The decision by an employment tribunal last week to classify UBER drivers as employees rather than self-employed contractors raises serious questions about the longevity of the ‘gig’ business model.
The landmark ruling means UBER drivers are entitled to receive basic rights such as the national minimum wage, holiday and sick pay plus rest breaks.
The case, brought to court by the GMB Union on behalf of two workers of the taxi firms, centred on whether drivers were misclassified as self-employed contractors rather than employees who should receive benefits and to whom the organisation has a legal responsibility towards.
Although the tribunal only affects two people, the result of the preliminary hearing is expected to have huge implications for UK’s rapidly expanding industry of on-demand transportation services accessible via mobile apps, where people work for multiple employers day to day without having a fixed contract.
UBER model under threat?
Nick Whiteley, Managing Director at Vanquish Integrated People Solutions says the decision poses a serious threat to the business model that has made companies, like UBER, a global success.
“Not having to pay employee benefits for years has been critical to bottom line growth in this rapidly expanding industry. Suddenly, that’s all about to change and companies will see their labour costs rocket through the roof and their responsibilities change as they face the challenge of having to track an on-demand workforce in order maintain accurate payroll and tax calculations, pension contributions and administer holiday entitlements and rest breaks they receive.
“The ruling also brings to the surface the dangers of relying on a business model that is currently experiencing an influx of legal lawsuits, suffers from bad publicity which can damage a company’s reputation and brand image, and appears to create a lack of long-term commitment between employer and employee.
“Employers need to rethink their strategies and create a working environment that increases productivity and rewards staff performance, and where competitive advantage is secured through the development of positive brand image created by customer acquisition and the retention of a reliable, talented and loyal workforce.”
Focus on the back-end
To achieve this, Whiteley says organisations need to shift their attention away from front-end applications to the often neglected back-end technology, such as workforce management.
He says: “While advances in customer facing applications have helped companies, like UBER, to accelerate their route to market and business growth, it is the consolidation of back-end processes that form the backbone of any business.
“Embracing cloud-based workforce management solutions to automate and integrate key processes for example, provides the real-time insight organisations need to make optimum use of their staff resource.
“With total transparency of the workforce managers can take steps to enhance staff schedules, drive productivity and introduce working practices that support staff wellbeing and overall job satisfaction. All of which creates a working environment that brings out the best from employees, which in turn adds value to the bottom line through enhanced service levels.”
Whiteley concludes: “We need to move away from the false binary thinking that is about protecting people or protecting profit. This is a false proposition. Where is the customer in this?
“A committed, skilled and engaged workforce can do more to increase customer retention and acquisition than any spend on marketing or underpricing strategy could ever achieve. It is the overall customer experience that matters and the workforce is central to this.
“Although the decision will more than likely be appealed by UBER, whatever the outcome, the courts have shown that they are ready to intervene and enforce limits on the ‘Gig’ economy. Subsequently, it seems this business model will face further questions going forward.”