Sarah Ingwersen Market Insight, In-House
Following a recent event held in partnership with Taylor Wessing, Sean Nesbitt, Partner in Employment, Pensions & Mobility team, offers his views on the gig economy and how it may affect the legal sector.
How big is the gig economy?
All good lawyers like a definition! In the narrowest sense, meaning those working on digital platform–enabled short-term tasks, UK studies estimate 2.8 million in the government's February 2018 survey, down to 1.1 million in last year's RSA survey (links to both are below).
You need to look at all survey methodologies very carefully, because they generally take narrow samples, and can fluctuate widely if extrapolated from different geographies – the US labour market is very different from the UK, and many surveys derive from the US.
Even if the gig economy, in the sense of platform–enabled workers, has embraced over a million people, very few people depend on it as their main source of income. There are notable demographic features e.g. young people are much more likely than older to have worked in it, and it is very London-centric.
On the other hand, if we take a wider definition of gig economy to mean those who work in "atypical" jobs – short term, temporary, agency work, zero hours employment contracts, self-employed - the figure could be as high as 8 million. Drawn from the Office of National Statistics Labour Force Survey September 2018, some numbers are:
- Self-employed: 4.8 million
- Agency workers: 0.9 million
- Zero hours employment contracts: 0.9 million [This excludes platform workers in that capacity]
- Total UK workforce: 32 million
How is the gig economy affecting the traditional model of working life?
In either sense, the gig economy is growing and likely adding to as well as displacing full-time jobs. It enables a number of shorter-term, transitory relationships with less investment cost from businesses (and people). It can mean less access to the developmental and social benefits conventionally associated with full-time employment e.g.
- Access to training
- Access to safety net services such as health insurance, life insurance, sick pay
- Retirement savings vehicles
On the other hand, it means:
- Ease of access to jobs without long-term commitment
- Perceived autonomy
- To the government, a big concern of the gig economy is a likely reduction in social security and PAYE contributions, and these taxes are particularly important as it is easier to tax wages for people and transactions. Hence suggestions that the platforms which use gig economy work might have a different taxation treatment – see the exploratory report from the Office of Tax Simplification here https://www.gov.uk/government/publications/ots-suggests-paye-equivalent-for-online-platform-workers
Some of the downsides of the gig economy are that contractors cannot get redundancy pay, have no holiday pay, pension auto-enrolment, no maternity/family rights and no minimum notice period – Will this affect the gig economy in the long term?
Some of these "lost rights" arise through misclassification. If it is accepted that people are workers within the UK statutory definition, they will have rights to holiday pay and pension auto-enrolment – they may not want to take up the latter, because of the contribution levels required from workers themselves, but there is that option. A key feature is to avoid misclassification, because it enables newer business models to compete unfairly with established businesses.
Once misclassification is reduced, we move on from questions of unfair competition or legality into desirability. Since conventional employers have traditionally carried with them a bundle of social obligations – (training – benefits, provision of other support networks etc), once that model is eroded, where will those benefits come from? And what happens if there is not enough work to go round (a concern of some people around automation)? At this point you look at long range forecasts around the provision of a universal income to all in society, whether they work or not, and potential dystopian visions of a world where professional work is a highly prized, narrow access benefit, reducing social mobility.
Do you see the future of work being the gig economy?
Yes, it's part of the future. Young people positively want to work this way – indeed surveys consistently report that all ages of participants positively choose to work on platforms.
It can enable economic growth, and result in greater productivity, which is a problem with the current UK economy.
A third reason is that the "worker" status associated with the gig economy, if preserved, can act as an exploratory middle way between full-time employment and the almost no-rights feature of self-employment.
Will Brexit increase the gig economy?
It is hard to get off the fence on this one! Brexit makes it more likely that we will retain and perhaps enhance the "worker" status in the UK, if this government remains in place that will support the gig economy. Recent commitments from the shadow chancellor would result in greater rights for workers, while not necessarily converting them into employees. That would not in itself erode the gig economy, as long as the services offered and business models are fundamentally sound.
Will law firms be affected by the gig economy? If so, how?
The short-term answer is that they get work because of it: a lot of firms are engaged on working out the regulatory perimeter and helping businesses avoid brand damage through false classification of gig economy workers.
They also use contractors for specialist skills and the growing gig economy is likely to be relied on to make those rare skills available e.g. in PR and brand management, IT, back office services.
In the wider sense of the gig economy – flexible workforces, lawyers on demand etc - it really depends on the nature of work undertaken. Firms with work entailing a large number of common processes – real estate, some banking, personal injury - etc may well enhance the use of a two-tier work force of permanent and temporary colleagues. If class actions – e.g. the Volkswagen diesel emissions case – gather pace, the economic model would suggest using larger numbers of atypical workers for these projects.
Also, unless law firms can provide enough autonomy, flexibility and variety, they are at risk of erosion as full-time employees seek other ways of working.