Stephen Morrall and Annabelle Woosnam discuss pensions in the gig economy, in Employee Benefits

This article was originally published in Employee Benefits, 06 July 2022, and can be found here.

An article published by the Financial Times on 14 June reported that ‘the UK pensions regulator has conceded that not all gig economy employers have done the right thing and offered pensions to staff’.  What does this mean?  Don’t staff have a legal right to a pension?

In recent years vast numbers of people have entered the gig economy, working on zero hours contracts or some kind of piece-work basis and employers have gone to great lengths to avoid their staff having the status of an employee or a worker.  Whilst this allows businesses flexibility, it disadvantages the individuals because they do not get the basic employment rights such as membership of a pension scheme – an issue which was considered in the recent landmark case of Uber BV v Aslam.

In order to qualify for certain key rights, you have to have worker status.  This is defined by statute and is a hybrid status, requiring personal service and a degree of mutuality of obligation. A qualifying worker will be entitled to auto-enrolment in a pension scheme and their employer will be required to make minimum pension payments. No such rights are granted, however, to self-employed contractors.

Differentiating between the two is by no means straightforward and how the statutory definition of worker should be interpreted has been a matter much deliberated by court and tribunals. The test that has been developed as a result is applied on a case by case basis, leading to notably inconsistent results.

In Uber BV v Aslam, the drivers persuaded the court that they were workers rather than self-employed. Conversely, in cases concerning Deliveroo riders and Yodel delivery people, those staff were found to be self-employed. People who perform remarkably similar jobs will therefore find themselves facing vastly different economic situations depending on who they work for.

As long as there is confusion as to what constitutes a worker, employers will try to deprive their staff of valuable and essential rights.  It should not be up to the Pensions Regulator to put moral pressure on companies to do the right thing and give their staff worker status. The law needs urgent reform.  The government needs to redefine worker and improve the lot of the millions who work in the gig economy.