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Many in UK gig economy not getting pensions, regulator warns

The UK’s pensions regulator has conceded that not all gig economy employers have done “the right thing” and offered pensions to staff following a landmark court ruling involving Uber drivers.

Charles Counsell, chief executive of The Pensions Regulator, last year urged companies in the fast-growing gig economy to recognise staff as “workers” and to “voluntarily and promptly” enrol those eligible into pensions.

The definition of workers might have to be changed to accelerate the change, he added on Wednesday in a hearing with MPs.

The call followed a landmark Supreme Court ruling in February 2021 which declared that Uber’s tens of thousands of drivers were “workers”, as defined in legislation, and not independent contractors. This meant they were entitled to employment rights, including minimum pay and a pension.

However, the ruling only applied directly to the Uber drivers who brought the action and not millions of other individuals in the booming gig economy. Since the ruling, Uber has moved to reclassify its UK drivers as workers, setting up a pension scheme as part of the process. Evri, the delivery company that rebranded itself from Hermes, also put pension arrangements in place earlier this year for couriers opting for what the company terms “self-employed plus” status.

But there has been no such move as yet from businesses such as Deliveroo, the food delivery company, which has so far fought off court challenges on the self-employed status of its UK riders.

Employers are obliged to automatically enrol those identified as eligible workers into a pension and contribute a minimum of 3 per cent of their pensionable salary towards their retirement fund.

Counsell made his comments to the House of Commons work and pensions select committee on how gig economy businesses had responded to his call to voluntarily “step up and do the right thing” rather than wait until they were compelled by a further court ruling or change in regulations.

“Did they all engage with us? No. Some are,” he said. “There are an awful lot of employers [in the gig economy],” Counsell added.

Counsell told the committee he was working with gig economy businesses covering 150,000-200,000 people whom he hoped would “end up” with a pension.

“The definition of a worker is in the legislation and so what we do find is there are gig economy workers who have contractual mechanisms in place which mean they don’t come under that definition [of worker] and for me that’s where we need to encourage those [businesses] to do the right thing for their workers in any case,” Counsell said.

In recent years, the regulator has taken a keener interest in the so-called gig economy where short-term flexible jobs are offered, rather than traditional work involving an employment contract.

Jobs which once came with employment contracts, from cleaners to consultants, are now being offered on a gig economy or services basis, leaving these individuals at risk of poverty in retirement as they are not benefiting from a workplace pension.

Asked whether the definition of a “worker” needed to be adjusted to prompt faster pensions coverage in the gig economy, Counsell said: “In the end, if there are a significant number of people who are losing out because they are not being automatically enrolled and they are part of the gig economy, then I think we may have to look at the definition of a worker,” he said.

“The more we can shine a light on this, we can all shine a light on this, and encourage gig economy employers to engage with us, and more importantly to set up a system of automatic enrolment for their workers, the better,” Counsell added.

The Department for Work and Pensions declined to comment.

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