Uber surprises and the effect on small businesses (Part One)

uber-ruling

2016 will surely go down in history as the year in which nothing would ever be the same again. And not only has it been a year of life-changing decisions affecting so many nations, businesses and individuals, these have also been results which silenced the experts, stunned the world and, at times, even surprised the winners…

 

The year started with a string of celebrities passing away too early; then there was the Brexit decision, Trump winning the US Presidency, the Uber employment tribunal ruling in favour of the workers, Leicester’s triumph in the Premiership and Andy Murray becoming world number one. It has been a real year of surprises!

 

Could Uber be bigger than Brexit?

 

It would be a mistake to think that the recent employment tribunal, granting worker’s rights to Uber’s 40,000-strong legion of drivers, is only relevant to the taxi industry. To underestimate the depth of this ruling and the far-stretching consequences of its implications, for UK small businesses, would be similar to misreading of the electorate’s views in recent pre-elections polls.

 

In short, rulings like this one could disrupt accepted ‘ways of working’ in business environments all over the country. I would even venture as far as to say, that for many UK SMEs, this could be bigger than Brexit!

 

The Uber model is a perfect example of modern technology creating a whole new way of facilitating an age-old way of doing things. As a business idea, it is brilliant, innovative and game-changing in the way it delivers a service and generates highly profitable revenue for its inventors and owners. It is an example of successful entrepreneurship through embracing technology and executing new ideas. The problem is that by venturing into new territory where the age-old rules need to be adapted, interpreted and applied on the move, you might get bitten by legislation further down the track. This is very much part of the reason Uber lost this case.

 

Many companies in other modern world environments are using similar methods to connect ‘workers’ to specific jobs using App technologies, and they will be nervously watching to see what happens next. This has become known as the ‘gig economy’, and its very presence is now under threat.

 

What about hiring freelancers and contractors?

 

Every time there is a twist or reinterpretation of an existing piece of employment law, the knock on effect has the potential to reach everyone else. Clearly, the ‘gig economy’ does have cause to be anxious right now: but what about the millions of other UK businesses that rely on freelancers and contractors to deliver their products and services each day? How might it affect them?

 

It all hinges on the difference between an employee, a worker or someone who is self-employed. Employment law has strict definitions for each classification, and there are various rights and benefits that must be provided (by an employer or customer) for those employed under each category. The relationships between freelancers, contractors and the companies that they work for has long been one fraught with litigation and potential lawsuits. In pivotal IR35 cases such as Dragonfly Consulting, which left the owner with a £99k tax bill, the interpretation of the law was costly indeed; but employment law goes even deeper than HMRC’s considerations and calculations.

 

In part two of this post I will go into more detail on what determines a persons employment category, and more importantly, how to protect yourself against the potential aftermath of Uber.