‘Gig workers’ need to ‘SIPP it’

Maike Currie
Maike Currie
Fidelity Personal Investing12 July 2017

Marketers will tell you that the rarest and highest form of ‘brand-name achievements’ is when a brand goes from being a noun to a verb. Consumers ‘verbifying’ a brand is seen as signifying a closer emotional connection between them and that brand. There are the classic examples - we ‘hoover’ the house or ‘superglue’ a broken item. And, thanks to the rapid proliferation of technology we now also ‘Google’, ‘Photoshop’ ‘Facetime’ and ‘Skype’.

In recent years a new breed of brands has jumped to verb status very quickly - we ‘Uber’, we ‘Airbnb’ and we ‘Deliveroo’. These companies have only been around for a few years, but already they have infiltrated our physical existence to such an extent that we use their brand name to directly translate what they do. These names/verbs are also symbolic of the rapid rise of the so-called ‘gig economy’- a term that tends to refer to people using apps to sell their labour.

Digital advances have brought with it new ways of working - wave-goodbye to the regular nine-to-five, the daily commute and office politics, today people are opting for more flexible ways of working with self-employment and freelancing becoming more common. But there are also concerns that this new world of work leaves workers more vulnerable to being exploited.

Uber has been accused of treating its drivers like “sweated labour” while the likes of Deliveroo and Amazon have been criticised for using “bogus” self-employment practices. In essence it comes down to a question of work security and workers’ rights versus work flexibility, with many arguing that the two shouldn’t be mutually exclusive.

So step up Matthew Taylor. A former policy adviser to Tony Blair, Taylor was appointed by prime minister Theresa May to investigate this new world of work where the ‘gig economy’, self-employment and freelancing are increasingly common. The point of the review was to consider how employment practices need to change in order to keep pace with modern business models.

This week his findings were released in a paper entitled, Good work: the Taylor review of modern working practices, with mixed responses depending on which side of the fence you sit. The report has called for more protection for those employed in the gig-economy, suggesting minimum wages for those on zero-hour contracts, paternity and maternity leave for the self-employed, along with the holiday and sick pay if requested.

While the paper suggests a number of reforms, it has avoided proposing heavy regulation of those companies offering flexible work. Instead, it suggests giving gig economy workers the status of a ‘dependent contractor’, as third employment status alongside the employed and self-employed.

While this third status (currently called “worker”) has long existed in UK law it has been blurrily defined. The review suggests that “the status of ‘dependent contractor’ should have a clearer definition which better reflects the reality of modern working arrangements, properly capturing those more casual employment relationships that are on the increase today.”

While many unions have dubbed the report a “missed opportunity” not least because it does not suggest banning the practise of zero-hour contracts, others have welcomed Taylor’s findings, saying it balances the importance of protecting workers without stifling innovation.

Importantly, the Taylor Review offers some key insights and suggestions into the importance of securing the long-term financial wellbeing of those opting for a more flexible way of work.

One approach would be to effectively auto-enrol self-employed people into a pension and administer this through HMRC’s self-assessment process. So, for example, when a self-employed individual submits their tax return to HMRC via self-assessment, they could also be expected to provide 4% of their income towards a pension unless they choose to opt out. It points out that the Lifetime ISA presents a good opportunity to incentivise self-employed people to save for their future.

The report also suggests making the most of the digital advances that underpin the gig economy by creating payment software that automatically transfers money directly into a pension or Lifetime ISA so that it becomes as much of a norm as when an employed person has their employee pension contributions deducted at source.

Today, it is estimated that more than 1mn people are working in the gig economy - that’s equivalent to the number that work in the NHS. Meanwhile the self-employed cohort continues to grow - swelling by an estimated 25% in the last ten years. The vast majority of these people have made no pension provision for their old age.

If you are one of the growing number of people choosing to work for yourself make sure you don’t forget to save for retirement. A self-invested personal pension, or SIPP for short can step into the pensions void left by leaving formal employment and foregoing a workplace pension. Perhaps the best measure of the long-term success of the ‘gig economy’ will be if some day people also verbified getting a pension - so if you’re going to take an ‘Uber-it’ approach to your employment, make sure you also ‘SIPP-it’.

Watch our MoneyTalk video where we explore the rise of the self-employed and why this group cannot afford to ignore saving into a pension.


Important information

The value of investments and the income from them can go down as well as up, so you may not get back what you invest. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. Fidelity Personal Investing does not give personal recommendations. If you are unsure about the suitability of an investment, you should speak to an authorised financial adviser.