Tackling global worker classification challenges with Raoul Parekh of Littler

Hi, everyone. My guest today is Raoul Parekh. Raoul is a partner in the London office of Littler, the largest global employment law firm. Raoul specializes in helping multinational companies solve employment law problems. He co leads London offices international practice and has a particular focus on classification issues and employers of record.

Raul is recognized as a leading practitioner in Chambers and Partners twenty twenty four and in international employment lawyers, IEL, Elite. So we're very delighted to have Raul on the podcast today. Welcome, Raul.

Thanks, George. Great to be here.

Excellent. Well, look.

I'm really excited to be speaking to you today. The focus of today's conversation is all around employee classification and contract classification.

We're gonna be talking about things like how to correctly identify employees versus contractors and global problem based by global company. So I guess, to kick things off, how would you define contracts and misclassification, and why is it a big deal?

Yeah. So, so George, contracts and misclassification basically refers to companies and individuals declaring that the relationship between them is not an employment relationship, I. E. That the contractors are self employed, when the law of the relevant country, where the contractor is operating, says otherwise. So at its simplest, it involves the company and the contractor signing a piece of paper that says they're not an employee, and the law of the land says that they are.

You also asked why is it a big deal?

And I think the first thing to say about that is that, actually, sometimes it isn't.

A lot of the time, the mistakes that companies and individuals make about classification just never come to light.

So it's not a big deal.

And it's it never even no one ever knows.

For example, let's say that you hire you hire would be contractor. The individual makes proper tax declarations. The company's got a solid agreement to protect themselves.

Maybe it's for a particular project, a particular piece of work. At the end of the relationship, company contractor need to go their separate ways, then in all likelihood, the arrangement will never come to the attention of any court, any regulator, any lawyer.

It will be a happy ending.

But obviously, not all stories do have happy endings, and sometimes these things do come to people's attention. And probably the most common time when it comes to, comes up is at the termination of the relationship.

On the way in, everyone's happy, more or less, to sign the piece of paper they're being given to say that they're not a contractor when, they're not an employee when when perhaps the rule of the land says that they are.

But then when you get to termination and the company wants to end the relationship perhaps, but the contractor doesn't, that's when the contractor might see an advantage in their position to asserting that they are an employee.

Because one of the consequences of being an employee in most countries around the world is that you have some degree of protection and termination. Whereas, of course, if you're a contractor, it's a business to business relationship, and your only protection is the terms of the contract, which might say the company can terminate ten days notice or even no notice.

And when that happens, when it does when the issue does crystallize, when the sort of chickens come home to roost, the issues that companies can face in that situation include tax issues, where they should have been deducting payroll taxes from the amounts they were paying to the to the would be contractor.

There can be termination costs. Talks about termination protection, and that can mean that the company is due to pay a certain amount to the contractor when they terminate their employment. That can be pension liabilities. Like in the UK, you have to, auto enroll, employees in pensions, in in a workplace pension. Doesn't apply to contractors.

And there could be other claims like discrimination, for example, where employees will, in pretty much all countries, be protected. Contractors, to varying degrees, generally won't.

And it can even lead to the stamps where to to the extent that termination is sort of difficult or impossible because the contractor might be entitled, if they are an employee, to be reinstated into their previous role. So as a company, you think you've terminated the relationship, you think you've said goodbye, you don't just get sued, you don't just have a back tax liability, you also have got the person back that you want to shot off in the first place. So that's the worst case scenario, and that's really why it makes sense to, yeah, have a podcast and talk about these things.

Yeah. In fact, that final point, I'd never even come across myself. I didn't even realize that was, that was possible, but I guess that depends on the the situation. But just to summarize, it sounds like sometimes this isn't a big deal. Sometimes this is a big deal. It's typically at the end of the relationship when it when it kind of rears its head, and that can that can have a lot of different consequences associated to it. Does that sound about right?

Right. I think the end of the relationship tends to be when the contractor sort of see see the reason to push it. That can occur at other times when sort of adverse changes are being made, for example, but generally, it's at the end.

Yeah. Got you.

And I think one thing that I'm starting to see a lot here is that, like, different countries have different approaches. And, and in your mind, is it quite black and white, like this person's a contractor, this person an employee, or do you often see blurred lines there?

No. This is definitely an area of the law that is full of grave.

So, you know, there's there there are there are tests. There are factors.

