There is much talk in the media about the gig economy, but what is it all about? On a near-daily basis we are bombarded with opinions and perspectives on whether it is a good thing or a bad thing. The fact is that the resourcing needs of businesses vary as much as workers’ demands for flexibility and stability.
There is some research and much opinion about what level of choice is exercised by workers in taking up ‘employment’ arrangements that afford them flexibility. Given the cases taken by workers in some high-profile companies in the UK, seeking union recognition and employment rights, it is clear that not all such arrangements are fully ‘by choice’.
So, what are the potential opportunities and pitfalls for your business? Well, the gig economy is about the increased prevalence of non-traditional work arrangements – the ‘traditional’ arrangement being the full-time permanent job. The non-traditional arrangements range from use of fixed-term contracts through ‘zero-hours’ contracts, to independent contract (contract for services) and piecework (where a worker is paid a fixed fee for each unit or action performed).
All of these arrangements have their place and may be used for the benefit of your business – giving you much-needed flexibility. The key, however, is that these arrangements are not misused.
The ‘contractor’ arrangement is very common. Many employers believe that where the worker is responsible for his/her own taxes, then he/she is not an employee. This is not necessarily the case! Many people do not complain about these arrangements. I can only speculate, or rely on anecdotal evidence, that it suits them (they deduct expenses as a self-employed person) or they are reluctant to risk tarnishing their reputation in the small economy of Ireland. Employers face exposure, however, when something changes in the dynamic or where they are the subject of an inspection (by the Workplace Relations Commission) or a Revenue audit.
A recent decision of the High Court placed a high emphasis on the existence or absence of Mutuality of Obligation between the parties when deciding whether the relationship was a contract of service (i.e. a contract of employment) or a contract for services (i.e. a business contract for the provision of services). Mutuality of obligation refers to the obligation on the employer to provide work and the obligation on the individual to carry out that work.
The nature of the relationship between the parties determines whether Employer’s PRSI is payable; the PRSI rate; whether or not holiday pay and a plethora of other employment rights apply.
Mistakes can be very costly. Decisions by Revenue or the Department of Social Protection usually have retrospective effect. Employers can face not only a build-up of arrears, but interest and penalties. Some guidance is provided by the DSP on what criteria they use in arriving at a decision, however, in reality, it is very broad and open to interpretation.
The courts, WRC, DSP and Revenue look at the reality of the relationship, usually incorporating many factors and aspects of the work and how it is carried out.
The gig economy has great potential for business, the flexibility it provides is great but it should be exercised with caution. At Talbot Pierce, we advise on all aspects of employment, including appropriate contract arrangements – identifying what is best for your business, without falling foul of your obligations.
Contact Talbot Pierce to discuss how we can support your business. We provide tailored HR and people management solutions to employers.