Calls for UK minimum wage law to cover more self-employed workers

4th July 2017 | News

A UK think tank say rules should apply to those whose prices are set by a firm, such as Uber and minicab driver.

A study conducted by think tank Resolution Foundation revealed that one in five employees were classed as low-paid, earning less than two-thirds of the typical weekly wage of about £500. But for those classified as self-employed, half were earning less than this £310 low-pay threshold.

The report is part of the think tank’s submission to Matthew Taylor’s review of modern work practices. They believe the Government should not only ensure that the current law is properly enforced but also extend the law’s reach.

Resolution Foundation has urged the Government to step in to help those with extremely low pay, by extending minimum wage legislation so that it covers more of the 4.8 million-strong self-employed workforce.

The introduction of the Government’s ‘national living wage’ which pays £7.50 an hour for over-25s, has reduced low pay among employees but does not affect the self-employed, because they are not entitled to it. There is a risk firms could reclassify workers as self-employed to avoid paying the legal minimum wage.

Resolution Foundation stated: “Many of those in the gig economy as it currently stands are likely to be ‘workers’, an employment status with greater rights than the self-employed, meaning they should already receive at least the minimum wage… Greater enforcement is needed to ensure these workers get the rights to which they are entitled.”

The Resolution Foundation said there should be a test, built on existing employment law, to ascertain whether a person working at an ‘average’ pace would be able to earn the minimum wage by doing their job, accepting that the minimum wage could not simply be extended to cover all self-employment.

They suggest the principle of this test be applied to self-employed people where the price of their labour is fixed by a firm, including gig economy-style platforms claiming to simply connect self-employed people to potential customers, but setting the price for work done.

Conor D’Arcy, a Policy Analyst at the Resolution Foundation, said: “The UK’s labour market has been very successful at creating jobs in recent years. However, far too many of those jobs offer very low pay and precious little security.

“This is especially true of the growing army of the self-employed. While many are higher earners who benefit from significant flexibility, around half fall below the low pay earnings threshold of just £310 a week. The government can start by extending minimum wage protections to those self-employed people whose prices are set by a firm. This would mean that self-employed people in the gig economy would be given protection against extreme low pay for the first time ever.”

Those helped by the suggested changes would be 170,000 self-employed workers in taxi operations, including both Uber and minicab drivers, and 40,000 postal and courier service workers. Some, but not all, of the 150,000 self-employed hairdressers and 80,000 cleaners would also benefit from greater protection.

Mike Cherry, chairman of the Federation of Small Businesses, said: "It would be helpful if a better distinction could be made between real entrepreneurs and those who, in all but name, have the appearance of being employed by giant corporations."

Although The Institute of Directors (IoD) said it agreed that the status of workers should be clarified by the government, Seamus Nevin, Head of Employment and Skills Policy said undermining the gig economy would bring disadvantages:

"Evidence from the Labour Force Survey (LFS) and the ONS suggest that easier routes into self-employment have also led to rising workplace participation for those who have historically struggled to find a job; notably single parents, disabled individuals, and the long-term unemployed."

He explained: "An obligatory minimum wage would undermine the business model of many gig platforms, such as taxi, delivery or cleaning services, who would find it hard to justify paying people at times when there was no demand."