But you can speak to two different employment lawyers, get two different answers about whether a particular person is more probably categorized as an employee or a contractor. So this stuff isn't easy, and that's why there are laws about it. That's why there are cases about it, and that's why there are disputes.

But just because it's it's difficult, it doesn't mean you should ignore it.

Kinda mean the opposite. It means you have to pay attention and and get into some of the detail if you're gonna manage the risk of your business.

Yep. Gotcha.

So, yeah, definitely can be a gray area. Definitely look to look to take some advice. Sounds like a a clear clear message there.

What about in instances where you might see that actually there's an international employee.

You don't have a business there in that country. So you end up, like, kind of de facto, employing them as a contractor as opposed to, ultimately, what would you have kind of?

Yeah. I mean, that that is a very classic fact pattern that you described. It's a it's a common situation that you that you have. You you might get on the phone to a to to a new client who'd been introduced to you, says, maybe they're an international business, and they've, found their perfect CTO or chief marketing officer or whoever it might be.

But let they're in, let's say, Cyprus, where the client has no business, in particular, plans to have a business. Their only interest in that country is that their perfect hire is there.

And that can make hiring that person quite challenging. You know, in in pretty much every country in the world, you're employed or you're self employed. Sometimes there are a little bit more there's a little bit more complexity than that, but generally, it comes down to those two categories. So you've got to choose. Are you going to employ this person? If you're going to do that, generally, you'll need a legal entity, not always. If you don't need a legal entity, what you'll need anyway, or if you do, you'll need to set yourself up to deduct taxes and pay them over to the local taxing authority.

You'll need a payroll agent. You'll need a locally compliant employment contract and so on. So that can feel quite unattractive.

In comparison to that, the contractor option can be quite seductive. All you need is a contractor agreement that, you know, might find off the Internet or certainly, you know, a a lawyer will give you for for not very much money.

And often and sometimes the candidate will be quite enthusiastic about that option too because they might perceive that being a contractor carries a tax advantage. Whether it does or doesn't varies quite significantly from country to country, and often people perceive it as having an advantage, and really it doesn't.

But it can feel as as the sort of advisor or whether it's an HR professional or lawyer in the room there, you can feel like you're you're kind of breaking up the party. Client the company's happy to hire them as a contractor. The candidate's happy to be engaged as a contractor. Why why are we saying that that they shouldn't?

But the reason, of course, is is some of that stuff we were talking about a a little while ago, the potential when it goes wrong.

Now, of course, there is also another option when you're focusing on employment to what I do to what I described, to not to the legal entity setup point. And that's using something like an employer of record as a solution. Obviously, something omnipresent does and and another provider. And what that can do is it can, mean that you've got something approaching the ease of the contractor solution that attracted you there because it, you're not having to take on all of this administrative burden of basically setting yourself up to be an employer in a come country where there's just one person you want to employ.

But it comes obviously at a at a cost because, any any employer record or drawer investment is the same or want a fee for the service they provide, but it can provide a a valuable sort of third way that, avoids the classification risk because the CTO in our example is is now an employee above the present, but also avoids the administration because the employer of record is handling that for you.

Yeah. I see it. I think give given kind of some of the, risks you mentioned, a bit earlier on, like finding a contractor agreement online feels like a very simple solution. But, you know, you don't know what you might be sleepwalking into there. Right? So Google certainly or ChatGPT might not be your best friend in some of these.

So Yeah.

Exactly. Maybe one day, but but not quite yet.

And another thing that kinda sprung to mind is you mentioned kind of, you know, you find a CTO in Cyprus that you think is a really good person.

But in my understanding is, like, different countries are gonna have different perspectives on some of these things. Certain countries might be more lenient. They might not be not be quite as, quite as demanding when it comes to classification, whereas other countries, will might come down a bit harder on you. What's your take on kind of navigating some of those complexities?

Yeah. So so, yeah, you're one hundred percent right, George. There are each country has different laws and different rules. And even, you know, within the EU, this isn't an area where there's harmonization across the member states.

So, it's a matter of national law, and and and obviously, countries outside the EU as well have their own national laws.

What's surprising from having done a lot of sort of global classification projects is actually the degree of lawyers in particular countries about what makes an employee and lawyers in particular countries about what makes an employee and what make an in an a genuine self employed contractor.

Things like taking on financial risk or, the employer not exercising control in how the work is performed, payment by results instead of by time, the ability for the contractor to send someone else on their behalf to do the work or outsource it to their own employees.

