Summary
The self-employed are a large and growing part of the UK labour force. Five million people—15% of workers—are now self-employed, and the expansion of self-employment has played a significant part in current record employment levels. New technology has facilitated the growth of the “gig economy”, which has led to a large number of positive developments and opportunities, as well as continuing to alter the nature of work in many sectors. This continued growth in self-employment presents fundamental challenges for the welfare state.
Our welfare system is founded on contribution. Workers pay in through National Insurance Contributions (NICs), and receive support in return. Historically, self-employed people received much less support than employees. Now, following the introduction of the New State Pension, entitlement to all of the services funded by National Insurance is almost equalised. Yet self-employed workers contribute far less. The incoming government must set out a roadmap for equalising self-employed and employee NICs. To fail to do so would be to weaken further a crucial pillar of the welfare social contract.
A further pillar of the social contract is basic standards of support and a safety net for those in need. To help protect them from hardship and the welfare state from costs, employees are entitled to certain minimums and rights. The self-employed have no such rights or entitlements. Increasingly, some companies are using self-employed workforces as cheap labour, excusing themselves from both responsibilities towards their workers and from substantial National Insurance liabilities, pension auto-enrolment responsibilities and the Apprenticeship Levy. The ease with which companies are able to classify their workforces as self-employed both fails to protect workers from exploitation, and potentially increases strain on the welfare state. An assumption of the employment status of “worker” by default, rather than “self-employed” by default, would protect both those workers and the public purse. Companies wishing to deviate from this would need to present the case for doing so. As default, workers would have the employment rights commensurate with that status. As there is no “worker” status in tax law, tax status would be unchanged. In effect this would place the burden of proof of employment status on the company, rather than the worker as it currently stands.
Self-employment can be a positive choice. The Department for Work and Pensions must ensure that its programmes and resources reflect this, and can support low-paid and would-be self-employed people to reach their potential. This is likely to require an expansion of specialist support for the self-employed offered through Jobcentre Plus. It will also necessitate urgently revisiting and revising Universal Credit rules for self-employed claimants, which risk cutting off support to viable businesses before they have had a chance to get off the ground.
Self-employment is neither inherently good nor bad. It can represent entrepreneurial zeal and a highly desirable culture of self-reliance. It can also be deeply negative, allowing companies to evade responsibility for their workers’ wellbeing and increase their profits. It is incumbent on Government to close loopholes that incentivise this behaviour.
29 April 2017