The gig economy is a labour market of short-term contracts and freelancers. It’s on the rise in recent times, with many companies preferring to hire people on short-term contracts rather than full-time employees.
Companies can end up saving money by using gig workers because they don’t have to pay them employee benefits and can use them as and when they need them.
Many high-profile companies have come under fire for relying on these gig workers to avoid paying salaries. In these cases, it’s uncertain whether a worker can be classed as an employee or self-employed.
The recent case of Pimlico Plumbers ended with them losing the court battle over the status of its workers. The company argued that one of their plumbers was an independent worker, despite working for the company for six years. The court ruled that he was not in fact self-employed.
Bad News for the UK Economy
New research from the Trades Union Congress has highlighted that the gig economy is actually having a detrimental effect on the UK economy as a whole.
The rise in insecure work is thought to be costing the government nearly £4bn a year due to lost tax income and benefit pay outs. As people are not earning enough, many gig workers are still having to rely on benefits to make ends meet. This is not the picture most people have in mind when they think of someone who is self-employed.
The number of self-employed people has grown by 26% in the last ten years to 4.8 million. They account for 15% of people in work. The TUC says that of these figures, the amount of people in low paid self-employed work has risen by 21% over the last decade.
General Secretary of TUC, Frances O’Grady said: “The huge rise in insecure work isn’t just bad for workers. It’s punching a massive hole in the public finances too.
“Zero-hours contracts and low-paid self-employment are costing the economy billions every year in lost tax revenues. That’s money that could be spent on stopping the crisis in our schools and hospitals and making sure every elderly person gets decent care.”
The TUC says that around one in ten workers are believed to be in insecure work. O’Grady said: “Bosses who employ staff on shady contracts are cheating all of us. That’s why we desperately need more decent jobs that pay a fair wage. Getting more people into unions is key. Employees in unionised workplaces are twice as likely to be on better-paid, secure contracts.”
Theresa May’s adviser on the future of work, Matthew Taylor has previously warned that the gig economy is bad for the public interest. He was appointed to review employment practices and concluded that self-employed workers and contractors were paying around £2,000 a year less in tax than employees in similar roles.
A spokesperson for the government said that: “The government is committed to creating an economy that works for everyone and that is why Matthew Taylor is leading an independent review into whether employment practices need to change in order to keep pace with modern business models.
“We recognise that the tax system also needs to adapt, and the government is considering ways to ensure it remains fair, simple and effective for everyone.”
Do you think gig work is a good or bad thing? Have you ever worked as a gig worker? Share your thoughts and experiences in the comments!
Want to learn more?
Subscribe to our newsletter to get accounting tips like this right to your inbox
About The Author
An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.