Technology created the gig economy and, as a sector, was an early adopter of using self-employed staff to add important skill sets to their businesses.

Walk through any UK city, and you will see self-employed Uber drivers ferrying passengers back and forth and swarms of Deliveroo riders queuing to collect orders from fast-food counters.

Less visible, but no less numerous, are the many self-employed workers undertaking important roles in businesses across the tech sector, where high-end skills are sought, such as in IT, software development or content moderators on social media sites.

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Surge in self-employment

Helped on by the pandemic and a new desire for flexible forms of working, the numbers of self-employed have been growing consistently.

The Office for National Statistics recently released figures showing that the self-employed population has seen four quarters of consistent growth and now stands at 4.3 million people across the UK.

Outside of the UK, there is a similar desire for self-employed labour.

Tech giants, such as Meta (the owner of Facebook and Instagram) and ChatGPT, are reliant on cheap self-employed labour outsourced to the Global South for roles in coding and content moderation on their platforms.

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What are the different types of employment status?

The employment law rights and protections an individual is entitled to depend upon their employment status. "Employment status" refers to the legal status of an individual at work.

There are three types: employee, worker and self-employed. All three carry different rights and entitlements and have their own pros and cons.

The benefit of self-employed labour for employers is clear. It offers enormous flexibility, where roles are often performed and paid on an ad-hoc basis.

Further, with no employer National Insurance contributions payable and no right to the National Minimum Wage, the cost base is even lower.

This starkly contrasts the more expensive exercise of engaging employees under a contract of employment.

They often have fixed hours and enjoy numerous employment rights and protections (ranging from protections from unfair dismissal to rights to paid holidays and other forms of leave).

Workers have fewer rights than employees but will still be entitled to the national minimum wage, paid holiday, protection for whistleblowing and protection against discrimination, amongst other things.

However, there are benefits to engaging workers and employees, with the employer normally enjoying greater control over who does the work and when, where and how the work is done.

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"Bogus" self-employment and action against tech platforms

Running a business model that utilises self-employed labour is not without risks for employers.

In 2021, after a long legal battle, the UK's Supreme Court finally ruled that Uber's thousands of drivers were workers rather than self-employed and were entitled to rights such as the minimum wage and holiday pay.

This was partly due to the level of control that Uber exercised over the drivers in practice, including setting the fares and contractual terms and penalising drivers who rejected too many rides.

Individuals working for companies such as Deliveroo and Pimlico Plumbers brought a raft of similar claims, who all alleged that their apparent self-employment was a sham.

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Global shift in employment laws

The UK is one of many places where the laws around employment status are being tightened. Similar claims have been brought in countries like the Netherlands and the USA.

Two hundred outsourced workers dismissed in Kenya filed successful claims against Meta in the Kenyan courts, claiming that Meta was their employer, even though it was an intermediary company they were contracted with.

Employment status is a particularly complicated area of law, and proving worker or employee status can be difficult.

Courts will normally evaluate factors such as the individual's level of control and autonomy over when, where and how they are working to establish whether there is a direct employment relationship.

In the context of technology platforms, which vary greatly in how they operate, determining someone's true employment status can be particularly complex.

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What is the future of outsourcing and self-employment in the tech sector?

There has been a clear trend over recent years in the UK and worldwide, where self-employed individuals have demanded greater rights and clarity around their employment status.

Such claims could be brought by workers in any sector, but most have been brought by companies reliant on some form of tech platform.

The software offers a means to simplify complicated tasks and quickly distribute offers of work to remote workers whilst simultaneously giving the business a way to track performance and delivery.

This has made the practice of engaging self-employed labour a natural fit for many business models in the sector.

Therefore, the large number of self-employed in the sector has attracted greater employment status claims.

Whilst the courts have led the way in applying employment status laws and spotlighting sham self-employment over recent years, the issue is also attracting political attention.

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Labour party pledges to end 'bogus' self-employment

At the Labour Party Conference this week, labour pledged to introduce a single status of worker and to end "bogus" self-employment that circumvents workers' rights.

There are currently no details to this proposal, but employers that rely on self-employed labour must watch for any such legislative changes should labour win the next general election in 2024.

This follows increased levels of awareness and action in other countries, such as Kenya or Spain, where their "Riders Law" recognises platform operators as employees and grants them various social protections and benefits.

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The consequences of mislabelling self-employed individuals

The price of "mislabelling" an individual as self-employed in their contract but actually treating them as a worker or employee in practice can be steep.

Not only could the individual be owed backdated holiday pay and accrue increased rights and protections, but there could also be liability for unpaid tax and National Insurance contributions or for not paying the national minimum wage under separate financial laws.

Employers are encouraged to review their relationships with self-employed workers and seek advice where there is any uncertainty around their status.

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