Gig economy companies supplying “freelance” workers to shops, restaurants and warehouses may be operating illegally, the government has warned, after a series of Observer reports highlighting their use.

Justin Madders, the employment rights minister, last week wrote to YoungOnes and Temper, which provide thousands of purportedly self-employed workers to British businesses, to tell them their business practices could be breaching employment law and staffing agency regulations.

In almost identical letters to the Dutch-owned platforms, Madders states that “bogus self-employment is entirely unacceptable” and he will “not hesitate to ask all relevant authorities to scrutinise employers or agencies whose behaviour appears to be exploitative”.

Madders is concerned the freelance workers on the platforms are not receiving employment rights. He adds it is unacceptable for businesses to claim people are self-employed “when it does not represent the reality of the relationship”.

He demands that the chief executives of YoungOnes and Temper confirm the steps their companies are taking to comply with the laws governing employment status and employment agencies in the UK.

The letters come after the Observer revealed gig shop workers who refused to pay charges to YoungOnes to receive their wages promptly were left waiting for payment over Christmas.

The growing use in the retail sector of gig economy workers, who lack basic employment rights, has been described as “worrying” by the TUC.

The new payment system has led to further complaints against YoungOnes. Workers who decline to pay a fee to receive their wages quickly have to wait for clients to pay YoungOnes, which can cause difficulties for gig workers, who cannot rely on a regular wage packet to pay bills.

One worker, who asked not to be named, said that he was still waiting to be paid for a bar shift he completed well over a month ago.

He said: “The company have been awful to deal with and have sent me tone-deaf replies, essentially stating they haven’t been paid either, so it’s not too bad. The difference being I’m a person trying to supplement my wages and make ends meet by picking up gig work and they are a huge company profiting off of that.”

YoungOnes messaged the worker after he complained, stating that “since you chose the ‘wait for the client to pay’ option, there’s always a small risk involved if the client doesn’t pay their invoice”.

Madders has asked the Employment Agency Standards Inspectorate to investigate YoungOnes and Temper.

The letters state “we believe your business to be an employment agency”, adding “if the legislation and regulations apply to you, some of your business practices that have come to our attention are unlikely to be compliant with the law”.

Agency workers are entitled to a range of employment rights, including holiday pay and 20-minute rest breaks, if they work more than six hours. But workers treated as self-employed do not have these protections.

Last week, the Observer found YoungOnes was offering multiple shifts over six hours in shops, kitchens, restaurants offices and warehouses without any breaks.

One London restaurant was looking for a kitchen porter to work nine hours for £12 an hour, with the YoungOnes app stating “you don’t get a break”.

A Glasgow warehouse was seeking to recruit five warehouse associates for an 8.5-hour shifts with no breaks for £12 an hour, while a London shop offering £12.50 an hour was sourcing a retail assistant to work 11 hours without a break in the app.

Madders’s letter also references a now deleted Temper briefing to hospitality clients claiming freelancers are not covered by fair tipping laws, which was first reported in the Observer.

He writes that the “workers you provide via your platform are likely to be agency workers, and therefore covered by the Employment (Allocation of Tips) Act 2023”.

There is mounting concern that companies could use gig workers to avoid a number of new rights in the employment rights bill.

Keir Starmer faced calls at prime minister’s questions this month to introduce a single legal status for workers to stop more abuses of employment law.

Labour’s Andy McDonald, a former shadow employment rights secretary, told Starmer that insecure work denies workers their rights: “Having a single status of worker will help end such abusive practices,” he said.

YoungOnes said it had responded to Madders’s letter. It said employment rights law and employment agency regulations do not apply to the company. “While neither framework applies to YoungOnes, we remain aware of, respect and understand these laws and regulations,” said James Medd, chief operating officer of YoungOnes.

Medd said the platform did not offer or assign shifts, but instead that businesses post gigs and freelancers choose the ones that suit them.

Medd said: “They have full transparency regarding hours, can negotiate their pay and decide whether to accept – it is entirely their choice.”

The company said it offered freelancers a range of clear payment options that they can choose from based on their individual needs. “When applying for a gig, freelancers can view the average payment speed of a business, ensuring they are fully aware of the expected timeline,” added Medd.

Temper said it welcomed the opportunity to engage constructively with the Department for Business and Trade. “Temper operates with full confidence in the legality of our model, which has been rigorously evaluated in both the Netherlands and the UK.

“We stand firmly committed to ethical practices, transparency and contributing positively to a sustainable labour market,” said a spokesperson.