New ‘self-employed plus’ status will not solve gig economy woes, warn experts

5 Feb 2019 By Maggie Baska

Courier firm’s offer to workers hailed as ‘groundbreaking’ – but concerns raised over tax implications and lack of legal clarity

A new “self-employed plus” employment model created by delivery firm Hermes to fix its troubled relationship with gig economy workers has received a mixed reaction from unions and legal experts, with many warning it does not address fundamental discrepancies around employment status and tax. 

Following a ruling by an employment tribunal last year that the business’s couriers were workers and not self-employed, Hermes struck the deal offering the group paid holiday and guaranteed pay rates. 

Under the new “self-employed plus” model, couriers can opt to utilise up to 28 days of paid holiday and can also individually negotiate their pay rates to earn at least £8.55 per hour over the course of a year – more than minimum wage, which is £7.83 an hour and will rise to £8.21 in April.

While welcomed by some, including the GMB union which helped negotiate the deal, others have raised concerns the new status will create confusion for workers and does not address the tax implications.

Simon McVicker, director of policy and external affairs at the Association of Independent Professionals and the Self-Employed (IPSE), warned the new model was only “muddying the water”. He called for the government to create a legally binding definition of self-employment.

“Instead of creating this new and unnecessary status, Hermes should simply give their drivers the full package of benefits they are entitled to,” he said. “We believe the way to clear the confusion about employment status is for the government to write into law a statutory definition of self-employment.”

“[This would] not only protect legitimately self-employed people, but also ensure falsely self-employed workers have the rights and protections they deserve”. 

This view was echoed by David Greenhalgh, head of the employment practice at law firm Joelson, who said the deal “does not represent the landmark precedent GMB would have us believe”. He added that any pressure for other firms using gig economy workers to follow suit would be “reputational rather than on the back of a new legal precedent having been set”.

The new status was partly a reaction to a Leeds Employment Tribunal ruling that found Hermes couriers were workers rather than self-employed.

The tribunal held several of the company’s couriers were entitled to workers’ rights, and a further hearing was arranged to determine the unpaid holiday pay and national minimum wage due to the couriers, along with any unlawful deductions they may be able to claim back.

But self-employed plus, unless recognised by new legislation, would not change the tax implications for self-employed couriers, or the misalignment between employment status and tax status which drives much of the confusion around the issue. 

Matthew Taylor, chief executive of the Royal Society of Arts and author of the Taylor review on good working practices, raised concerns over the tax implications. Speaking to the BBC’s Today programme yesterday, Taylor said HMRC would be “looking at this very closely”.

“If somebody has most of the benefits of being an employee, and if the employer has most of the benefits of employing somebody, then the tax authorities will want the employee to be paying national insurance as an employee, and they’ll want the company in particular to be paying national insurance on those people,” he said.

However, Tim Roache, general secretary of the GMB, described the new status as “groundbreaking” and credited the courier firm for “showing that the gig economy doesn’t have to be an exploitative economy”.

Neil Carberry, chief executive of the Recruitment and Employment Confederation (REC), also hailed the deal as a “great sign” employers and unions could work together and offer staff both choice and protection.

“We hope this is the start of a deeper dialogue around flexible work that moves away from demonising jobs that don’t conform to a 9-5, permanent employment stereotype,” Carberry said. “Flexible working is hugely beneficial to companies and work alike – but that flexibility has to be matched with fairness.”

Martijn de Lange, Hermes UK CEO, said the new option allowed couriers to “retain the flexibility of self-employment” that was important to them and “gives them the certainty of guaranteed levels of earning, the security of holiday pay and a strong voice”.

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