If you asked lawyers from fifty different countries what makes an employee, what makes a contractor, there'd be a very big overlap in the middle of the Venn diagram of the factors that they describe.

The differences tend to come in how those factors are weighted. So for example, in the, in the UK, the ability for, an individual to not be required to do the work themselves and have the ability to send a substitute is particularly important.

And in other other countries have their own particular focuses.

There's more in common than they have difference.

But the other area where things do diverge more dramatically is on enforcement and consequences of misclassification.

So for example, some countries will have quite a regulator led enforcement approach where agencies will, seek out the misclassified, as they see it, employees, maybe even bring claims on their behalf or, or sort of bring levy fines against companies who are engaging these contractors.

Other place in other places, again, like the UK, for example, that is very un largely unheard of, and it's up to the individual contractors, would it be employees, to bring the claims. So that can make a significant difference to, the practical risk that a country might face, even in two countries where the rules on paper look pretty similar.

Yeah. That that makes total sense. It sounded like there's some there's some common themes about financial risk and, and be able to outsource work and what control you have. But like you say, like, there might be certain countries that really that really are are very stringent on this whereas those are a bit looser.

I'm I'm curious, though, about, the workers' perspective on this because for some, I guess, it might seem like a really simple, okay. I'll just sign this contract. I get to work for this company that I want to work for, and a really quick and easy way to get to get going. But how might that not be in their best interest?

Yeah. Well, I mean, of course, the whole reason why countries have these laws which draw attempt to draw this bright line between employee and the self employed is because of what goes along with employee status, all of the protections and benefits that a country gives to employee, which obviously differs significantly across country across country. It's gonna be a very different, picture of employee protection as, an employee in, say, Texas compared to an employee in France or even an employee in California.

So what what protection you get differs a lot to what benefits you get.

The fact that there is something there doesn't. So diving into that in a bit more detail, I mentioned earlier on when we were talking about protection from dismissal. That's a really big one. Again, not something that most people think about on their way into a relationship with a new new employer or new new new client as it were.

But, you know, sadly, most most, work relationship come to an end. And it's at that point that that protection from dismissal can be really important. And again, can vary a lot from in the UK, where you have, protection from unfair dismissal at the moment when you get to two years service, something likely to change under the under the Labour government.

And to, you know, in the US where there's very little protection from dismissal because they have outworld employment, and then other places like France where you maybe an even higher level of protection than the UK.

Another big point is social security contributions.

So firstly, they can obviously be quite, significant and expensive for the company, but also having those contributions made on your behalf can be very important to your entitlement to future benefits as, an employee as a self employed contractor.

We also mentioned, pension earlier, which again can be, quite a valuable benefit, as an employee. You know, maybe it's five, maybe it's ten percent of salary going into your pension that you're just not gonna get as a contractor.

Another big one that that hits more day to day is paid holiday, which is an entitlement in, across the EU, in the UK, and in most countries in the world for employees only.

So some things will hit from day one. And then probably another bucket is related to time off work. So things like paid maternity leave, paid family leave, they will only be available to employees.

So there is quite a big bucket really of protections that have built up over time, I'd say, as the employment landscape evolves in each country that is, generally speaking, only available to this protected class of employee. So if you're not if you're not identified as being in that class from the outset of the relationship, at some point, if you wanna get those benefits, it's gonna be a fight.

Yeah. It makes a lot of sense. There's one of the instances I might throw in the throw in the mix as well. So putting my, hiring manager hat on. I was I was interviewing somebody a couple of months ago, and, they were hired as a contractor for the company, and they hadn't been paid, for, like, two or three months. And feels to me like it would be much easier for them to, like, actually go and claim something back if they weren't hired as a contractor if they were. And then we'll be right and have much more, much more sound legal grounding to go and to do something about it.

Yeah. That's a really good example. So, in the UK, for example, if an employee hasn't been paid, they can bring a claim for free in the employment tribunal for unlawful deduction from wages.

On the other hand, if a contractor hasn't been paid, that's a breach of contract claim that you need to bring, on MoneyCAD online in the county court, like, suing your builder for doing your bathroom wrong. And it's it's not an impossible process, but it's more painful and a little bit more difficult.

In other countries, it it goes further than that, and not paying employees can have can lead to what they call pocket penalties. So, fines that are levied on the employer for failing to pay employees on time can very significantly increase the risk for an employer of not paying their employees on time compared to a contractor. So the thing where you put your finger on there is like another example, one of those employee protections, employee entitlements that, in your example, your your candidate had been outside of the tent. And if you have been in, it would be a different picture.

