Owners who plan to go the gig economy way should think again

A recent ruling by the Supreme Judicial Body in the United Kingdom against this Uber Job-market rules may change in the rapidly growing ‘gig’ economy and in gig economy-based attendant business models. The ruling dates back to 2016, when 35 Uber drivers went to court against the company, arguing that they were not self-employed and that Uber was in control, as Uber assigned their customers and dictated the charges.

The UK Supreme Court has ruled that drivers who work for Uber through its application should be treated as ‘workers’ or ‘independent contractors’ as booking agents for services contracted by passengers through Uber. In addition to other workers’ rights such as paid annual leave, it determines whether such drivers are required to pay the UK’s minimum wages and this affects its business model. The court also considered these ‘part-time’ drivers to work for Uber — the entire time drivers are logged into the Uber app and ready and willing to accept trips, or as long as they lead passengers to their destinations.

In the absence of a written agreement between Uber London and the drivers, the court chose to override the nature of the relationship “based on the conduct of the parties, as considered in its relevant factual and legal context”, rather than on the general principles of contract law. Agency. Judging in favor of the drivers, the court noted the position of their subordination and dependence on Uber, “they have little or no capacity to improve their financial status through professional or entrepreneurial skills.”

This ruling is likely to have an impact on the future of work everywhere in the gig economy. Gig Economy refers to “economic activities in which the service sector typically employs temporary or freelance workers to do jobs.” It includes not only temporary blue collar workers in delivery and taxi-aggregator services but also white collar. Employed through independent contractors and consultants-digital platforms in various fields such as information technology, content creation, social media marketing and communications and creative fields.

The phenomenon of looking for employment between jobs is summarized by the concept of ‘conflict unemployment’ in macroeconomics. During a recession, temporary employment is very important and can help with economic recovery. The pandemic-led recession, by contrast, is driving the trend towards a structured system of temporary employment through the work of the gig economy. The crucial difference between past and present recessions lies in the nature of such temporary employment, with both job-seekers and job-providers actively seeking and accepting the gig framework-led business model.

Employment agencies may prefer such a gig economy for a number of reasons, which have emerged sharply in the face of epidemic-induced uncertainty. Complexity and difficulty in hiring, training, engaging and retaining full-time human resources, liquidity associated with gig models, huge cost reductions with such temporary manpower in terms of real estate, training and skilling, etc., as well as low direct cash burden associated with full-time labor . Most importantly, the contract company has a gig economy that promises to convert the human resources it employs — skilled and unskilled — into costs, the next asset.

From a workers’ perspective, a gig economy offers the flexibility to decide what one wants to do (and more importantly should not do), when, for whom, and from where. Along with this flexibility come additional opportunities such as undertaking multiple jobs to increase income, avoiding dreams associated with full-time jobs, pursuing upskilling and / or hobbies.

Various recent surveys have captured the trends in the Indian gig economy. December The Gig workforce ratio in December 2020 was found by an Ion-Nasscom survey of various major sectors, including pharmaceuticals, fast moving consumer goods, banking, financial services and insurance, manufacturing, services, technology and business process outsourcing and ed tech. It is likely to increase from about 50% to 76%. Two-thirds of the companies surveyed plan to increase the number of gig workers they employ over the next two to five years. Industry Body Assocham predicts that the Indian gig economy will grow at a compound rate of 17% this January with an annual growth rate of $ 455 billion by 2023.

Although attractive, engaging and maintaining a low-investment gig workforce by companies has been challenging in the past. Another challenge is to align the geographically dispersed group of temporary workers with the company culture. For companies looking to explore these new business models and adapt to them, the UK regime and its certifications throw a spanner in the rough. While the future of work in India is being re-examined, companies looking to move on to gig platforms with a variety of blue-collar and white-collar functions need to work carefully on the legal aspects of such a transition. Policymakers need to consider the regulatory aspects of such a transition and ensure that the interests of both parties are balanced. They should also take into account the macroeconomic implications of an economy that is always ‘temporary’ in full employment.

Tulsi Jayakumar is Professor of Economics at the SP Jain Institute of Management and Research, Mumbai. These are the personal views of the author.

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