SOLVE THE “UBER RIGHTS” PROBLEM-
WHAT YOU MUST DO IF YOUR BUSINESS IS USING SELF-EMPLOYED CONSULTANTS OR CONTRACTORS OR FREELANCERS?
For over a year we have been advising our clients about the risks of using freelancers. We discuss in depth any potential pitfalls and the protective steps that a business must take if it’s going to use self-employed consultants, contractors (often called freelancers) to deliver to customers/clients. However, there’s always a feeling of “it won’t happen to me” that all delude ourselves with when starting a business where freelancer use seems to make a lot of sense.
Except now it has. It’s happened big style to someone. To Uber, to Deliveroo and no doubt many other businesses will also be affected.
What’s All the Uber Fuss About?
Unless you’ve been hibernating, you’ll know that Uber is a software company that developed technology which puts taxi drivers and potential customers needing a ride in touch with each other. Uber and (and many other similar businesses) provide the means (in this case, the software) to make this relationship happen – they don’t provide the taxis/ or deliver the services. They facilitate the connection, the platform so things can happen.
Instead, taxi drivers sign up to the software on the basis that they want to find customers. At its simplest, it’s a way of marketing your taxi business. Taxi drivers pay for that help by paying Uber a percentage of what they earn.
Although some taxi drivers and other types of freelancers do form limited companies, most are registered to pay tax (with HMRC) as self-employed individuals.
To some extent it’s easier if the taxi driver or freelancer does operate as a limited company because it’s really clear that your business is contracting with another business. It’s when the taxi driver or freelancer is self-employed, or providing a personal service to your business that the problems really start.
What’s the Problem?
It’s all to do with working status and what rights and benefits individuals are entitled to. Things such as guaranteed minimum wage, holiday pay, sick pay, maternity and parental/adoption leave and pay, sick pay and more. These are all very valuable rights and benefits.
Limited Company – it’s usually clear that you are working with another business (although there are still some potential pitfalls) so that a limited company doesn’t have working status rights and benefits because it’s not an individual. Where a limited company is owned (shares held) by one person and it’s the same person doing all the work under a contract then HRMC will dig further also into that scenario If the limited company has just the one client or so few clients it’s looking like multiples of part time employment. A lot here will depend on the contract in place and how things operate on a day to day level. It’s complicated.
Employees – at the other end of the scale, if you are employed you have great benefits, such as guaranteed minimum wage, holiday pay, sick pay etc, but of course, not quite the same working flexibility.
Self-employed – Being self-employed and running your own business sometimes sucks. You personally probably provide the work/service but you don’t have the rights that employees have. Unless you work you don’t get paid and there is no minimum wage, holiday or sick pay and certainly no guarantee that you’ll get paid and make the rent/mortgage at the end of the month. Yet what you do have is flexibility and freedom – choose what you do and when you do it making it ideal to fit in with other life options and commitments.
Workers? – Now here comes the twist. Sometimes self employed people who personally provide the work/service can be classed as “workers”. It all starts (but is not quite as simple) with how easily that could substitute someone else to do the work. So, for example, your business contracts with Mr X but even if he was ill it would be difficult for him to send someone in his place to do the work, then Mr X would probably be a worker.
Workers do not have all the rights that employees have, but they do have some, such as
- being paid at least the National Minimum Wage
- having paid holiday and rest breaks
- protection against unlawful discrimination and less favourable treatment if they only work part-time.
It’s because of these rights that
- the self-employed freelancer would like to be a worker. So, the taxi drivers working with Uber want to be classed as workers to get these rights
- it may not be what your business has in mind
It would always be wrong to exploit anyone when you are in business. we think that using self-employed freelancers to deliver to your clients is still a great idea because you can access highly skilled, professional and committed individuals who enhance your business. However, we believe that for both the sake of your business AND the self-employed freelancer it’s vital to set things out clearly from the outset so that everybody knows their rights, obligations and role generally.
Both your business and the freelancer need to get the relationship committed into a firm and clear agreement by following these steps:
Step 1 – decide what’s important to each of you in the relationship e.g. flexibility, access to work or something else.
Step 2 – agree what you expect from each other and work out the rights and obligations for each of you
Step 3 – look at what areas could grow into problems and consider the solutions
Step 4 – compromise on the basis that you can’t have the best of both worlds. We call it the “penny and bun” syndrome. You can’t, for example, have the flexibility of not having to pay someone full time but then expect them to be on speed dial every time you need them, irrespective of what’s happening to them or their own plans.
Step 5 – get it writing
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