A report published in the UK by Lancaster University’s Work Foundation predicts a tipping point will be reached next year where flexible working will become more common than working from an office.

While flexible working is on the rise, governments and organizations such as the International Labour Organisation are increasingly concerned by the prevalence of disguised employment. This is where the true nature of the relationship is employment but it is outwardly treated as self-employment, depriving the workers of their rights and reducing the tax revenue that governments rely on.

However, the law lags behind these new working relationships and governments are searching for solutions that will continue to preserve basic forms of protection for workers — and their major source of income.


Source: “Non-Standard Employment Around the World,” International Labour Organisation 2016 report.

Nonstandard employment. There is no definition of a “standard” form of employment. As the basis of modern employment law, the original master and servant laws were designed to ensure that employees conformed to their employer’s rules, and penalties for a breach of discipline were harsh. Today, the employment contract is categorized by the fact that work is exchanged for a wage, and that the employee stands in a relationship of relative dependence, or inequality of bargaining power vis-à-vis the employer.

The arrangement considered to be the standard or traditional form of employment — work that is full time, for an indefinite term, as part of a subordinate and bilateral employment relationship — is becoming less common. Workers are more willing, either through choice or necessity, to work flexibly and have multiple sources of income. Research conducted by the UK’s Chartered Institute of Personnel and Development found that just 14% of respondents said they did gig work because they could not find alternative employment. The most common reason for taking on gig work was to boost income (32%). Overall, gig economy workers are also about as likely to be satisfied with their work (46%) as other workers in more traditional employment (48%).

The control test. While tax and employment laws continue to treat employees and the self-employed differently, the challenge for employers as well as government bodies is in recognizing when a relationship is employment and when it is self-employment. The reason for the differential in tax treatment is the relative lack of security and access to social protections afforded to the selfemployed. But this reduced-cost option is also attractive to employers when margins are tight in the wake of a global recession and political uncertainty.

In jurisdictions around the world, the right of control or the exercise of control is the decisive factor that determines the balance of power. But facts often get in the way of the theory, and the spectrum is broad and based on a range of factors that may or may not point decisively to an answer.

This lack of a clear definition and the multiple factor tests used to try to reach a conclusion makes the law difficult to police, and for employers difficult to comply with. The challenge for governments is designing a system for tax and employment rights to reflect the nonstandard and flexible forms of working that will become the norm without reliance on an outdated test. For organizations and workers there must be a relationship of mutual benefit.

In the gig economy, brand is everything. For companies like Uber that don’t own any cars, they must impose rules on their drivers in order to ensure that the quality of their brand is not diminished. However, the challenge for such companies is to differentiate between imposing rules that spread their values throughout the organization and maintain the standards that their reputation is built on, and instructions that amount to exercising control over the individuals who provide their services.

Workers understand that there is a trade-off between flexibility and job security. Workers surveyed by the Chartered Institute of Personnel and Development for its report, “To gig or not to gig: Stories from the modern economy,” found that gig economy workers were equally likely to agree as disagree (at 36% to 35%) that “the gig economy should not be regulated and companies should compete to offer workers fair pay and benefits, even if it means less income and job security for people.”

The social or psychological contract. Where workers are more willing to move jobs or have multiple jobs, and are much more aware of their rights, modern organizations will need to develop a strong psychological contract with their workforce in order to attract and keep the talent they need.

For example, Deliveroo drivers organized a mass protest over alleged sacking or restricted hours given to drivers who had been discussing changes to their working conditions on social media. This has drawn some unfavorable headlines for the bicycle courier company in the UK, and unwanted attention from government as to their business practices.

Exploiting the legal uncertainty of the control test to keep costs down is not going to help organizations thrive. Providing meaningful work and fair pay and benefits as well as a shared vision and values are more likely to engender loyalty and engagement whatever the form of employment.