Jessica Fino 12 Sep 2018 09:58am

Business baulks at McDonnell’s gig economy plan

Business groups have criticised John McDonnell’s gig economy proposals, which include the introduction of rights to sick pay and maternity leave

In a speech at the Trades Union Congress’ conference yesterday, the shadow chancellor outlined proposals to extend gig economy workers' rights by creating a “new workplace environment” that would boost productivity.

McDonnell said gig economy workers should be entitled to the same rights as full-time employees and that the government should “properly resource” HMRC and fine employers who break the rules.

Responding to his comments, the Confederation of British Industry (CBI) said that although the Labour Party is “asking the right questions”, an “ideological hostility to business” was leading it to “outdated and ineffective” answers.

Josh Hardie, CBI deputy director-general, argued that, "Fairness and flexibility can and must go hand-in-hand. A better approach would be to ensure effective labour market enforcement, reform the tribunal system and promote better employee engagement in the workplace."

The Association of Independent Professionals and the Self-Employed, however, took a stronger stance. It said McDonnell’s proposal would “drive a stake through the heart” of the flexibility which makes gig work so attractive to people.

“The gig economy has created opportunities for workers, benefited consumers and confirmed the UK as a global beacon of innovation,” said Andy Chamberlain, IPSE’s deputy director of policy.

“Gig work gives them a sense of control over their careers, which is particularly important for people who need to find work which fits around parental or caring responsibilities.

“This proposal may have the unintended consequence of making it more difficult for people who want to explore new challenges by having a ‘side hustle’”, Chamberlain added.

The Institute of Directors also criticised the proposals, with senior economist Tej Parikh saying, “A thriving entrepreneurial community requires the right balance between security and flexibility. This cannot be achieved by imposing one-size-fits-all regulations on businesses."

He said this approach would likely “stifle the crucial access” to an on-demand workforce which smaller businesses needed in order to “grow, raise wages, and create more jobs in the long run”, and argued that such a situation “won’t be good for anyone”.

“A better way forward is to make clear and distinct definitions around the ‘gig economy’, so that employees get more security where appropriate, and companies know where they stand,” Parikh added.

Meanwhile, Mike Cherry, national chairman of the Federation for Small Businesses, highlighted that although the vast majority of the 4.8 million workers registered as self-employed are genuinely so, “it’s clear that there’s a problem around a minority, often working in the gig economy, which needs to be tackled”.

“A measured response is needed to tackle false self-employment, and this must not hamper genuine entrepreneurs. The focus should be on the risks faced by the genuinely self-employed.”

Cherry concluded that while self-employed people are often happier than they would be as employees, they also face challenges that “have long been ignored” and “it’s vital that they receive the support that they deserve”.