Yeah. Absolutely.

I'm curious to get your take on something else, though. Do you see use of contractors being more prevalent in certain industries or in certain in certain kind of marketplaces? What's your what what are you seeing?

Yeah. I mean, I think to some extent, this is a universal issue. It does it does affect lots. Like, most industries will have some use of contractors to some, and to some degree, that will be legitimate. Some it might it might not if push came to shove.

The two places I'd say it comes up more than the average are, first really obvious one, the platform economy or gig economy, where taxi drivers, delivery couriers, other people working in that sector are not classified as employees, and where there have been a series of of cases about that that we can get into a bit more depth if we want to. But that's that's an obvious one, and that's been they've made the law in a lot of countries in in this area in recent years.

I think the other is the tech sector because, for a few reasons. One one is, I think, and not to stereotype, I think you get a lot of people wanting to get things done fast and being a little bit impatient with, sort of compliance, particularly in a a start up culture.

So that maybe drives people to take that seductive choice that we were talking about earlier of the easy contractor agreement from Google versus, you know, having to deal with delays like payroll.

But the other reason is I think that, it's quite common for this search for talent intact to take you to places that you are places outside your own borders, which makes employment more difficult and, makes contracting sometimes seem like the only option.

And it it and finally, I think as well, there's something about the, particularly in the sort of, coding side or the the the more technical side of tech hires you might be making. People are often quite the candidates are quite keen for it, and the candidates tend can be often legitimately contractors because they are working across a portfolio of multiple clients on a project basis. So it's not necessarily to say that tech is a hub of misclassification so much as to say, tech makes big use of legitimate use of contractors as well. And then, obviously, that creates a bit of a a fuzzy zone in the middle between their also large and three basis.

Yeah. Absolutely. I think the yeah. You touched on a few different points there.

Interestingly, I was in, I was in Barcelona at the weekend, for my daughter had a cheerleading competition.

Slightly off topic. But, but it's like going around Barcelona everywhere is Glovo is the, is like the deliverer of Barcelona.

The deliverer drivers around underneath.

You see, you see them over there, in the same in the in the same numbers.

I read something about eighteen months or so ago about them having some fines and having some difficulty about fast buying contractors.

Yeah. And that's that's a an example of one of the things I was I was sort of alluding to there. And in terms of the economy fighting in it, it sounds like it's losing a a misclassification case. And it's something that we've seen in lots and lots of countries in Europe, in in lots and lots of different sort of segments of the of the platform economy. So the the probably the most published heavily publicized one here in the UK was, the Uber drivers went up to the Supreme Court on classification.

Actually, strictly speaking, not about whether they were employees or not. That was not an issue there. It was about whether they were part of a a different sort of subcategory under UK law, but got a lot of publicity.

And then in other countries, we've also seen decisions going actually more radical in this area. It's introduced new laws that that make environment more difficult for platform economy in general. But other countries have seen decisions go in in the platform's direction as as well as others that have gone the other way.

So it is something that I know that those platforms pay close attention to and think quite deeply about.

There's also some upcoming legislation that EU Platform Workers Directive, which is just in the process of coming into effect, which amongst other things is going to introduce a presumption of employment, for those, workers that are caught by by the platform worker directive.

But that needs a lot more.

There's a long way to go at the moment between the text that we've got from the EU and what it might look like at a national level. So that's something that a lot of people in that area I know are looking closely at. It's also something that I think will see significant change here in the UK as well.

The the test, who's an employee and who isn't, because it's something that labor identified at quite an early stage as being something that they wanted to look at in their first two hundred days in offices. At the time of recording this podcast, it looks quite likely to happen after the the upcoming election.

Yeah. Absolutely.

So what you're saying is labor labor are talking about in their first hundred days, kind of looking at how they might, revisit the testing for contractors and if they are a contractor or if they should be a full time employee.

Exactly. Yeah. I mean, the proposals at the moment talk about, a single status, which would, remove that sort of subcategory I I referred to very briefly earlier, create a more brighter line between people who are employees and not employees, rather than this this intermediate category we have of of nonemployed workers. You get some, but not all of the benefits of employees.

That you need to say is more difficult to do. So it'd be really interesting to see the detail of proposals that I expect will come out for consultation, over the first few months.

