Working in the
The Micro Business Handbook
22 June 2017
Results from the latest Zurich SME Risk Index have revealed that more than a quarter (26%) of small and medium-sized enterprises in the UK have employed at least one gig economy worker – a worker with one or more short term contracts or doing freelance work – in the last 12 months.
I have been working in the gig economy for over 20 years and didn’t really know it. The freelance writing business I have been developing has been given many titles over the year. I’m a freelancer, contractor, creative specialist, content producer etc.
Only recently have we been hearing the term ‘gig economy’ when in fact, its origins go back to the financial crash of 2008, when many workers found they needed an additional income, so begun doing ‘gigs’ or part-time work to make ends meet. The term ‘gig’ is musician’s slang for an engagement to play, with the earliest use of the term in 1950’s America.
Today of course, the term is an umbrella for the legions (around 6 million now work in the gig economy) of freelancers and micro business owners that have chosen to go it alone and take more control of their work/life balance.
Companies such as Deliveroo and of course Uber have moved the gig economy into the limelight. People have always contacted their labour to businesses, but today, the whole business model of some companies relies upon a flexible workforce.
The research from Zurich is the latest to look closely at how the gig economy has rapidly developed over the last few years, and how it’s set to massively expand, as workers look for more flexible employment.
workers are now the norm in many businesses
Of those decision makers that have employed gig economy workers in the last 12 months, many attest to the importance of flexible workers to their business, with more than two thirds (70%) agreeing that gig economy workers are important to their company’s profitability. One in ten of these decision makers (10%) reported that gig economy workers make up 90% of their workforce or more, while more than two in five (41%) report that gig economy workers make up at least a quarter of the workforce.
When asked to describe gig economy working practices from the perspective of a worker, almost three in five (58%) stated that they believed the gig economy provided “flexibility for workers”, while more than a third (34%) said that gig economy work provided “new opportunities” for workers and was “time efficient” (28%).
Yet, the survey demonstrates that SME decision makers are also conscious of the risks for gig economy workers, as well as the benefits. When asked to select as many responses as was appropriate, more than half (52%) agreed that gig economy work “lacks security”, while more than a quarter (27%) agree it can be “exploitative” and a fifth (20%) are of the opinion that the arrangement can be “unfair” on workers.
There are potential negative impacts for businesses too, and a significant number of decision makers agree that gig economy work can result in a lack of security for their own business. Two in five (40%) reported concerns that gig economy work can create a less dedicated workforce and almost a third (30%) agreed that it can create a less motivated workforce.
Nonetheless, Zurich’s statistics suggest that, overall, SMEs are embracing the opportunities the gig economy has to offer. Almost three in five (57%) agree that gig economy work was “flexible for businesses”, and nearly two in five (38%) thought it created greater opportunity to “better manage workforce capacity”.
Paul Tombs, Head of SME Proposition at Zurich, comments: “With so many UK SMEs employing gig economy workers, it would be a mistake to characterise the entire gig economy as an exploitative tool that only benefits employers. Self-employment is on the rise and demonstrates an increasing demand for flexible work which is beginning to shape the way that businesses think about workforce management.
“While politicians and the media voice concerns that gig economy work is about maximising profits and manipulating staff, when we speak to business owners, it is clear that the majority are associate it with flexibility and opportunity. If the gig economy has sprung up as an imperfect solution to the increasing demand for flexible work, then a review of the system should focus on reforms that maximise the benefits for all parties rather than descending into a blame game.”
“With so many UK SMEs employing gig economy workers, it would be a mistake to characterise the entire gig economy as an exploitative tool that only benefits employers.”
As a gig economy worker, I am in control of the work I do and the businesses I work for. Some enterprises that use gig workers as the basis of their businesses will find that legislation and regulation is coming. As the gig economy expands, governments will increasingly pay attention to this growing group of workers.
For freelancers like me, more social security would be welcome, and could be paid for with a different tax structure. The risk is that government attempts to bring freelancers and those across the gig economy into the employed workforce, which in many ways is trying to square a circle, and is a misunderstanding of why people enter the gig economy in the first place.
New research published by CIPD shows 4% of UK working adults aged between 18 and 70 are working in the ‘gig economy’, and nearly two-thirds of them (63%) believe the Government should regulate to guarantee them basic employment rights and benefits such as holiday pay.
The research also found that, contrary to much of the rhetoric, just 14% of respondents said they did gig work because they could not find alternative employment. The most common reason for taking on gig work was to boost income (32%). Overall, gig economy workers are also about as likely to be satisfied with their work (46%) as other workers in more traditional employment are with their jobs (48%).
Control and better work/life balance are key to gig economy workers.
However, there were concerns raised by some workers interviewed for the report about the level of control exerted over them by the businesses they worked for, despite them being classified as self-employed. This is supported by the data, as just four in ten (38%) gig economy workers say that they feel like their own boss, which raises the question of whether some are entitled to more employment rights.
Peter Cheese, Chief Executive of the CIPD, the professional body for HR and people development, said: “This research shows the grey area that exists over people’s employment status in the gig economy. It is often assumed that the nature of gig work is well-suited to self-employment and in many cases this is true. However, our research also shows many gig economy workers are permanent employees, students, or even the unemployed who choose to work in the gig economy to boost their overall income.
“Our research suggests that some gig economy businesses may be seeking to have their cake and eat it by using self-employed contractors to cut costs, while at the same time, trying to maintain a level of control over people that is more appropriate for a more traditional employment relationship. Many people in the gig economy may already be eligible for basic employment rights, but are confused by the issue of their employment status.
“It is crucial that the government deals with the issue of employment status before attempting to make sweeping changes, else they risk building foundational changes on shifting sands. We welcome the Chancellor’s decision to wait for the Taylor Review before looking at making any changes in tax levels. We would like to see a full consultation on the complex issue of employment status, which explores whether it is possible to have greater clarity and consistency on this issue across employment, tax and benefits.”
All eyes are now on the Taylor Review that should report at the end of the summer 2017 with recommendations to the government for how the gig economy and traditional employment can be integrated. Read this as how the gig economy can be further taxed, which is fine as long as the higher tax burden also has all the rights and benefits that employees now enjoy. Watch this space for more news.