‘Self-employed getting the worst of both worlds’

Many self-employed workers get a worse deal at work than traditional employees – but may also be failing to enjoy the traditional benefits of self-employment, such as greater autonomy, according to a new report by the Social Market Foundation think tank.

The new SMF paper, entitled The employment divide: is it possible to simplify the distinction between self-employment and employment?, says that many self-employed people may look and behave very much like employees and yet are less likely to be paid for overtime, lack the rights and protections of employees and even lack the autonomy which many think self-employment confers.

The report urges the government to consider measures which reduce the incentive for firms to treat workers as self-employed, rather than employees, such as:

  • equalising the level of National Insurance Contributions over time; and
  • gradually limiting the option of self-employment to higher-paid workers, who have the bargaining power to access the benefits of self-employment while trading off rights and protections

The author of the paper, SMF director Emran Mian, said: “This new research suggests that self-employed workers may be getting the worst of both worlds. At the very least, people may look and behave very much like employees and yet lack the rights and protections of employees. Equally, they may in fact be self-employed – without a single employer responsible for giving them tasks or paying them – and yet fail to benefit from the tax treatment of other self-employed people.

“The two categories of employment and self-employment simplify and often distort a much more complex labour market in which people are working and being paid in a range of different ways, including limited company contractors and workers employed through an umbrella company.

“The challenge this variation poses is that our tax system and the rights and protections offered through employment law may no longer fit the reality of the labour market.”

The report says that, aside from employment status, it can be difficult to find differences in the data between self-employed workers and employees. It adds that the variation within each employment status may be more significant than the difference between them, but points to some important differences:

  • Self-employed workers are less likely to be paid for overtime: 71% of self-employed who work overtime do so unpaid.
  • Self-employed workers are half as likely to receive training as employees.
  • Self-employed workers take fewer days off sick. They are half as likely to take sick days.
  • Self-employed workers are less able to save money from their earnings. It points to an 11% gap between self-employed and employees
  • Many self-employed workers lack autonomy. The report says one in five self-employed do not report a lot of autonomy over their job tasks; and one in three do not report a lot of autonomy over working hours. It says the IR35 and ‘supervision, direction, control’ test for tax purposes are founded on the principle that the self-employed should be totally autonomous with a clear distinction between the way they are engaged and the way employees are engaged.



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