It could lead to I mean, obviously, it will be a burden for the platform economies. I think it will actually have a much broader implication as well because they're not making rules specifically for that industry. They're making rules that will apply to all of us.

That's really interesting.

And on on those broader rules, how do you, and obviously, in the last few years, there's been a huge rise in this work from home era. And I'm curious to get your take on how that affects things like like classification of employees.

Yeah. I mean, I think it's I think it's sort of a a double edged sword, to be honest, because when people work from home, and have more have less sort of classical employment relationships, so you're not leaving your house at eight thirty every morning, coming into the office for nine to five, and then going home.

When they're doing something else, working a bit from home, a bit from elsewhere, it's up to them.

It's it's more more difficult to monitor what they're doing for for one thing, but it also gives them an opportunity that they didn't have in the classical employment environment to potentially do other things. So it it gives them more a more genuine opportunity to act as a contractor, for example, to say, I am providing, I don't know, marketing services to three or four different companies. I'm not I'm not just a nine to five marketeer for company a. I'm doing this multi company. I'm an independent sort of marketing freelancer.

That's possible in that working from home world.

I haven't I haven't seen many people go from I'm an employee for this company to, I'm going to now we're going to change your contractor relationship, and I'll do this more broadly. What what I what I think you do see is people set themselves up in that frame who wouldn't have been able to do it before because they would have been tied to the nine to five in in person attendant.

So so that's a positive for creative opportunities. Negative is for companies is there's less it's less it's less easy to monitor. It's less easy to, be sure what people are or are doing.

And that creates that creates a sort of further challenge for people. But I think by and large, it's a it's it's an opportunity rather than a negative.

Yeah. Yeah. Absolutely.

So what would be your, kind of tips for avoiding misclassification? How can companies make sure they're ticking the right boxes, if they're if they are in this kind of, gray area, which you mentioned there's there's a fair amount of gray in this this area of the law?

Like, what are the things they should be thinking about to make sure they're either firmly on one side or the other and not caught in the middle?

Yeah. Well, I I think the really basic thing to get right at the start is to get your terminology right and to not be calling your contractors or people that you are saying are contractors employees, not talking about their salary to be, to be precise in the language that you use, not to be treating them like employees, basically, except to be conscious about it. I think the other tip I'd I think about is not just not assuming that it's fine. I spoke right at the start of this podcast about how, a lot of the time, it could well well be fine because the relationship may end in a in a it may be a good breakup.

But that's if you if you sort of assume that's going to happen, then the time when it doesn't will be all the more devastating. Though, you know, that's that that old maxima about sort of hoping for the best but preparing for the worst. I think that lies here too.

Finally, you might think about putting in place something I've worked on with several of my clients, which is a questionnaire, which sort of flushes out the legal risk at hire. So at at hire, you can ask a candidate or sort of would be contractor to alter a series of questions that try to tease out some of those factors that we talked about earlier. You can also have a hiring manager, alter the same questionnaire more or less. And then as the sort of control person in the business, whether that's HR or legal or or sort of more senior manager, you can compare their answers and see whether how the contractor anticipates working aligned to how the hiring manager anticipates working. And then, again, how that measures up to the legal test that's applicable in the country.

I suppose it's finally typical for a lawyer to say, you should, of course, take legal advice on, your classification issue come up.

But I'm also realistic that no company is gonna do that every single time it happens. So I think the more important thing is to put something in place that make sure that hiring managers and HR have have some guardrails themselves that they can access without needing to escalate.

Yeah. I think that makes a little sense. In fact, I I really like that, that questionnaire idea. And then, that gives you the process then to to fall back and say that this is how we if we're ever going through a DD process or something like that, that Yeah. How we've classified everybody. But then also, I guess, what you'd, what you'd suggest is then having all of those documents, those questionnaires that the employees have filled in on file, so you always got those records to, to fall back on. Right?

So let's say you find, you do some of these questions. If you do some of this, you ask some of these questions, you find that actually you've got some employees who who are con who are classified as contractors, and you need to then think about how you how you, change the employment model. How would you think about, handling some of those, some of those situations?

Yeah. So I think I think as as ever, when you've identified a potential problem like this before panicking I mean, don't panic ever, but you want to scope out the risk to work out what the potential financial exposure there is. Because there's a big difference to thinking that, you know, someone who works, a few hours a week for you and and maybe relatively low paid role is potentially misclassified versus your CTO.

