The EU has over 500 digital platforms, providing about 28 million people income opportunities. The gig economy leaves room for labour disputes primarily related to pay and working conditions. As of September 2022, over 100 judgements classified independent contractors and gig workers as employees and the digital portal as the employer, which puts the burden of legal responsibility of contractors and independent workers on the companies that provide the platforms that connect them to employers.
Simultaneously, this raises a question on the role of employers who hire and pay gig workers through the online interface. Accelerated digitisation and growth of the gig economy have drawn the attention of regulators towards digitally procured work. The proposed EU rules for gig and contractual workers are the first step to protecting the interests of both digital enablers and the workforce.
The Proposed EU Directive
The most critical component of the gig economy is the digital platforms that connect job-seekers with employers looking for temporary workers based on skills. These include apps and websites that help employers outsource short-term work. The relationship between the platform (company) and service provider is often that of an independent contractor: certain employment obligations like tax and social security, depending on the jurisdiction, are passed onto the contractor rather than the company.
The EU predicts that these platforms will give employment to 43 million workers in the EU by 2025. Workers are likely to be highly educated and predominantly young males. The gig economy in the region spans diverse work profiles, such as language translation, pick-up and delivery, taxi services, and many on-site jobs, such as repair work, elderly care, and more. Digital employment websites and apps generally charge a subscription fee from individuals and third-party employers that hire gig workers, which tends to create an imbalance of power and earnings in favour of the companies. The regulation intends to balance the process in the interest of all involved parties.
In the digital world, many businesses, staffing agencies and consultancies recruit electronically, often automating parts of the candidate matching and screening process. Consultancies that use digital modes to connect self-employed consultants with job-seekers and employers form the intersection of gig and traditional recruitment operations. Employee roles and statuses tend to get blurred in a gig economy, while worker-employee conflicts have increased, highlighting the need for greater regulatory oversight. Greater oversight may lead to categorising many types of gigs and contractual work as employment, with defined employee-employer relationships and liabilities that platforms steer clear of.
How Will the Regulation Affect Employers, Workers, and Those Who Connect Them?
Consumer impact
Increased company costs will inevitably fall on to the consumer, and EU officials estimate it could be as high as 40%. However, officials are also confident that consumers are prepared to meet those costs to ensure better protections for gig workers.
What this means for Workers
There are two main goals of the regulation that will impact workers directly:
A) Determine the Employment Status of a Worker Clearly
A worker’s employment status will be based on whether the platform is classified as an employer. If the platform meets three of the seven criteria, the Directive would classify a digital platform as an employer:
- The platform determines the upper limits for the level of remuneration.
- Requires the person to respect specific rules regarding appearance, conduct towards the service recipient, or work performance.
- The platform supervises the performance of work, including by electronic means.
- Restricts the freedom to choose one’s working hours or periods of absence.
- Restricts the freedom to accept or refuse tasks.
- Restricts the freedom to use subcontractors or substitutes.
- Restricts the possibility of building a client base or to perform work for any third party.
Consequently, the platform will be accountable for working conditions and must comply with employer regulations for the work arrangement or the gig. It must fulfil its duties as an employer towards the employee. Classification of an employed relationship empowers the worker to enjoy regular employment’s social and ethical rights, including minimum wage, paid leaves, sickness benefits, and much more.
B) Establish Rules for Using Artificial Intelligence (AI) in the Workplace, Especially in the Hiring Process
The Directive intends to improve transparency in the algorithmic workforce management framework. It also aims to ensure that workers get proper working conditions and give them the right to contest automated decisions.
What does this Mean for Employers?
While the regulation will take some time to implement, overseas business owners will be among the first affected since they rely on platforms to connect with their workers. KEVIN: WHY? More significant regulatory oversights mean more stringent work quality and working condition standards. Additionally, uniformity and standardisation will enhance the work experience while the quality of work requirements will ensure that employers receive what they pay for. All involved parties will have defined actions they can be held accountable for. So, employers will need to prepare for increased scrutiny and changes in compliance requirements, which may burden compliance and salaries on small and medium-sized employers seeking short-term cheap and low-skill labour.
What Does This Mean for Recruitment Agencies?
The European Commission’s proposed Platform Worker Directive gives a very broad definition of what constitutes a “platform.” It could include any enterprise that automates matching candidates to jobs or uses technology to establish payment rates. Such a broad definition could, therefore, include recruitment agencies. Therefore, agencies offering staffing services in the EU should know that those services will be considered as a digital labour platform if:
- They provide a commercial service (even partly) through digital means, such as via a website or mobile app.
- The service user requests commercial service, which involves matching the demand and supply of labour.
Employers of Record (EORs) will also be classified as “digital labour platforms” since they offer their services wholly or partly electronically. An EOR is the legal employer for individuals working for a third-party company. They take care of matching labour demand with adequate supply and payroll management.
We await further information or clarifications from official sources and will keep you updated.