In a landmark decision on 28 October 2016, the Employment Tribunal decided that Uber drivers were not self-employed and should instead be classified as ‘workers’. This then entitled them to a range of employment benefits - one potentially being the right to be auto-enrolled into an occupational pension scheme.
This decision gives the estimated 40,000 Uber drivers in England and Wales significant increased protection. As workers, they are now entitled to the national minimum wage and paid holidays, although they will not be entitled to redundancy or unfair dismissal protection. The reasoning behind the decision is that Uber are considered to provide sufficient service facilities to have also assumed these higher employment obligations.
HMRC are also likely to be pleased with this decision as it should result in extra national insurance contributions being paid. It also opens the floodgates to cases being brought by other organisations that run on a similar basis to Uber in the so-called ‘gig’ economy like Deliveroo couriers who have now demanded union recognition and the minimum wage. Citizens Advice research has estimated that 160,000 people could be wrongly classified as self-employed which amounts to an eye watering £341 million a year that HMRC could potentially be missing out on.
So how would this affect the world of pensions? As workers, if Uber drivers meet the auto-enrolment criteria, they will be entitled to be automatically enrolled in an occupational pension scheme by their employer. However, the auto-enrolment requirements include a minimum number of hours worked and this is where the difficulties arise. The very nature of Uber drivers’ work means that they do not have fixed hours and the hours that they work can vary broadly from one week to the next. As such, determining whether an individual driver has met the auto-enrolment criteria in any given timeframe is likely to be an administrative nightmare. In addition, Uber are likely to have very limited records as to their drivers so making this exercise even less manageable. As a result, Uber may have to go through the pain staking exercise of reconstructing their workers’ records.
Understandably, Uber have announced they will be appealing the decision. It will be interesting to see the stance the Supreme Court takes, but in the meantime, Uber will have to implement the existing judgment and make provision in their accounts for the extra costs they will face, including pension costs.
It is important to note that this decision is unique to England and Wales; interestingly, there is no concept of a worker (as being half way between an employee and a self-employed person) in other EU countries or in the US. There is no doubt, however, that this ruling will have a powerful effect on our shores. Uber may well just be the tip of the iceberg – gig economy employers beware!
Finally the Pensions Minister has announced he is keen to review the current pension requirements to make it easier for the self-employed with a collection of very low paid jobs to save for a pension. It’s less clear how he would achieve this in practice.
If you would like any advice on the above please contact Penny Cogher or your usual member of the team.