Nearly a million Australians now work on a freelance or project basis rather than in permanent jobs. Casual employment is not new, but it has evolved and gained traction, thanks to digital platforms that allow businesses to connect directly with workers willing and able to provide short-term and specialised services. New middlemen, like Uber and UpWork, have moved into space as well.
It may turn out to be a happy marriage of supply and demand, but there are risks both for gig workers and those who engage them. For workers, the risk is not having a secure income. For employers, it’s legal liability.
The good news
The biggest advantage on both sides of the equation is flexibility. Younger workers, in particular, may be motivated by a desire for growth and experience and less interested in the stability associated with permanent employment. Small businesses and start-ups may not have the financial capacity to carry a large “inventory” of permanent staff.
In some cases, gig work may also be a way for both the worker and the potential employer to assess each other and the likely direction of business before moving into a permanent employment relationship. It’s like dating.
Because gig workers come without statutory employment entitlements, they may also be cheaper for businesses to hire. That brings us to the dicier side of things.
The risks
Gig workers bear the burden of economic insecurity and the absence of benefits like wage and hour guarantees, redundancy pay and superannuation contributions. There are no workplace safety protections. For better or worse, this is what it looks like when a free market meets an unregulated workplace.
Businesses that depend on gig workers for too long may forfeit the opportunity to build a workforce with company-specific knowledge and internal management expertise.
There is also considerable legal risk to employers who have misclassified workers as independent casual workers rather than employees. In determining whether an employee has been misclassified, courts consider five important factors:
- Whether the hirer controls the work performed.
- Whether the worker is integrated into the hirer’s organisation or is in the business of his or her own.
- Whether the worker is paid according to time spent or product delivered.
- Whether the worker can subcontract out work.
- Whether the worker is free to work for others.
If an employee is misclassified, an employer may find itself on the hook for back wages and interest, in addition to penalties and fines. To avoid legal liability, businesses should review their agreements with gig workers very carefully. It is important to review actual practice, as well.
The nature of work is changing in fundamental ways. If you want to engage gig workers to fill a need for your small business it’s important you know your legal rights and responsibilities.
Rolf Howard, Managing Partner, Owen Hodge Lawyers