Photograph of Deliveroo workers

The law must change to end the “mass exploitation” of workers by companies who use bogus self-employment to avoid granting basic rights like holiday pay and the minimum wage, MPs have said.

In a draft bill published on Monday the Work and Pensions select committee and the Business, Energy and Industrial Strategy (BEIS) committee said personnel should be considered workers by default, with the onus on the companies using their services to prove otherwise.

Labour MP Frank Field, who chairs the Work and Pensions Committee, said the draft bill “would end the mass exploitation of ordinary, hard-working people in the gig economy” and would “put good business on a level playing field, not being undercut by bad business”.

“It is time to close the loopholes that allow irresponsible companies to underpay workers, avoid taxes and free ride on our welfare system,” he said.

But the GMB Union said it was “disappointed at the limited ambition” of the new bill.

“Today’s select committee proposals are just a start in tackling the scourge of insecure work in the UK,” GMB general secretary Jim Roache said.

“If these plans go ahead – they may make a small difference. However the fact remains that without real investment in HMRC and a political will to get tough on rogue employers who are cheating the British taxpayer out of millions and reaping profits out of worker exploitation, then there will be no significant change.”

The proposals come as gig economy firms face a series of legal battles over how they treat those that work for them.

Earlier this month, Uber lost its appeal against a landmark ruling ordering it to treat its drivers as workers. The company has vowed to launch a further appeal, insisting its drivers are self-employed and that they appreciate the flexibility that the status affords them.

Last week, takeaway service Deliveroo won a case at the Central Arbitration Committee, which ruled that the food delivery app’s couriers are self-employed, rather than workers. The CAC said it made the decision because Deliveroo’s riders have the right to put forward a substitute to do their work in place of them.

Employment lawyers delivered a mixed reaction to the draft bill put forward on Monday.

Crowley Woodford, an employment partner at Ashurst said that, if enacted, the proposals would “take a major step towards destroying the flexibility currently enjoyed by the gig economy”. The current self-employed model would not survive, he said.

Emma Bartlett, a partner at Charles Russell Speechlys, described the automatic presumption of worker status as a groundbreaking proposal. “A flexible workforce is fundamental to many businesses to be able to respond to the fickle demands of our present economy, particularly if they want to grow and continue to offer work to those who need flexibility in their working life,” she said. “ However, it shouldn’t come at the cost of a basic level of remuneration to those workers.”

The new proposals come after a government-commissioned review carried out by Matthew Taylor earlier this year put forward its own recommendations for reforming labour laws. At the time of the report’s release in July, Mr Taylor described his recommendations as the “biggest reset of employment law for the most vulnerable workers that we’ve seen in a generation”.

A spokesperson for the Department for Business, Energy and Industrial Strategy said that the UK’s flexible labour market had helped reduce unemployment, but added that the department recognised that the system “is not working for everyone”

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