The gig economy – in which workers are employed on short-term contracts or freelance terms – has become an increasingly popular form of employment over the last year or so.
Fuelled by disruptive businesses such as taxi application Uber and food delivery service Deliveroo, workers get paid for each ‘gig’ – rather than a salary. The trend has grown in recent years to the point that an estimated five million people in the UK and 30% of the US labour force are employed in this capacity. Yet, despite the size of the gig economy, the trend has attracted both negative headlines and the attention of regulators, which could herald the end of the system.
Should procurement be worried about such a trend?
Supply chains are becoming increasingly stocked by workers employed on either short-term or freelance contracts. From seasonal farm workers to contracted warehouse staff, many parts of the supply chain employ such workers.
Paying workers by the gig has helped companies to manage labour costs, as they do not have to pay for time off, pensions or any kind of national insurance contribution.
However, the media has reported numerous instances of businesses taking advantage of workers. This has led to a number of tribunal hearings in the UK to determine whether these employees should, in fact, be classed as permanent or temporary. In October 2016, Uber drivers in the UK won the right to be classed as employees – rather than independent contractors. Meanwhile, in January 2017, a courier with logistics firm City Sprint won a similar suit, gaining access to full employee rights and benefits.
If a business wrongly classifies an employee as an independent contractor, then it can face fines and considerable legal costs further down the line.
Similarly, a recent UK government review proposed that companies should start to pay national insurance on gig economy workers.
While the cost advantages may appeal to firms, the risk posed by bad press and the potential for governments to update employment law and tax codes mean the gig economy could be on its way out before it even really takes off.
Image: Jonathan Weiss / Shutterstock.com
This article is a piece of independent writing by a member of Procurement Leaders’ content team.