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Compliance Risks and the Gig Economy

Sep 01, 2018 Red Flag Alert Updated On: October 11, 2023
Compliance Risks and the Gig Economy

If a business interacts with ‘gig economy’ platforms like Uber, Handy or Airbnb they open up a number of compliance risks. These risks are manageable but you need to be aware of their many forms; here is a quick guide so you can start to assess the risk profile of your business. 


It’s easy to underpay tax when you are hiring regularly through gig economy platforms.  Freelancers may certainly be paying too little tax so you are associating yourself with tax avoidance. Also, hiring people on a long term basis through these platforms can avoid paying employer NI and pension costs which would be payable if they were a full time employee.


Many sellers on platforms should be charging VAT but aren’t so they can be more competitive. VAT fraud cost the UK £1bn in lost revenues last year alone. 

Supporting Modern Slavery

Some gig economy platforms are less onerous in ensuring they meet the Modern Slavery Act. An Airbnb which is cleaned by employees who are in compromised conditions with regards to wages, discrimination, and worse can be avoided by giving staff training on what to look out for when making these bookings.

Minimum Wage 

Many suppliers in the gig economy don’t ensure minimum wage, leaving employees working illegally. As a user of their service you may be able to stipulate minimum wage terms and do checks to ensure this is happening. 

Legal Right to Work 

As an employer you are responsible for employees having the legal right to work. If you hire through a gig economy platform and the checks haven’t been completed thoroughly you obviously shouldn’t be making that hire. 

Data Breaches 

Sensitive data that is in the hands of gig economy workers can find itself being used in unscrupulous ways. It is important to make sure that data policies are in place and any freelancers used are adhering to these policies; making them sign a contract with penalties is no problem. 

Alternative Employment Practices 

If you use casual labour you aren’t giving employees the appropriate rights, and a company is open to being sued. There have been a number of cases recently about ‘zero hours’ contracts where employees have been successful in suing. It is important to ensure gig economy workers get the rights they are legally entitled to. 

Organisations should have a set of questions they ask before taking on gig economy workers. These simple compliance checks can stop bigger problem down the line. Here are a couple of examples of questions to ask when building a compliance process: 

  • Is the platform trustworthy?
  • Does the platform meet the threshold for workers’ rights?
  • Has the immigration status of workers been checked?
  • Is the worker paid minimum wage?
  • Are all tax obligations by the platform and our organisation being met? 

Overall, it is a case of weighing the risks against the benefits. If you’re using a trusted platform and asking important questions then using these platforms should be trouble free.

Published by Red Flag Alert September 1, 2018

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