A decision by the Supreme Court to uphold the employment status of a plumber could have wider ramifications on employers and their duties around auto-enrolment and see more than 360,000 additional workers auto-enrolled.
Supreme Court justices today (13 June) unanimously agreed that plumbing and heating engineer Gary Smith qualified as a 'worker', rather than a contractor, under employment law.
They rejected an appeal by Pimlico Plumbers, which had sought to class Mr Smith as self-employed, hence shirking its responsibility to contribute to his pension or grant him benefits such as holiday pay.
Under legislation introduced in 2012 all employers have to auto-enrol their employees into a workplace pension as long as they are at least 22-years-old and earn £10,000 a year or more.
Currently companies have to contribute a minimum of 2 per cent to the workplace pensions of their employees, with the staff contributing a further 3 per cent.
But the same does not apply to contractors or gig economy workers classed as self-employed.
Government figures published in February showed about 2.8 million people worked in the gig economy last year, of which 56 per cent were aged 18 to 34-years-old and 13 per cent earned more than £10,000, equating to roughly 360,000 workers eligible to be auto-enrolled into a pension.
What is more, recent figures from the Office for National Statistics showed most self-employed people have little confidence in their pensions, and almost half of those aged 35 to 54-years-old have no private pension at all.
Alistair McQueen, head of savings and retirement at Aviva, said the judgment could have significant ramifications on the wider workforce, taking into consideration the government statistics.
Jon Greer, head of retirement policy at Old Mutual Wealth, agreed the ruling would shift boundaries in the employment system, and combined with HM Treasury's crackdown on 'bogus self-employment', could reduce that savings gap substantially.
But James Bingham, associate director at law firm Sackers, cautioned the judgement was based on a particular contract between Mr Smith and Pimlico Plumbers, so not all gig economy workers might be affected by it.
He said the judgement gave some clear guidance, which would “inevitably lead to more employers being caught out”, but it could also help bosses come up with new contracts, which fall outside of the ruling.
Aviva's Mr McQueen dismissed concerns the ruling could have adverse consequences, saying recent experience had shown most employers are happy to comply with auto-enrolment duties.
“Any fear of a backlash is overblown,” he said.
He added the judgement may help inform the government’s wider thinking on how to help the self-employed benefit from auto-enrolment, which is currently underway.
The Association of Independent Professionals and the Self-Employed (Ipse) called on the government to write into statute a positive definition of self-employment to avoid the type of uncertainty that led to the Pimlico Plumbers case.
The body's director of policy, Simon McVicker, said: “This would send a clear signal about who is and who isn’t self-employed, and would mean that people wouldn’t have to go all the way to the Supreme Court to get a resolution.”