Gig economy to hit Treasury in pocket

Changing employment practices brought on by the rise of the gig economy could have a "significant" impact on government finances, one of the Prime Minister's top advisors warned.

Matthew Taylor, who has been appointed to review modern employment practices, said the growing number of people self-employed and working for companies such as Uber and Deliveroo means the government is set to lose out in tax revenues.

Self-employed contractors, the controversial classification for these types of workers, pay on average £2,000 a year less tax than employees doing equivalent jobs.

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Last week, during his Autumn Statement, Chancellor Philip Hammond warned of the "structural effect of rapidly rising incorporation and self-employment" on tax revenues.

If ten per cent of the UK's 4.7 million self-employed workers are deemed to be engaged in labour that could also be classed as employment, that would imply an annual loss to the Exchequer of close to £1bn, The Guardian says

The BBC says the Office for Budget Responsibility "estimates that in 2020/21 [self-employment] will cost the Treasury £3.5bn".

Theresa May has expressed concern over workers with precarious employment and has pledged to crack down on businesses which "impose the expectations and obligations of employees but, by defining workers as self-employed, deny them their due rights".

An employment tribunal ruling against Uber could lead to its drivers having to be reclassified as workers. It could also trigger a wave of claims against other firms.

However, these cases relate to employment law, which allows for a middle ground status of "worker", which sits between full-employment and self-employment and gives entitlement to holiday and sick pay but not redundancy protection.

Tax law is different - and simpler - and only defines someone as being employed or working for themselves. Changing the law in this area is one option open to the government to recoup lost revenue.

Gig economy 'myth' opens door to NI reform

9 November

National Insurance (NI) could be set for substantial reform over the coming years after a study claimed most of the assumptions made about the so-called gig economy were a "myth".

The Resolution Foundation think-tank undertook an analysis of the latest official household survey data and found the number of people in the economy doing more than one job is at a 25-year low of 1.1 million.

While the overall total is sharply down, the number of multi-jobbers who are at least partially self-employed has risen to 540,000 amid a "broader shift towards self-employment", reports the Financial Times. Five million workers are now either partially or wholly self-employed – an all-time high.

According to the report, education and healthcare are the primary sectors most likely to feature people with more than one job, while the most common second jobs are in fitness centres, bars or as self-employed piano teachers, academic tutors or hairdressers.

Overall, "most multi-jobbers are female, in high-income households and working in sectors such as health and education," adds the FT.

The report blows apart the common image of an economy increasingly populated by people doing multiple, low-paid jobs at companies such as ride-hailing app Uber, which treats all its drivers as freelancers.

"Despite all the talk of Uber, the taxi sector is not one of the top 10 sectors for multi-jobbers", the FT reports.

Based on its findings, the Resolution Foundation broadly supports proposals from the Office for Tax Simplification for a major overhaul of NI, which it says could raise as much as £360m a year in additional contributions.

The move would see workers being taxed on their aggregate tax position, rather than per job, so workers would effectively be paying more NI on their second job. This would add around £19 per week to the average multiple-jobber's tax bill, says the Resolution Foundation.

The figures also show that the poorest two-fifths of workers would be least affected, either because they earn too little to pay or they would lose less than £10 a week, with some of this offset by the roll out of Universal Credit.