law. Different employment status tests are used for the purposes of tax, employment law and pensions auto-enrolment. An independent review into modern employment practices, led by Matthew Taylor, was commissioned by the Conservative government last year. Taylor has previously called for the government to end the difference in tax treatment between workers and the self-employed, which he has said often drives 'self-employed' status.

In its report, the Work and Pensions Committee described the drive by companies like Uber and Deliveroo to classify their workers as self-employed on the grounds that their contracts offered none of the benefits of employment as putting "cart before horse". This "myth" of self-employment frequently fails to stand up in court, but workers must bear the risks of challenging their employment status in this way.

An assumption of 'worker' status by default, rather than 'self employed', would protect the rights of these workers while shifting the burden of proof of employment status from the worker to the better-resourced company, according to the report. It would also require companies and workers to make the requisite contributions to the social safety net, through increased income tax and NICs.

The committee has also called on the incoming government to begin the process of equalising employee and self-employed NICs. Self-employed people and employees receive almost equal access to all of the services funded by NI, particularly following the introduction of the new state pension, yet the self-employed contribute far less. Plans to increase NICs for the self-employed, announced by chancellor of the exchequer Philip Hammond at the 2017 Spring Budget, were quickly dropped after Conservative backbench MPs claimed it breached the party's manifesto.

"While the committee doesn't say so in as many words, its conclusions confirm the direction of travel towards 'levelling the playing field' for tax purposes and applying PAYE and NICs to payments to workers," said employment tax expert Chris Thomas of Pinsent Masons, the law firm behind Out-Law.com.

"That would be a radical change, but echoes comments made by Matthew Taylor and certainly has some logic – indeed, many would say it is long overdue. It also looks very likely that the next government will take forward action to increase NICs from the self-employed, once no longer bound by the 2015 election manifesto commitments," he said.

Employment law expert Stuart Neilson of Pinsent Masons said that of the committee's central recommendations, the tax changes would be "simple enough to implement from a legal perspective, but could be politically very difficult".

"Conversely, implementing worker status by default would have limited political ramifications, but there would be huge practical and technical difficulties given the extent to which it cuts across employment law," he said. "There is no denying its attractiveness as a concept, but much would need to be thrashed out before we can see how it would work in practice."