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Self-employed workers may be getting worst of both worlds, says think-tank report

New research from the Social Market Foundation (SMF) think tank finds that 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.

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.

It concludes that a significant proportion of self-employed people do not enjoy the autonomy associated with self-employment; and yet also fail to enjoy some of the rights and protections that those in employment, with similar levels of autonomy, have access to.

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

•        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 (this too would have to be a gradual change) 

This paper is part of a broader programme of work which the SMF is undertaking, looking into the position of self-employed workers in the labour market. This research is kindly supported by PRISM. The Social Market Foundation retains full editorial control over all of its outputs.

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 SMF will shortly begin a process of gathering further evidence from end users, recruiters, contractors and providers to better understand the issues raised in this paper. We hope that trade bodies, representative groups and other stakeholders will help us to reach organisations and individuals who are affected.”

Crawford Temple, chief executive of PRISM, commented, "The initial findings suggest that the closer you look, the less easy it is to differentiate between the way the self-employed and employed are engaged.

"The traditional distinctions have been eroded and are becoming more complex as time goes on, shifting as both individuals and companies use ever more varied modes of engagement, often spurred by the effect of technology on working practices.

"The world of work has evolved and as we have been saying for some time now, employment and tax legislation has failed to keep pace. Many changes made are no more than sticking plasters and fail to address the underlying issues. We are excited to be sponsoring this thorough and in-depth look at these issues in the hope that potential solutions emerge that preserve Britain's flexible workforce and competitiveness, as well as giving workers adequate rights and protections where they are required."

Picture courtesy of Pixabay

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