So you go back to that example. So I think it's worth thinking about the amount of salary or or fees that this person is paying and also what the local enforcement regime and consequences are there so that you can try and get a bit of a ballpark figure. And that can also be really helpful internally because, sometimes people who, haven't listened to this podcast are not as appreciative of the potential issues here. So being able to say that, guys, we need to focus on this because this is a potential million euro liability. Can focus some minds equally. It mean it it gives you some credibility if you say if you're able to say, this is something we need to talk about, but ultimately, our exposure is limited to this. So it can be be prioritized accordingly.

So that's the first thing, scoping the risk.

The second thing I think is working out what you want the future to be for those people, as in, you know, not what happens to their hopes and dreams, but what what do you want for for them in the company? Do you want are they a really important key hire to retain that you, such that, you know, you you couldn't lose them? Or are they someone who actually the financial risk, the misclassification risk is a problem, more of a problem than the idea of losing their services, because that's gonna inform how you approach it. You might think about actually wearing some classification risk if it's person that wear their contribution to the business and their insistence that they'd be classified in that way outweighs that risk. So you need to have both both sides of that.

And then once you've done that, I think the next stage is is really sort of working out how you're going to deal with this if at all. Looking at the costs and practicalities of bringing these people onto payroll, that's one time when you might loop back to the employer of record solution that we spoke a little about earlier, which obviously is a is a key part of the marketplace for that. And just working out whether that that is the best solution for them, what the, individual attitude to that is, and also what the company's sort of negotiating position going into it is. And that's why the future point is so important for that because you will be approaching the conversation quite differently if this is someone you cannot afford to lose a serve of versus someone who, actually the company putting more of an ultimatum to them saying, we are terminating your contractor agreement. Here's an offer of employment if you want it.

Yeah. Got you. I guess this can be quite a that kind of situation can be quite a, quite a challenging one, not just for the employee, but for the employee as well. Right? If you're gonna have, let's say, a dozen people that you want you you actually wanna have some of these conversations with, that can be that can create some anxiety for the employee, but also the employer knows about these risks. They know what the what could happen if things go wrong. So I guess what would your thoughts be your guide or, advice be for people that are that are kind of embarking on some of these conversations?

So do you mean from the employer side or from the Yeah.

From the employer side. Yeah.

Yeah. I think there's a balance to be struck between being reassuring and making and and depicting this as as kind of business as usual as a sort of tidy up, versus not, giving the impression that this is big problem or that the individual has done something wrong or similarly that the individual has, some significant point of power over the company here. So, it tends to it depends quite heavily on the bargaining power, I'd say, and what the offer is from the company.

Because, for example, we talked earlier about the fact that sometimes being a contractor can carry some tax advantages for the individual.

So if you're coming in as an employer and you're saying, I want you to stop being a contractor that we're paying forty thousand euros to a year, but here's an offer of employment, forty thousand euros a year. Is that going to mean less net salary each month for that person?

And or and and is that and if so, is that a problem? Because there'll be other things. Like, as an employee, they might not have brought us contracts, so, like, pension contributions and benefits and so on. So I think as an employer, you need to really put yourself in the shoes of the person on the other side of that conversation and work it work out if you are delivering good news or bad new. And if it is bad news, does it have to be bad news, or can we revisit that and do all that? Because no one wants to break bad news if you can avoid it.

Yeah. Absolutely. I think you're absolutely right to think about all of the different all of the different aspects of this that are gonna impact the employee. One is, say, you have to say the take home pay, but there's also the additional things they get, like the additional leave, holiday, other things like protections, pension contribution. I think that's a really important thing to factor in and use that, like, put yourself in their shoes and and what you know, give yourself a bit of empathy on that that conversation.

A few things you touched on, are like you mentioned kind of, like, the if the labor government if there's a new labor government in the in the coming weeks, they're probably gonna create a brighter line between, for for the misclassification issues. Talked a bit about, certain countries kind of, like, siding with the companies when it comes to something as gig economy situations.

And I'm curious to get your take on, like and you also mentioned, like, the EU, legislation's coming out as well. I'm curious to get your perspective on, like, from a global perspective, which way is the wind blowing? Are we headed more towards protecting employees, or we're heading more towards, like, favoring businesses? Or is it a bit of, like, everyone's doing their own thing?

Yeah. I think I think the general direction of travel, as much as you can sort of identify, is towards greater employee protection and towards that that tent of the employee getting larger rather than smaller.

