The Work and Pensions Committee and the Business, Energy and Industrial Strategy Committee have published a draft bill and a report on workers’ rights and the gig economy.
According to research carried out by the Chartered Institute of Personnel and Development, there are 1.3m people working in the UK gig economy.
This month, Uber lost its appeal against a ruling requiring it to treat its drivers as workers. Uber did not respond to requests for comment.
The law therefore needs to be changed to say that these gig economy workers need to be given a proper employer pension contribution
Adrian Boulding, Now Pensions
Reform AE to fit gig economy
The report, entitled “A framework for modern employment”, makes little direct reference to pensions provision for gig economy workers.
The definition of a worker has come under intense scrutiny with the advent of the gig economy, and is a central theme of the report.
Tim Gosling, defined contribution policy lead at the Pensions and Lifetime Savings Association, said the debate should prompt auto-enrolment reforms.
He said auto-enrolment needs to be realigned with the new definition of what a worker is.
“We’d put the line between self-employment and being a worker in a different place. Then everybody on one side of the line gets scooped into automatic enrolment in the traditional way,” he said.
Following this year’s review of auto-enrolment, he said the PLSA would “find a different way of bringing the conventional, traditional self-employed into automatic enrolment”.
An open goal for the regulator
Companies such as Uber have successfully adopted aggressive pricing models, in part through the the treatment of workers as independent contractors. This arrangement is less likely to involve the provision of a workplace pension.
According to the CIPD, 30 per cent of gig economy participants say they are saving through an employer pension plan, compared with 57 per cent of other workers.
Adrian Boulding, director of policy at mastertrust Now Pensions, speculated that the joint report may have largely ignored the topic of pensions, given the expected imminent publication of the auto-enrolment review.
“The quick win for them will be to sort out the workers in the gig economy,” Boulding said.
While employers in the gig economy have come under pressure to self-regulate and expand the rights of their contractors, Boulding argued that the burden of responsibility for change lies with the government.
“Uber and Deliveroo are proper, law-abiding companies. They’re following the letter of the law as they’re required to… they’re not going to do stuff voluntarily, and I wouldn’t expect them to,” he said.
“The law therefore needs to be changed to say that these gig economy workers need to be given a proper employer pension contribution,” he added.
Boulding said this is easier to achieve for gig economy workers, who have an identifiable employer, than an entirely self-employed worker, who does not.
Could the gig economy look to NICs?
While the bill places specific focus on gig economy workers, the debate could provide solutions towards offering pensions access for the purely self-employed.
Ian Neale, director at policy specialists Aries Insight, suggested making use of class 4 national insurance contributions.
Neale accepted the political difficulties surrounding the use of NICs. Following the March 2016 Budget, chancellor Philip Hammond was forced into a U-turn over a proposed increase to class 4 NICs.
“So-called class 4 national insurance contributions are really a tax on the profits of self-employment,” he said. “They’re not national insurance contributions in the way we normally think of it, because they don’t mention qualifying for anything.”
Are pensions what the self-employed need?
Ben Jennings is not saving into a pension, and neither are his peers. The cartoonist and illustrator, whose work appears in this publication and The Guardian among others, says he and and other self-employed 20-somethings are too busy trying to pay their rent.
He said if a portion of that could be mandatorily diverted to a pension scheme, it would be “relatively simple” to administer. “It wouldn’t actually involve any additional cost to the self-employed. There’d merely be, obviously, a cost to the exchequer,” he said.
As a business owner, Neale recognised the financial burden of planning ahead for retirement for the self-employed.
“Self employment is growing, and it’s inevitable that it will continue to grow because of the pressure on employment costs, and the general atomisation of the economy and society as a whole,” predicted Neale.
“From a society point of view, we have to carry on facilitating pension provision by the self-employed,” he said.
