Covid-19 and the case for portable benefits - RSA

Covid-19 and the case for portable benefits


  • Employment

As the coronavirus spreads, trade unions are urging governments to ensure that all workers can access sick pay. But this epidemic has surfaced the need for a more radical reform of the benefits system.

The government was accused of failing to grasp the threat of gig economy workers spreading coronavirus, after a minister at the Department of Work and Pensions advised those with no access to sick pay to claim unemployment benefits instead.

But as trade unions have warned, many of these workers may not be able to afford to self-isolate for two weeks if they develop symptoms and could potentially hide their illness rather than lose pay, which could risk worsening any outbreaks.

This time it looks like the government may have to foot the bill. The Chartered Institute of Personnel and Development have suggested that "there may be a case for the government to create some sort of compensation or hardship fund to help individuals such as the self-employed, temporary or low-paid staff if they are not eligible for sick pay or paid leave.”

This is sensible given circumstances, but something of a sticking plaster when we need to radically reform the benefits system.

Why don’t gig workers get sick pay?

Whether or not workers are entitled to benefits depends on their employment status classification. Recent years have seen a spate of court rulings on this in the gig economy. Gig platforms can mediate employment relationships because they leverage algorithms and big data to more efficiently manage the workforce. Through clever matching algorithms, Uber enables drivers to complete more trips than traditional minicab firms.

But this use of algorithms also raises questions about the control the platform exerts over workers. Control is an important test for determining employment status, which has led many to argue that Uber drivers should be re-classified as ‘dependent contractors’ with access to benefits such as holiday pay and the minimum wage.

While many gig workers may well be entitled to greater protections in the future, it’s likely that the landscape will remain fragmented. Gig platforms have very different business models, so the extent of coverage will vary across different sectors and services. A graphic design professional offering bespoke services through a platform such as Upwork completes tasks in a way that is very different from a delivery driver zipping across London.

In response to the recent AB5 state law in California, Uber actually changed the workings of its app to give drivers more control. Drivers can now see where a rider wants to go and an estimated pay-out before they accept. A recent Wired article suggests that in response to this some savvy drivers have started to cherry-pick their rides, so they make more money from fewer rides.

What are portable benefits?

Portable benefits could help plug the sick pay gap by giving self-employed workers access to a range of non-statutory employment protections. Portable benefits can be accumulated on a pro-rata basis across multiple employers. Unlike the current system in the UK, once portable benefits are accrued, they are retained by workers even if they move jobs or become unemployed.

An example of this is Alia, an online platform for portable benefits developed by The National Domestic Workers Alliance (NDWA). Alia works by enabling different clients to contribute to a single pot ($5 per job in lieu of regular gratuity), which can be drawn down by domestic cleaners to cover sick pay, life insurance and paid time off.

Alia was initially piloted on the basis that clients would contribute voluntarily. But the NDWA has since introduced legislation in Philadelphia that mandates they contribute to paid time off through a portable benefits platform, as part of a wider package of reforms for domestic workers. 

Portable benefits have actually garnered much support from gig economy platforms. As Deliveroo CEO Will Shu put it:

“If you work with us for 40 hours a week then that relationship and the benefits you get should mirror that much more [those] of an employee… However, if you log in once a year, then it shouldn’t.”

How could we pilot a portable benefits system in the UK?

Like Alia, the system could initially be trialled on a voluntary basis with a particular group of gig workers (eg, Deliveroo drivers) to evaluate its impacts. Piloting on a voluntary basis means no new regulations will need to be passed. During initial trials, delivery drivers might receive benefits in the form of tips from both restaurants and customers. The platform could be developed with a third-party provider such as a FinTech already providing services for gig workers. This could help mitigate a concern of platforms that offering this kind of benefit will risk employment status reclassification.

A system for portable benefits could be scaled across different sectors through collective agreements between trade unions and platforms. One such example is the recent Hermes-GMB ‘self-employed plus’ deal, which gives the couriers who choose it the most important rights that go with dependent contractor status while they continue to be classified as self-employed. 

Such agreements would not only help build legitimacy. Palak Shaw, Social Innovations Director at NDWA, explained that “if you read the law carefully, there will need to be one operator to administer the system – you need to have an aggregator function for the worker, so that they can realise the paid time off all together.” 

A portable benefits system would not be very useful if a delivery driver received benefits from Uber Eats and Deliveroo in different accounts. The practicalities here are yet to be worked out, but nod towards the Ghent system where trade unions administer welfare benefits. Alternatively, there may be a role for an organisation such as NEST, the government-backed workplace pension provider, to pool together smaller amounts from different employers.

How will employment law need to change?

In the long-term, the government should introduce laws that mandate portable benefits so that they can be enjoyed by all self-employed workers. The law should specify that the contractor of labour pays. In instances where workers provide services direct to consumers, such as domestic cleaning, it would be the consumer that contributes. Where there is an intermediary such as a platform, they would cover the costs (but in theory they could pass them on to consumers).

A recent portable benefits bill proposed in Washington specified that the amount contributed should be equal to 15 percent of the total fee for each transaction, or two dollars for every hour worked (whichever is less). This could allow a full-time Uber driver to accumulate $70 per week that they could draw down for paid time off or in case of illness.

The bill also specifies that providing portable benefits does not contribute to determining employment status. However, this is not intended to facilitate some kind of Faustian pact: more benefits instead of employment reclassification. The Hermes self-employment plus deal, for example, requires that workers use route optimisation software and regulators will need to decide if this warrants reclassification on the basis of management control.

Portable benefits could also provide a solution for workers who are classified as dependent contractors or employees, but who are working across multiple jobs. Many of these workers still miss out on important protections. There are two million low-paid workers who are not self-employed but fall below the threshold for statutory sick pay (£118 per week). The government should also introduce laws to ensure that these workers can accrue benefits on a pro-rata basis from day one.

By bringing these issues to the foreground, Covid-19 may represent a significant global moment for the future of work.

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