I was asked to write an article for Southwark Business Today, the official publication for Southwark Chamber of Commerce. The article discussed the challenges of offering traditional employment and a Living Wage. Here’s the article in their April/May edition.[/cs_text]
In his spring budget of 2017 the Chancellor Philip Hammond wanted to address what he said was a disparity between the amounts of tax paid by the directly employed and the ever increasing self-employed workforce in the UK. Despite the arguments for and against this proposal, it raises an interesting question as to the reality of working conditions for many workers who register themselves as self-employed – and their motivations for opting for this status. The Resolution Foundation (directed by Torsten Bell – ex-Labour Policy Chief) pointed out in a press release on October 16th 2016 that whilst the self-employed workforce has increased by 45% since 2001/2002 their actual earnings have dropped. This prompts the questions: Are workers genuinely opting for self- employment? Or are they pressured to do so by employers who want to avoid direct employment obligations such as sick pay and holiday pay?
The rise in companies pressuring employees to adopt this kind of self-employed status, thus exempting themselves from the statutory employer responsibilities, is the main driving force behind the explosion of the ‘gig economy’. The ‘gig economy’ is characterised by low paid, short term, precarious employment, where labour is tapped on demand creating unstable patterns of employment. High profile cases, such as the ruling against Uber in a UK employment court in October 2016 have put a spotlight on digital platforms who argue that they out-source their work to independent contractors and are therefore not directly responsible to their employees. This practise raises a paradox for the ethically minded consumers whose buying of goods and services may be unwittingly contradicting their ethical value set. The ever increasing need for cheap and on demand services means employment rights and stability is being side-stepped by the service companies such as Uber, City Sprint, Pimlico Plumbers et al…
These precarious contractual arrangements are rife and have become the norm. They are not limited to technology based firms – such Pimlico Plumbers– but almost all ‘agency’ based service work. According to the Gang Master Licensing Authority, the domestic cleaning industry is the largest abuser of black and grey market practices. It is impossible to quantify the size of the market (as it is largely invisible) but estimates suggest there are hundreds of thousands of cash-in-hand and sub-contracted cleaners in this unregulated and therefore exploitative market.
Trading in this environment is particularly challenging for employers that take a traditional approach and want to protect their employees with fair pay & statutory rights. In the domestic cleaning sector it makes it almost impossible to compete as consumers have engaged in black market practice for many years and do not think about the implications of handing over cash to a cleaner or an agency who sub contract to an unregulated work-force. In fact, consumers often don’t realise their well-intentioned cash-in-hand payments, or use of an agency, means worker exploitation and the health & safety of the work-force is being constantly kept at a low level through poor regulation.
Ethical and responsible employers competing in these self-employed sectors can be particularly disadvantaged as they are legally obliged to pass on additional employment costs to the consumer such as VAT on the total cost of the service. This makes them less competitive on price and operating in this legal model is much less attractive even though it offers stability and rights to the employee. Few employers choose to operate in this way and most succumb to overwhelming market pressure and adopt this self-employment model. Whether this model persists is in part determined by the courts, and in part determined by how aware consumers are of the employment status of their cleaner, taxi driver, plumber etc.… The case has been made quite strongly for products – fair trade chocolate and coffee etc. – but the purchasing of ethical services remains a poorly understood area.