According to EU data, there are some 500 labour platforms operating within the EU — and that’s likely to be a conservative estimate.
These companies allow workers — often those who may otherwise have struggled to find employment — to make a living by performing on-demand tasks like delivering food, picking up groceries, or even completing digital tasks like translating a document or creating a piece of web content.
Many workers choose to work for labour platforms because of the flexibility it offers: they can decide when and how much to work, which makes it easier to fit work around other commitments.
However, some worry that a small portion of the 28 million people working through digital labour platforms in Europe may have been incorrectly categorised as self-employed by the platform, when their actual working relationship looks much more like employment.
In this case, they may be missing out on the benefits they’d usually be entitled to as an employee or worker, like paid overtime, national minimum wage, or paid holidays.
Providing fairer working conditions for platform workers is the main purpose of the Platform Work Package, a set of guidelines released by the EU Commission in December 2021.
But for platform operators, the proposed new rules represent a lot of uncertainty. Will labour platforms be able to continue operating in the way they always have — or will they need to make significant changes to their business models? And should those operating platforms be concerned about the effects the new rules will have on their ability to remain competitive in a growing market?
In this article, we’ll discuss how the proposed Directive will affect platforms and their ways of operating — and what these companies can do to stay compliant.
What does the Platform Work Package include?
The EU Commission released the Platform Work Package in December 2021 with a view to improving the working conditions of people who work through labour platforms in the EU, and providing greater legal certainty for platform workers.
The package comprises:
- A communication setting out the EU measures: This sets out the approach that the EU will take to improve standards for platform work. It also describes the actions that national authorities, social partners and other relevant parties should take to complement the EU measures.
- A proposed Directive to improve working conditions: This includes measures to correctly determine the employment status of people working through digital labour platforms. It also sets out the new rights that workers will have regarding algorithmic management practices. The Directive is set to come into force at the end of 2022 or in early 2023.
- Draft guidelines on the application of EU competition law to collective bargaining agreements: The aim of the guidelines is to make it easier for solo freelancers, including those working through labour platforms, to collectively seek to improve their working conditions.
What changes will the package bring about?
With the Platform Work Package, the EU Commission is aiming to make three major changes to the way labour platforms operate and engage workers, and the way platform workers experience work:
1. Worker status
One of the main aims of the proposed Directive is to clean up the classification of workers who work through labour platforms. Currently, nine in ten platforms operating in the EU classify their workers as self-employed.
And in most cases, this is an accurate classification: many platform workers enter knowingly and deliberately into a freelance relationship with a platform in order to benefit from the freedom and flexibility that this status offers.
However, other workers may have had less choice in the matter, and may even have been incorrectly classified if the nature of their working relationship with the platform looks more like employment than a freelancer working for a client.
This means that they are effectively missing out on the employment benefits they would be entitled to as an employee.
The EU Directive sets out a list of control criteria that determine whether a platform is acting as an employer (and must grant employment benefits to its workers).
If the platform meets at least two of the listed characteristics, it’s legally presumed to be an employer.
This shifts the burden of proving whether an employment relationship exists from the freelancer, who often has little power or influence, to the employer themself.
2. Algorithmic management
The Directive also aims to increase transparency about the use of algorithmic management, which many platforms use to automate decision-making.
Under the proposed new rules, platforms will have to provide clarity on how they use these practices and ensure that human monitoring is in place. Workers will have the right to contest any automatic decisions.
3. Collective bargaining
The EU Commission has also released a set of guidelines that describe how EU competition law should apply to collective bargaining agreements made by and between solo freelancers, including those who work for platforms.
Currently, freelancers are often not able to work together to negotiate a better deal for themselves without EU competition law getting in the way.
How will the measures impact labour platforms?
Exactly how the new EU measures affect labour platforms will depend on whether they currently engage workers as freelancers — and whether this classification is found to be legitimate under the new guidelines.
According to the Directive, a worker will be presumed to be an employee if at least two of the following apply:
- The platform determines (or sets an upper limit for) the rate the worker can charge
- The platform requires the workers to follow rules regarding their conduct, performance, or appearance (e.g. wearing a uniform)
- The platform restricts the worker’s freedom to refuse work, outsource tasks to subcontractors, or decide when or how to complete work
- The platform restricts the worker’s ability to build a client base or work for other parties
When workers are genuine freelancers
The EU Directive doesn’t (or shouldn’t) affect platforms whose workers are genuinely working on a freelance basis and enjoying the freedom and flexibility this status offers.
In these cases, the platform operator is not required to provide their workers with employment benefits like sick pay, set rest times or the national minimum wage.
However, we will likely see platforms that currently exert a certain amount of control over their workers making changes to their business models to create the right conditions for genuine self-employment.
This might mean making it easier for freelancers to pick and choose the work they take on, or to build up a client base outside of the platform.
Platforms will also have to provide more clarity to their workers on algorithmic management practices and how they are being used.
Workers should be able to understand how decisions are made and will have the right to contest any automatic decisions.
When workers are found to be employees
When a platform worker’s working conditions are found to meet at least two of the conditions listed above, they will be presumed to be an employee under the new Directive.
In this case, the platform operator will be expected to enable them to enjoy the rights that come with employment status, such as the national or sectoral minimum wage, sick pay and parental leave.
Naturally, this will come at a higher cost to platform companies than simply engaging so-called ‘freelancers’. This means that platforms that have previously misclassified their workers — deliberately or otherwise — will lose the unfair advantage that they have previously enjoyed.
Creating a level playing field for competition
Some platform operators and other key players in the contingent labour market argue that the new EU Directive could stifle competition and innovation within the labour platform market. However, platforms that correctly classify their workers would counter that innovation should take place in a truly competitive and fair environment.
Businesses should compete based on the quality of the service they provide, and not the working conditions of their workers. The proposed Directive not only ensures that workers will be treated fairly but also creates a level playing field and greater legal certainty for platform businesses.
CXC: Your compliant hiring partner
To prepare for the EU Directive coming into force, platform operators should assess all of their workers to determine whether they are legitimately self-employed, or operating under false self-employment.
Working with an expert partner in contingent worker classification can help you to complete this process more accurately, quickly and efficiently. CXC’s worker classification solution can help you to ensure proper classification of independent, freelance, sole trader and limited company contractors — making sure you’re operating in compliance with local and EU laws.
Interested to learn about how we could help your platform business as the new EU Directive comes into play? Get in touch to find out more.
Are you ready for the EU Directive?
Partner up with us to ensure proper classification of independent, freelance, sole trader and limited company contractors — making sure you’re operating in compliance with local and EU laws.
Our friendly team is more than happy to answer any questions you may have. Contact us today to find out how we can help you.