Are 'gig economy' worker right for your business?

There are approximately 5 million people employed on a 'gig' basis where they forgo a regular wage and instead get paid per 'gig'. Some companies have had great success from using 'gig' workers and expanded quickly because of it, but are they right for your business?

The gig or sharing economy is composed of organisations that hire independent workers for short-term positions. In the United Kingdom, approximately 5 million people are employed in this fashion, according to the University of Hertfordshire’s report. In fact, more than a quarter of UK SMEs have employed a gig economy worker within the last year.

Your organisation may even employ some members of this group if you have volunteers, seasonal employees, contractors and other kinds of non-traditional staff members. Whilst they may be non-traditional, gig economy workers can be just as beneficial to your organisation as full-time employees. According to the report, 57 per cent of SMEs believe that gig economy workers provide greater flexibility for their business and 38 per cent believe that they allow for better workforce management. Some SMEs even reported that gig workers were more efficient in completing assignments due to the potentially stricter deadlines they had to meet.

However, hiring gig economy workers also has its disadvantages. With a temporary workforce, it is difficult to build a rapport with a gig employee and provide adequate (and sometimes necessary) training and supervision. Indeed, 40% of SMEs reported that they were worried the gig economy created a less motivated workforce.

Just as you do for your full-time employees, you have a legal obligation to provide these individuals with a safe working environment and employment rights. Even though some gig economy members may be independent workers, your organisation should not label them as self-employed. If you do, that could violate their employment rights. Classifying your employees correctly is essential as it impacts your compulsory employer’s liability (EL) insurance.

To ensure all UK employees are protected, the government requires most businesses, with a few exceptions, to have at least a £5 million EL policy. The HSE enforces this rule and can fine your organisation up to £2,500 every day if you do not have the appropriate level of insurance.


If you caught our last newsletter, you would have seen the article about the change in the Ogden rate which is used to calculate personal injury compensation. Although the law states that you must have at least £5 million EL insurance, very few insurers will offer less than £10 million. Due to the change in the Ogden rate, there are now questions being asked as to whether £10 million is enough as in some circumstances where a single claim could amount to over £20 million!


For more guidance about the gig economy and EL insurance, or if you would like some examples that show the huge impact that the Ogden rate change has had, contact Alan & Thomas Insurance Group today.