What is the gig economy?

17 May 2017

There’s no agreed definition for the ‘gig economy’, but the term is generally used to refer to low-paid, flexible work such as running errands (TaskRabbit), giving lifts (Uber) or delivery services (Deliveroo or Hermes), where people are offered piece-work through a website or app.

Though not formally defined, some research has been undertaken into the size of the gig economy. Roughly 1.3 million people work in it, according to the Chartered Institute for Professional Development.

Critics have raised concerns about inadequate rates of pay, lack of emergency leave, complicated pay and bonus systems, and poor job security. There’s a debate about whether workers who regularly take these contracts are really self-employed. Even if their contract says that they are, what matters legally is the reality of the working situation.

An employment tribunal recently ruled that Uber drivers are ‘workers’, not self-employed contractors as their contracts stipulated. This gave them basic legal protections, although fewer than a contractual ‘employee’ would have. Uber has appealed against this ruling and the appeal will be heard in September 2017.

Other employers in the gig economy have faced similar verdicts.

There have also been concerns raised about how the tax and welfare system interact with and complement the gig economy. For example, those working in insecure jobs may not be able to save enough money to live off during retirement.

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What’s the difference between zero hours contracts and working in the gig economy?

These two phrases refer to different things. They do have two features in common. Both are about working to demand— whether that’s for a specific task in the gig economy or to the hours set by your employer with a zero hours contract.

And for both, as for any form of work, the extent of your employment rights depends on whether you're defined as an employee, a worker or as self-employed.

But the gig economy refers to a form of work that is about performing specific jobs. You may or may not be paid by the hour but the amount you receive will be focused on the individual tasks you perform.

So Hermes couriers are paid by how many parcels they deliver. Deliveroo drivers began to be paid for the number of deliveries they made last year, although some areas still pay drivers an hourly rate with a bonus payment for each delivery and you can can opt out of the new scheme.  

Zero hours contracts (though there’s no legal definition) are specific employment agreements used by employers. What makes these contracts different is that employers don’t have to guarantee work and employees can refuse work.  You’re paid a wage for the hours you do work rather than for each specific task you perform.

For example, a bartender may be on a zero hours contract but wouldn’t generally be described as working in the gig economy—he doesn’t get paid for each drink he makes but for the hours he works.

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