While in excess of 60,000 gig economy workers in the UK could be eligible for a workplace pension following the recent Uber Employment Tribunal ruling and upcoming Deliveroo action, the legal cases have highlighted an issue that thousands of small businesses could face.
The tribunal found that an estimated 40,000 cab drivers, that access work via the taxi firm Uber and had been considered to be exempt from employee benefits, in fact had rights under the Employment Rights Act 1996. These include holiday pay, minimum wage - and a workplace pension.
The ruling found that the drivers were not ‘employees’, but rather ‘workers’ with an undertaking to perform work personally, ie not undertaking the work as part of their business – and that they had employee rights. It’s a very different distinction to what many felt was a clear case of being self-employed versus being an employee.
And as well as affecting the so-called gig economy, this could have profound implications for small firms moving forward as they reach their staging date for auto enrolment.
It’s quite common for small and micro firms to outsource regular work to a trusted contractor with self-employed status. Many firms thought this meant that they didn’t have to factor these individuals into their auto enrolment plans. But that’s not necessarily true.
The ruling actually tallies with existing advice on The Pensions Regulator (TPR) website around whether employers using self-employed contractors on a regular basis must offer them a pension.
The guidance advises that despite the fact that the worker is self-employed, the test is that if there is a ‘personal contract’ to perform work, then there may well be a requirement to offer a pension.
There are already 1.4m small and micro firms that are currently in the process of enrolling their staff in an auto enrolment pension, so they may need to go back and check the small print.
According to TPR, the test for whether someone should be offered a workplace pension centres around the following points:
- Does the employer have control of the hours the individual works
- Does the employer orovide any employee benefits
- Does the employer bear all significant financial risk in carrying out the work
- Does the employer provide what is required for the individual to carry out the work
- Does the employers consider the individual to be part of the company
Smart Pension is one of the few workplace pension providers that remains free to enrol for employers and which guarantees to accept every employer and employee, a critical feature for the hundreds of thousands of smaller British firms that will need to offer a workplace pension to their employees over the next 18 months.
Since it launched last year it has enrolled more than 100,000 new members.