Are gig economy apps risky business?

Major retailers like Lush, Uniqlo and Gymshark have recently stopped using gig economy apps to hire freelance staff, following concerns raised by the Trades Union Congress (TUC) about workers’ rights.

The gig economy, now with an estimated 1.7 million workers in the UK, continues as a popular avenue for additional income, with expectations for even more growth in 2025.

But while it offers flexibility – allowing workers to choose when, where and how much they work – it also raises questions about crucial employment protections such as minimum wage, sick pay and holiday pay.

So, can gig economy platforms balance flexibility with fair treatment of workers?

What is the gig economy?

Put simply, the gig economy refers to a system in which workers engage in freelance work, whether full-time or as a side hustle. As the Department for Business, Energy & Industrial Strategy describes it, it involves the “exchange of labour for money between individuals or companies via digital platforms that actively facilitate matching between providers and customers”.

But why has the gig economy grown so rapidly in the UK?

First, the launch of online marketplaces has made it easier for freelancers to connect with clients, and vice versa. According to research by StandOut CV, the most popular gig economy app in 2024 was Uber, with a workforce of 18%. Other popular platforms included Deliveroo (12%), PeoplePerHour (12%), Fiverr (10%), Upwork (9%), TaskRabbit (8%) and AmazonFlex (8%).

Moreover, changing attitudes towards work-life balance can be a contributing factor to its vast popularity, particularly as more people want to break free from the typical 9-5 schedule and seek better flexible working hours. Many people are also starting side hustles to earn additional income, and so are taking on freelance work outside of their regular job roles.

What are the benefits and risks of gig economy apps?

The main advantages of gig economy apps for workers are that they’re flexible, offer a sense of independence and allow for new opportunities across different industries and professions. For businesses, gig economy apps are beneficial for:

• Cost-effectiveness: hiring freelancers is usually cheaper than full-time employees, as there aren’t any costs linked to workplace benefits or the onboarding process.
• A wide range of talent: businesses can use gig economy apps to find a variety of freelancers with different skills and talents, making the hiring process quicker and easier.
• Flexibility: employers can hire freelancers for short term projects (e.g. implementing a new programme), eliminating the need to hire full-time employees that aren’t needed long term.

But while using gig economy apps has its obvious advantages, they have also faced controversy around ethicality, particularly within the retail and hospitality sectors.

This isn’t to say that using gig economy apps is completely unsafe, but it’s important to be aware of the risks that come with using them consistently. Fewer employment rights are a major factor, but other risks include:

• Potential tax avoidance: hiring freelancers consistently through gig economy apps could potentially lead to underpaying taxes, particularly if a business avoids paying National Insurance Contributions (NICs) and pension costs by hiring long term staff through these platforms.
• Data breaches: sensitive data can be at risk of exploitation by freelancers if it falls into the wrong hands. To avoid this, businesses should enforce data protection policies and ensure any hired freelancers adhere to them.
• VAT fraud: value-added tax (VAT) charges should be included when a freelancer advertises their services on a gig economy app. However, some may avoid this to stand out from competitors and attract more clients. While this may mean an inexpensive hire at first, it could lead to your business contributing to VAT fraud.

Using gig economy apps responsibly for your business

If you’re considering using gig economy apps to hire freelancers for your own business, it’s important to hire responsibly and avoid any of the above-mentioned risks. 

To ensure your business maintains ethical practices and remains compliant, you should:

• Choose freelancers carefully: with so many options out there, choosing the right freelancer can be difficult. That’s why businesses should take the time to explore a freelancer’s skills, knowledge and past reviews from clients to determine their abilities and trustworthiness. It’s also important to look for freelancers who specialise in the specific skills needed, ensuring they have relevant experience in the industry or project type. Businesses should also engage in detailed discussions before hiring to ensure expectations are aligned and to request a small test project or trial period to get a better idea of the freelancer’s work quality and reliability.
• Ensure fair pay: it’s important to ensure that freelancers are paid fairly and not any less than the National Minimum Wage. Businesses should also ensure that all received invoices are paid on time to avoid late or missed payments.
• Use contracts: businesses should have a written contract that clearly outlines a freelancer’s role and expectations. It should also include details about the freelancer’s employment rights, including a payment schedule to ensure timely payments, and health and safety information.
• Avoid over-reliance: while hiring freelancers is cheaper and easier, businesses shouldn’t over-rely on hiring them alone, as hiring long term employees this way could potentially lead to tax evasion. Therefore, businesses should determine specific roles and responsibilities that are either best suited for a freelancer, or for a full-time employee.

It’s understandable why so many businesses are jumping on the gig economy bandwagon – it’s quick, easy and cheaper than hiring full-time employees. 

That said, businesses should also be aware of the risks that come with consistently using gig economy apps, as well as ensure they’re keeping up with ethical standards when hiring. Freelancers may not be with a business long term, but they should always have the right to adequate protection and fairness.