MPs in the Work and Pensions Select Committee said the use of self-employed workers in the so-called gig economy rather than salaried employees undermines workers’ rights while reducing the government’s tax revenue.
Frank Field, the chair of the committee, said; "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 taxpayers pick up the tab.”
Workers in the gig economy are technically self-employed contractors, meaning they do not gain many of the rights of employees, while the employers do not pay national insurance contributions.
However, some of these arrangements have been challenged in court in cases where the contracts have the hallmarks of standard employment.
Pimlico Plumbers lost a recent case when one of its nominally self-employed contractors was found to be a worker because of the lack of control over his working conditions, while ride-hailing app Uber lost a similar ruling in October last year which could lead to its drivers receiving holiday pay.
Gig economy firms argue the model allows workers flexibility and control over their working hours. However, the MPs rejected that argument.
The report said: “Companies relying on self-employed workforces frequently promote the idea that flexible employment is contingent on self-employed status. But this is a fiction.”
The report said firms were instead using the arrangement to boost profits: “When pushed, however, Deliveroo, along with Amazon and Uber, conceded that their business models would still be viable if they took on couriers and drivers as employees. They might simply be less profitable.”
The government has commissioned Matthew Taylor, a former policy chief for Tony Blair, to carry out a detailed report on the gig economy and employment regulation, although the report, due in the summer, may be delayed by the General Election.
The committee’s report said the government should act to update the law and regulation surrounding self-employment, including possibly making employees “workers” by default.
The report said: “It is clear that current ways of categorising workers are creaking under the weight of the changing economy.”
Sean Nesbitt, partner at law firm Taylor Wessing, said: “The report concludes rights don't inhibit flexibility. Indeed they may support new, sustainable, evolutions of work."
He added: "Matthew Taylor will likely support and clarify the status of 'worker', perhaps relabelling it and working on the presumption that that is what staff are, with rights to contracts, and some workplace information and discussion. So agency staff at Shirebrook might be able to sit down with full workers and hear about management plans that affect them."
An Uber spokesperson said: “Almost all taxi and private hire drivers in the UK have been self-employed for decades and with Uber they have more control over what they do. Licensed drivers who use our app are totally free to choose if, when and where they drive with no shifts, minimum hours or uniforms.
“The vast majority of drivers who use Uber tell us they want to remain their own boss as that’s the main reason why they signed up to us in the first place. But we know drivers want more security too, which is why we are investing in a heavily discounted illness and injury cover offer for drivers with [self-employed association] IPSE.”
However, Field said: "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."