ICAEW’s vision is for a world of strong economies. We have been asking how economies can be built on fair and just societies, and how growth can be achieved within what nature can provide. Our support for the UN Global Goals is a key part of this work, and in particular Goal 8 ‘Decent work and economic growth’ gives a good narrative for our vision.
But how can we help policy makers encourage the creation of decent work? And what about the gig economy – do we need to improve legislation to ensure all workers have appropriate rights and security?
Zero hour contracts, the gig economy and inequality
In the UK, almost half of self-employed workers on zero hour contracts are paid by the hour and classified as being on low pay, in contrast to just 22% of employees on low pay. Without guaranteed hours and sickness and holiday benefits, many self-employed juggle a few contracts simultaneously out of necessity. What’s more, many regulations and laws that benefit employees do not apply to the self-employed.
And so while the flexibility associated with self-employment suits many individuals and can benefit the economy, these statistics suggest that the gig economy might also increase inequality. So what can the profession do to take action?
Tackling inequality and exploitation in a changing economy
A thriving economy depends on consumers; it must bring benefit to many, not just the few. Flexible working often makes commercial sense. But as the gig economy expands into new markets, (fuelled by the existence of internet platforms which make it easier to access a wider audience), appropriate regulations need to be in place to avoid exploitation and job insecurity for workers on zero hour contracts.
Many accountants are self-employed and the profession stands to benefit from this flexibility. Nevertheless, earning potential often gives accountants a position of power – a contrast to some workers on a minimum wage who are more at risk of exploitation. Protecting workers without stifling the way technology is changing the nature of work is both a challenge and an opportunity.
Is a flexible labour market the answer?
The Matthew Taylor Review defends the principle of a flexible labour market. However, it also acknowledges the need to overhaul the tribunal system to support workers, clarify the law relating to employment status and reform tax to address the challenges of the gig economy. The Trades Union Congress (TUC) suggests that there is a £1.95bn a year shortfall from income tax and NIC as a result of the growth of self-employed or low paid workers Read the ICAEW Tax Faculty’s perspective on the report here.
What’s the best way to tax the gig economy?
One challenge to overcome is how to tax the gig economy. The ICAEW Tax Faculty reported that, in particular, complications occur when establishing whether a worker is employed or self-employed. The relationship between tax and employment law is complicated as they don’t work to the same set of rules. Employment and tax laws have yet to catch up with the gig economy. Perhaps the solution is to better align these legal interpretations?
The Taylor Report claims that 60-70% of gig economy workers are satisfied. An opposing argument by NEF, however, describes high levels of surveillance, low pay, insecurity and physical and mental harm. Stefan Baskerville writes that, “More than 3 million people in the UK are in insecure work; almost a million people on zero hour contracts; more than five million people earning less than the real living wage. The system is not working for them.”
How accounting professionals can help
Four virtues characterise our profession: wisdom, prudence, truth and justice. Accountants give insight based on these qualities and our experience gives us a central leadership role in guiding businesses through uncertain times of change and innovation.
For supporters and detractors of the gig-economy, the accountancy profession can help find a solution by steering businesses and policy makers towards a fairer system for workers, employers, the Treasury and society. Economic success can be achieved if the following is aligned: profitable and sustainable businesses, effective and accountable public institutions, and equal access to decent jobs and services.
ICAEW’s sustainability work and our focus on the UN Global Goals will continue in 2018 and we will watch with interest the unfolding developments in the regulation and taxation of the gig economy.