Tech

Leila Abboud is a Bloomberg Gadfly columnist covering technology. She previously worked for Reuters and the Wall Street Journal.

It's easy to poke fun at Britain's government dysfunction. But there's at least one policy area where it's having a sophisticated debate with global implications: how to regulate "gig economy" companies such as Uber Technologies Inc. and Deliveroo so they don't exploit workers or skimp on taxes.

Working out new rules for companies that use smartphones to connect buyers and sellers is laudable, if devilishly difficult. On Tuesday, a Theresa May-commissioned panel released its ideas for how to do so. Some recommendations are smart, reflecting an honest attempt to balance flexible working with protecting citizens. Whether a weakened prime minister can pass any of this into law is another question. But at least she's looking at it.

Chief among the conclusions in Matthew Taylor's review is a call for new legislation to better define Britain's three categories of workers: the self-employed, who have few rights; so-called "workers", who get some benefits such as holiday pay and the minimum wage; and employees with full rights. The proposal would rename the middle category "dependent contractor" and more clearly define who it includes rather than leaving it to judges to decide.

Many gig economy workers now deemed as self-employed could be re-categorized with more rights. Already some drivers for Uber have won such employment cases. 

More than a Job
Britain has a three-tier labor system, unlike the U.S. where there are only two categories
Source: Bloomberg

Companies don't like this. It means paying more tax to cover benefits, including state pension contributions, that they now avoid. Employers get a 13.8 per cent tax reduction from classifying someone as self-employed, according to the Trades Union Congress, depriving the U.K. of 4 billion pounds ($5.1 billion) in yearly revenue. For the roughly four in 100 working Brits whose boss is an algorithm, not being classed as self-employed could entitle them to sick pay and holiday.

Crucially, the panel didn't say "dependent contractors" should get the minimum wage, siding with companies. Instead, they laid out a fiddly approach that would allow for different wages depending on whether demand was high or low, or paying people by task completed. This is complicated and too trusting of how app-owners decide whether it's peak time.

Uber doesn't garner much sympathy, but you can see why it wouldn't want to pay an hourly wage to drivers sitting around waiting for passengers. Its stratospheric private valuation is based on not spending millions on employee costs.

Still, it's hard to accept that people can work crazy long hours and be denied the minimum wage just because they work for a smartphone app. As the way we work is upended by technology, this stuff needs to be resolved.

Beyond Uber
Many in in the U.K. who are working on an on-demand basis are in white-collar jobs
Source: RSA/Ipsos MORI Survey
Note: some gig workers are providing more than one type of service

So closing the loophole on worker status would only be a good thing -- if it happens. Right now, employers have a huge financial incentive to stick people in the lowest category possible, leading to bizarre situations where someone "self-employed" can have their pay docked if they miss a shift. A Deliveroo rider is often asked to choose set work days, wear a uniform and can be kicked off the app for not accepting enough work. Does this sound like being your own boss?

Indeed, there are ways in which Taylor should have gone further. At present, it's up to individual workers to go to employment tribunals to prove that he or she is not self-employed. That should be flipped around. People who meet criteria such as time spent at a company should be presumed to be in the middle category of "worker" or "dependent contractor". Employers can go to court if they think otherwise.

But fair play to Britain for grappling with this one. The Ubers of the world will keep gaming the system if we all collectively allow it. Let's hope the business lobby doesn't kill this before it's started.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Leila Abboud in Paris at labboud@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net