Taylor review spells bad news for gig economy companies

Deliveroo and Uber could soon wave goodbye to cheap, flexible labour. Today’s Taylor review threatens to put a bombshell under the gig economy by calling for workers – which companies have long insisted are self-employed – to be reclassified as ‘dependent contractors’.

The name may not mean much on its own, but it could represent a major shift in practice. ‘Dependent contractors’ would be entitled to sick pay, holiday pay and the national minimum wage in the same way as employees. If author Matthew Taylor has his way, the law would clearly set out what distinguishes these contractors from self-employed workers, and companies would be required to follow suit. It would represent a win for the many gig economy workers who complain they have all the hallmarks of an employee other than the associated benefits.

Of course, it isn’t a done deal yet. The Taylor report is simply making recommendations to the government, which has no obligation to follow them. For now, Theresa May is remaining tight-lipped over whether there will be a change in law and has simply stressed the important of “fair and decent” employment.

Yet the rise of court cases involving the gig economy – Uber and Deliveroo being the most high-profile – means the government will have to take the recommendations seriously. Nicholas Le Riche, partner at law firm Bircham Dyson Bell, believes the government “may well” go down the route proposed by the Taylor report.

Employment costs

If so, Deliveroo et al are likely to face a hit to their costs. “They’re going to have to seriously look at their business model because if they want to keep the level of control they have over these individuals, they might have to accept that means they’ve got to increase employment costs to pay holiday and sick pay,” says Le Riche. “Or alternatively they could make the arrangements even more flexible so they’re self-employed.”

Stephen Ratcliffe, employment partner at Baker McKenzie, points out there is potentially even “even bigger” issue in the form of proposed new tax rules. The report calls for ‘dependent contractors’ to be treated as employees for tax purposes – meaning companies will also be hit with a National Insurance bill.

It is unlikely any changes will take place in the near future, especially with a meagre Conservative government and looming Brexit negotiations. But the message to the gig economy is clear: companies should no longer be able to have their cake and eat it.