What does the Uber ruling mean for contractors and the self-employed?

Uber drivers have been granted employment rights by the gig economy giant

Following a landmark victory for Uber drivers at the Supreme Court, much has been made about the decision to change their employment status from ‘self-employed’ to ‘workers’, and with it grant them certain employment rights. 

A two year legal battle reached its conclusion in February after judges took the view that Uber exercised significant control over its 60,000 plus UK drivers, dictating the fares they charge and imposing contractual conditions on these individuals. 

But such is the confusing nature of employment law, that many self-employed workers (and contractors for that matter) want to find out the possible implications of what is arguably one of the most significant moments in the history of the gig economy.

The questions asked range from ‘will it set a precedent?’ to ‘what are the ramifications for IR35?’. In this article, we will explore what the result means for the millions of people working for themselves in the UK.

Zero rights employment debate brought into sharp focus 

So what impact might this case have on IR35, if any? Directly, none. Uber drivers were working self-employed as sole traders and the IR35 legislation only applies to individuals operating through personal services companies. However, that’s not to say it doesn’t strengthen the case for contractors to be offered employment rights when operating inside IR35, where they are deemed ‘employees for tax purposes’. 

That Uber drivers have been handed holiday pay and minimum wage amongst other benefits, makes it difficult for the government to justify ‘zero rights employment’ - which effectively is what occurs when a contractor works inside IR35, where they are taxed as an employee but don’t receive rights in return. 

After the Uber case and taking IR35 reform in the private sector into account, the debate has been brought to the fore once again. While the government have promised to consult on the issue, it seems little progress has been made. Even so, watch this space. 

An important victory for the gig economy 

When focusing on gig economy workers - whether Uber drivers, Deliveroo riders or Amazon couriers - this win could set a precedent and see others who work this way given greater protection by their clients, who are under pressure to act. For example, since the Uber result, Deliveroo has lost a potential investor who chose not to invest in the food delivery service due to “concerns” over workers rights.

Along with Deliveroo, the Uber case is also likely to encourage other businesses to carefully consider the employment status of the individuals they engage - should someone be classed as self-employed, a worker or even an employee? 

Companies that fail to ensure employment status is set accurately from the outset will likely count the cost. This was a point our CEO, Seb Maley, made clear in The Guardian in the aftermath of the Supreme Court verdict:

“The ruling should serve as a stark reminder to businesses that employment status isn’t always clear cut, and that decisions must be made carefully. If a firm engages an individual under the wrong status, the cost - both financially and reputationally - can be massive.”

Contrasting needs of self-employed must still be acknowledged

However, not all independent workers - whether sole traders, contractors or consultants - are demanding employment rights. In many cases, people working for themselves would like to remain entirely independent. 

Understandably, it’s a different story for contractors operating inside IR35. 89% of independent professionals surveyed by Qdos in the past said they would expect employment benefits in return for being taxed as an employee.

With this in mind, perhaps what matters most is that the Government recognises the clear difference between gig economy workers (Uber drivers and similar) and the wider self-employed workforce (professional freelancers and contractors). It would be short-sighted to assume that the entire self-employed population - which is made up of different groups with contrasting needs - are vulnerable and want employment rights. 

Looking ahead, the issue of employment status looks set to grow in importance, hand in hand with the rise of the gig economy. It’s also an area of employment law that matters deeply to the wider self-employed workforce, who must work under the right status to ensure they pay the correct tax and, if working as an employee, receive the benefits they deserve. 

Qdos provide a range of award-winning  services to help freelancers, contractors and the self-employed determine their employment status and IR35 status. For more information, please call  0116 269 0999 or email [email protected].