Developments in the ongoing ‘self-employed’ v ‘worker’ debate

The well-known delivery company Hermes has just reached a deal with the GMB union to create a new “self-employed plus” status for its couriers.

This new employment model has been created by Hermes to fix its troubled relationship with their numerous gig economy workers and comes after an employment tribunal found Hermes couriers to be workers rather than self-employed. This decision itself followed on from the recent Pimlico Plumbers case, in which the Supreme Court found on the facts that the plumbers concerned were workers not self-employed contractors.

In 2018, the tribunal held that the couriers were controlled by Hermes and had an obligation to perform services personally. It was a “dependent work relationship” in which the couriers had little autonomy and was not one in which they could look after their own interests as a genuinely self-employed individual would be able to do.

While the couriers had a right to substitute a “cover” (someone already on the books of Hermes), or to find a “substitution” (someone of the courier’s choice), Hermes retained the right to veto the courier’s choice of cover and the couriers were under an obligation to ensure a certain standard of personal service in relation to the substitution.

See: Leyland and others v Hermes Parcelnet Ltd ET/1800575/2017 (22 June 2018).

Under the new “self-employed plus” status, workers can choose to receive 28 days of paid holiday per year and can also opt for pay rates of up to £8.50 an hour. According to the GMB, the collective bargaining agreement also requires couriers to opt-in, so workers can continue to earn a premium rate as a self-employed courier if they wish.

The GMB union have described the new status as ground-breaking and credited Hermes for showing that the gig economy doesn’t have to be an exploitative economy. It has also been hailed as a sign that employers and unions can in fact work together and offer staff both choice and protection.

The new option allows couriers to retain the flexibility of self-employment that was important to them and gives them the certainty of guaranteed levels of earning, the security of holiday pay and the voice of a worker. Whether this makes any difference or not to the existing gig economy workers remains to be seen, but the fact there is now such an option available may help the public move away from demonising jobs that don’t conform to a 9-5, permanent employment, while highlighting that flexible working can be and is hugely beneficial to companies and workers alike.

However, the deal has also been criticised by many.

Tax experts have warned that HMRC could require those who opt-in to pay national insurance as an employee, and further that the creation of the new status as unnecessarily “muddying the water” rather than simply giving drivers the full package of benefits they may be entitled to. What can be certain is that if somebody has most of the benefits of being an employee, and if the employer has most of the benefits of employing somebody, then the tax authorities will want the employee to be paying national insurance as an employee, and they’ll want the company in particular to be paying national insurance on those people. It is already the misalignment between employment status and tax status which drives much of the confusion around the issue.

Regardless of the merits of the new status, what the events highlight is the real need clarity which will only really come from new legislation that creates a legally binding definition of self-employment.
Further, the deal does not represent the landmark precedent some may have hoped for. It must be remembered that cases on the employment status of an individual are likely to be of limited precedent value since they will be highly fact sensitive. Indeed, the Tribunal in this case distinguished itself from the Pimlico Plumbers case and showed that at it was possible to decide the matter without regard to the Pimlico Plumbers case, based on previously stated principles in case law.

Therefore, any pressure for other firms using gig economy workers to follow suit will most likely be reputational rather than on the back of a new legal precedent having been set.

The question that then arises is which is best: voluntarily changing to improve the reputation of the business, or only changing because of a legal obligation to do so.

The gig economy continues to be a fascinating and developing area of employment law. If you have any questions on this or any other employment related matter, please contact Albert or any member of our team.