I think that's I can't think offhand of a a country where it's that's shrinking, the the addition of of an employee.

However, with that said, I think the focus is much more on the platform economy and sort of what are what are sometimes referred to as dependent contractors, people who are classified as self employed, but are in effect working solely for one client and where that client has all of the bargaining power. An example might be working as a delivery driver for a major logistics company, and then they say, you're not our employee, you're a contractor. Contract take it or leave it. And you're not really in a position to, you know, tell them that your lawyer will be back to them with a markup of the terms because that's just not the reality of the relationship.

So I think the focus is much more at that end of the scale than on to go back to the example, the CTO in his holiday home in Cyprus.

The question is, when those rules are drawn up, when those new laws come into effect, do they sweep in the sort of moneyed CTO together with the, platform worker in Barcelona and lift them both up and provide them with the same level of entitlements.

But I'm very I in my mind, the policy focus is very much from the the delivery driver rather than the CTO. The unknown, really, how the changes affect both.

Yeah. K. Makes a lot of sense.

Okay. Just a couple of questions, for me. And then so in terms of the lawmakers, is there any advice you would you would be pointing in that direction? Like, how how can, how can what stresses would you have for them to make your lives easier and the lives of your clients easier?

Yeah. Well, I mean, the truth is it's it just is quite a difficult area. Right? It's we're trying to draw a bright line on a territory that is breaking. Yeah. The the the truth is there's not there's not something that that that very one that any one person can point to produces this really care distinction.

And that's why this has been a field that's been ripe for litigation challenge and compliance issues. So I don't think, you know, that not to be too defensive of of any of any individual government, but I don't think there was an easy answer here that that that the governments have been missing.

The first words that often come out of any lawyer's mouth when you ask them to advise about a particular whether a particular person is a self employed or not is is a very fat sensitive issue.

And, yeah, I've got some sympathy with that because it it is difficult.

But that said, what we've seen mostly in recent years, certainly in the UK, but also elsewhere, is that there's been a real inaction, on the part of governments.

They've kind of made made rules in some cases sort of ten, twenty, thirty years ago, and they've just sort of hoped for the best in terms of those rules making reality.

And, unsurprisingly, the reality now is a bit different to the reality thirty years ago, and employers are left trying to, you know, force a a round peg into or a square peg into a round hole.

I think the inactivity is maybe worse, and I think, actually a renewed policy focus on this area, while it might produce some unwelcome results, TBC could actually produce some welcome greater clarity. That's what I hope.

Yeah. Absolutely.

Yeah. It's hard to hard to think back to, like, ten, twenty years ago with with, like, how much it changed, not just the gig economy, but things like social media and all of these kind of different situations. Like, there's a huge amount that that probably needs to be updated from, from a government to cool. So to finish off, Raul, it's been really great to have you here, but, I'm curious to just finish off with what would your key takeaways be for any business right now that might have a global workforce, and they're thinking about some of these topics that we've talked about?

Yeah. Well, yeah. I'll well, my my three tips have been gone. Number one, don't assume it's easy. We've spent, I don't know how long exactly talking about this issue now, and I I feel like we're we're just sort of scratching the surface.

It's not straightforward. There will be nuances. There will be shades of gray. So this is something that will require a bit of engagement and a bit of investment. Gonna get it right.

Number two is work out your risk tolerance, because this is an area which it's the only way to take zero risk is to assist everyone's an employee. But, a, that's very expensive. B, it's not practical because lots of people don't want to be employees.

So you'll lose out on talent if you do that. So you have to work out your risk tolerance somewhere between everyone must be an employee to any organ beer contractor, and where you're gonna be along that line.

And the third is knowing your people. Don't necessarily mean knowing, knowing them well and knowing sort of how many children they've got and their names, although that's probably a good idea too. I mean, knowing who you've got and what they're doing for you and where they're supposed to do it yet. Because, that's often the way these misclassification issues come to light or worsen is because there's a a contractor doing a particular task in a particular country without very much oversight. It's kind of fallen under the radar for a little while, and then the termination decision is made, and then suddenly we've got a problem.

So, yeah, those are the three tips. Don't assume it's easy. Work out your risk tolerance and know your people.

Makes a lot of sense.

Well, it's been great to speak with you today. I really appreciate all your insights. I've certainly done this a lot. And, yeah, thank you so much for being on the podcast.

Yeah.

Great to talk to you, George.