The self-employed are independent people. They recognise and accept that their chosen way of working is more of a risk, and comes without the framework of statutory benefits and entitlements that traditional employees are entitled to.
However, the government does have an important role to play in ensuring there is clarity over who is genuinely self-employed and what they should reasonably be entitled to. Many self-employed people are excluded from reasonable support – a more inclusive approach to this part of the workforce would benefit them in their work and home life and ensure they can continue to add value to the UK economy.
IPSE believes that with a growing number of freelancers more should be done to provide wellbeing and security on some basic areas where our outdated system risks leaving them behind.
Confusion over employment status is at the heart of many of the tax and legal problems that freelancers encounter. There are currently definitions in law for what it means to be an employee and what is means to be classified as a worker, but not for genuine self-employment. Following the Taylor Review and the debate around ‘Good Work’ in the 21st Century we believe the next government should be radical and deliver a statutory legal definition of self-employment. This would help individuals better understand if they are self-employed, prevent unscrupulous companies forcing people into disguised self-employment and avoid confusion over their status with those working in the gig economy. A statutory definition would protect those who are genuinely self-employed, and restore the rights of those who are being falsely self-employed.
Our recommendations:
- Deliver a statutory legal definition of self-employment.
Universal Credit (UC) does not work well for the self-employed. There are two critical areas where IPSE believe UC could be reformed: the start-up period and the Minimum Income Floor (MIF). UC does not recognise that businesses, such as those set up by self-employed people, more often than not take over a year to get off the ground. This is the nature of starting a business and we believe UC needs to reflect this reality. For self-employed people, the MIF can exacerbate fluctuating incomes, which some self-employed people are exposed to - reforming this will smooth out this punishing element of the benefit. In recent months, in response to the coronavirus crisis, the government has removed the MIF – we think this policy measure should stay in place beyond the crisis.
Our recommendations:
- Review Universal Credit (UC)’s impact on the self-employed and extend the start-up period of UC to two years.
- Abolish the ‘Minimum Income Floor’, or reform it by calculating earnings on a quarterly or annual (rather than month-to-month) basis, to take account of the fact that freelance earnings are volatile.
The flexibility and independence provided by self-employment can be particularly appealing to new parents. Between 2008 and 2018 the number of mothers working as freelancers increased by 80 per cent. However, those who choose to have children when they are self-employed are at a significant disadvantage compared to employees. Self-employed women are only eligible for the lower rate of ‘Maternity Allowance’ rather than the more appropriate ‘Statutory Maternity Pay’, while self-employed fathers are not entitled to Shared Parental Leave, paternity or parental pay. There is no reason why self-employed parents should receive less support, as parental benefits are funded by the state, not employers. Government should reassess these rights in order to enable more women and men to support their family and their business.
Our recommendations:
- Extend Shared Parental Leave (SPL) to the self-employed so that parents have equal opportunities to care for their children – and build their own business.
- Enable mothers who are self-employed to claim Statutory Maternity Pay, to replace the existing ‘Maternity Allowance’.
- Extend Statutory Paternity Leave to fathers who are self-employed.
For a disabled person, self-employment can bring greater independence than traditional employment. IPSE research has shown that one in seven (611,000) UK disabled people now work for themselves in their main job marking a 30 per cent increase for the last five years alone. Disabled freelancers share many of the same problems as the wider self-employed sector – on issues such as late pay for example, that can be particularly damaging for those with mental health needs - but they also face some specific challenges that require more tailored government assistance.
Our recommendations:
- Increase New Enterprise Allowance (NEA) mentor and benefit support to two years to reflect the length of time individuals need support whilst establishing their business.
- Better publicity for the Access to Work (ATW) programme via Job Centre Pluses and mandate Work Coaches to make all eligible people aware of ATW.
- Re-designing the Work Capability Assessment (WCA) to consider a range of physical and mental health conditions and reduce the chance of incorrect decisions being made.
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New skills and qualifications are a gateway to higher earnings and career progression for the self-employed but finding the time and money to undertake training is difficult. Only 12 per cent of the UK’s solo self-employed have received job-related training in the last three months, compared to 26 per cent of employees. Upskilling this growing sector is also crucial to ensure the UK tackles its productivity gap with other countries and can take advantage of rapid technological change. The government’s skills and apprenticeships system is overly focused on traditional employees and does not account for the training needs of the self-employed.
Our recommendations:
- Broaden the apprenticeship levy into a wider skills levy, giving businesses – including recruitment companies – the flexibility to spend on their self-employed workers and different types of training.
- Make training for new skills tax-deductible for the self-employed.
- Establish a self-employment hub to improve signposting to trusted online training providers.