The proportion of the workforce who are self-employed has shot up in recent years. Is this good or bad? The Resolution Foundation had released a report, its recommendations are bold, but do they get it right?
It seems to boil down to why you are self-employed. Maybe you have several clients, maybe being self-employed suits your life-style. Or maybe you have no choice in the matter. What we can say is that the proportion of self-employed to the total workforce has been rising.
According to a new report from the Resolution Foundation, one in seven of the workforce are self-employed. That means they are not entitled to the minimum wage. What can we do about it?
The Resolution report divides the self-employed into two categories: workers who work for a wage and to a timetable determined by employers and those who have some control over how they work: they negotiate their pay.
And it turns out that around 50 per cent of the self-employed, working full time, earn less than two thirds of the median wage. This compares with just 27 per cent of employees.
Of course, a lot of the self-employed workforce do very well nicely, thank you. A key factor may relate to why an employer chooses to hire self-employed workers. If it is because they are seeking to in some way arbitrage the system of employment rules, then that may not be so good. If it has self-employed contractors who just work on a specific project for a limited period of time, or because it cannot afford/does not need the 100 per cent commitment of certain contractors then that may be a different matter.
The Resolution Foundation said: "While a minimum wage would not be appropriate for the majority of the self-employed, for those who take work from firms or platforms and – crucially – don’t have control over the price they charge, moves to reduce exploitatively low pay for this group would be both meaningful and welcome."
It also recommends extending maternity pay and "extending contributory Jobseekers’ Allowance to those who have paid Class 4 NICs at a profit level of £25,000 for two years."
But it also says that if regulations are to be introduced to support the self-employed, then the tax system needs to be adjusted such that the self-employed are not given any advantages.
But the report may be overlooking some key points, in particular, it may fall short in the way it separates self-employed workers from those who are seen to be better off.
Even the self-employed who sit at the higher end of the earnings pool face certain disadvantages: for example, lack of holiday and sick pay, zero employers’ contribution to pension. Their income may fluctuate wildly, in some years not even paying out enough to enjoy personal allowances, in other years paying tax at the higher rate, consequently they may pay more tax over time than someone who earned the same average income, but with less year on year variance. The ability for all but a few self-employed to negotiate a fee may be limited, too. If the tax system cannot offer any advantages at all, as the Resolution Foundation suggests, then the self-employed work force, whose numbers in the digital era seem set to grow, may be the losers.
