Call for minimum wage for self employed

The next government should introduce a Self-Employed National Minimum Wage as a way of improving financial security for lower paid self-employed workers, a new report by think-tank Demos argues.

It says the wage would provide a legal obligation on firms to pay their contractors this minimum rate and would give leverage to the solo self-employed to raise their labour rates.

Demos says the Self-Employed National Minimum Wage should be higher than the regular National Minimum Wage to cover the additional risk lower paid self-employed workers are bearing as a result of financial insecurity.

The research also found that ‘liquid’ workers, such as gig economy workers and the self-employed face greater barriers to financial inclusion compared to traditional workers. They are less likely to hold financial products and are almost twice as likely (28%) to be turned down for financial products due to their employment history than traditional employees (15%), says the report.

It also revealed that:

• There is serious concern among workers on zero-hour contracts – they are more than twice as likely (31%) to feel very stressed and anxious about their finances than employees (15%) in the last year
• The ‘liquid workforce’ are over three times more likely to earn very low incomes than traditional workers, with 22% of liquid workers earning less than £10,000 per year compared to just 7% of employees. However, they are also slightly more likely to fall in a number of higher income brackets
• Liquid workers are nearly twice as likely (28%) to turn to a payday lender to meet credit needs than employees (16%)
• Whilst valuing flexibility, almost half of liquid workers (48%) would be willing to sacrifice some flexibility in the way they work for greater financial security – particularly those at the lower end of the income spectrum – whilst 21% of liquid workers would be unwilling to do so

The report calls for a package of solutions to improve financial security for the liquid workforce, including: a minimum wage, better financial services for people on flexible incomes, a more inclusive welfare system, measures to radically boost pensions take-up and more support with financial management.

The report’s further recommendations include:

• An auto-enrolment pension scheme for the solo self-employed with the government acting as their ‘de facto’ employer
• The government working with organisations, such as trade unions and banks, to establish universal portable benefit schemes for liquid workers
• A means-tested ‘accountancy aid’ to help liquid workers manage their finances

Ben Glover, Senior Researcher at Demos and The Liquidity Trap co-author, said: “Self-employed workers are not protected by the safety net that many of us take for granted, from sick pay to maternity cover. This bargain is only fair if self-employed people earn enough to cover the additional risk they take on, but too often in Britain today this is simply not happening. That’s why we are calling for a new, higher minimum wage for the self-employed.”

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