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Tread carefully when terminating worker relationships, says Anna Bithrey, associate solicitor in the employment law team at Taylor Walton Solicitors

For individuals engaged in the gig economy, working relationships are defined by the fact that they are often short-lived and casual in nature, with no obligation on worker or employer to undertake or provide work respectively.

Many industries, such as food and delivery services, are dominant in the gig economy and benefit greatly from these flexible working relationships which allow them to engage staff according to demand.

However, due to the nature of these relationships, the extent to which workers are protected by employment law, particularly when the relationship terminates, can be unclear. 

There are three categories of individuals in employment law: employee, worker or self-employed. The legal tests to establish where an individual falls within these definitions is often complex. 

However, a common category typically seen throughout the various business sectors within the gig economy are ‘workers’.

Workers are individuals who are not genuinely self-employed, but who, by the nature of their casual working relationship with their employer, are not subject to the same obligations as an ‘employee’, or indeed controlled by their employer to the same extent as an employee.

Whilst many workers view this flexibility as a good thing, it means they do not benefit from the same level of protection as an employee, particularly when it come to the termination of their employment. 

Each worker should have received a statement of the main terms and conditions of their engagement at the start of their employment. Unlike employees, the arrangements for an employer to terminate a worker’s engagement will largely be governed by the terms agreed in this statement, as opposed to statute, including the minimum period of notice to be given and the situations in which the contract can be terminated.

Employers will still need to be careful that they do not fall foul of the legislation protecting workers from discrimination in respect of the reason for termination of their employment. 

Holiday pay is a complex calculation

The key exception to the lack of statutory employment rights for workers is that they are entitled on termination of their employment to receive a payment for accrued but untaken annual leave. 

For workers who are entitled to the statutory minimum 5.6 weeks holiday but have no normal hours of work, this is not a straightforward calculation. Put simply, the calculation consists of two stages: (1) calculating accrued holiday entitlement; and (2) calculating the worker’s average weekly pay. 

The first calculation requires employers to calculate how much of the leave year has passed. For example, where 204 out of 365 days of the leave year has passed (namely 55.89%) and the worker is entitled to the statutory minimum 5.6 weeks holiday, their accrued holiday will be 3.13 weeks.

The second requires employers to calculate the worker’s average weekly pay over the past 52 weeks (or longer, if there are weeks to be disregarded in which the worker has not worked). The holiday payment will be the accrued holiday, multiplied by the average weekly pay. 

The cost for getting it wrong can be high, from a financial and reputational perspective, so tread carefully or seek expert advice.

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