Speaking at the recent Trade Union Congress, Labour leader Jeremy Corbyn criticised the thousands of UK companies which engage workers on short-term contracts, arguing that temporary work is a “source of continuous worry and insecurity for millions of people”. He also stated that the ‘gig economy’ denies “both employees and customers basic protections”.
Hitting out at the businesses which enable 2million freelancers and contractors to contribute over £119bn to the UK each year is a somewhat surprising move. Given that at least 50% of those working independently would ‘never go employed’ according recent research, Mr Corbyn might have been wise to make his comments less general, and a little more specific to an individual group of the independent workforce, and not to the entirety.
While 47% of freelancers and contractors revealed that lack of security is their number one business concern, there’s nothing to suggest that highly-skilled, qualified independent workers are rallying for greater protection, or even looking for similar rights to employees.
There are fundamental differences between ‘gig economy’ workers who take on ad-hoc work here and there, and professional contractors whose day-rates can average £500 or more. By not recognising or outlining the various differences between these sets of workers, Mr Corbyn has risked grouping them together as one, despite their motivations and concerns being quite different
Lower paid ‘gig economy’ workers might well need greater protection, and consider themselves more vulnerable compared to professional contractors. The recent Taylor Review picked up on this, and outlined the need for Government to consider employment rights for ‘dependent contractors’ – Uber drivers and Deliveroo riders to name a few.
But previous research from Contractor Calculator signalled that 80% of freelancers and contractors are actually happier working without employee rights, suggesting that they simply do not consider themselves vulnerable. Not all independent workers need nor want protection. Jeremy Corbyn’s recent comments do, to a certain extent, reflect a lack of understanding on his part.
For highly skilled, qualified contractors, the issue isn’t lack of protection or rights, it’s lack of support. The Government’s increased efforts to enforce IR35 reform and tackle tax avoidance with changes to the off-payroll working rules are somewhat reducing the benefits of working independently – particularly if public sector contractors, and potentially soon to be private sector contractors are not given a fair, unbiased IR35 assessment.
In the past, contractors working through their own PSCs have been able to enjoy certain, but tax limited advantages. Paying themselves more tax efficiently would in many respects balance out the risk of working independently, compensate for the lack of security, and go some way to making up for the fact that they do not receive employee benefits such as holiday, illness, maternity and paternity pay.
In many cases, professional contractors see lack of security as an everyday part of working self-employed. There will always be an element of risk, and a lack of security when going in search of greater independence, flexibility and freedom. But that isn’t to say this group of workers want employment rights.
Recent IR35 reform, which makes up one of a number tax changes affecting the self-employed is hampering UK contractors. Instead of rewarding those entrepreneurial enough to strike out alone and drive economic growth, the Government is seemingly punishing them. That 95% of contractors surveyed recently believe the Government is reducing the benefit of working independently speaks volumes.
Just last week, Conservative MP for South Thanet, Craig Mackinlay, brought up the issue of IR35 in a parliamentary debate. Although welcoming recent IR35 changes, he urged for greater clarity when it comes to deciding employment status – a point which we can all surely agree needs addressing.
“The rather complex process of recognising whether a person is properly self-employed or properly employed is quite confusing for a small employer. That is still somewhat vague, and there is some gold-plating in the public sector because of the worry about people’s status.
“I regularly see people who work through a proper personal service company and who are clearly self-employed, and not in an employment situation. Out of fear, the public sector is tending to move everybody who works in such a way inside IR35, which adds cost to the sector. It is very difficult to balance,” he explained.
And it is a difficult situation. Lack of security is a near unavoidable by-product of self-employment, but IR35 and the tax system can be designed to balance the risk of independent working. Before that happens though, there needs to be greater clarity over IR35 and employment status, and UK politicians must begin to truly understand the diversity of the UK’s self-employed workforce.
This is not a problem unique to Jeremy Corbyn and the Labour Party though. Right across the political spectrum there is a misunderstanding of what drives and motivates the freelance economy. It is not the first time that a politician has failed to understand the quite specific and different needs of each sector of the self-employed workforce. Nor will it be the last.
But Mr Corbyn’s comments have once again brought into sharp focus the need for senior politicians – regardless of their Party – to properly engage with each component of this diverse sector, and rethink their position on IR35, the ambiguity and confusion surrounding employment status, and the tax system as a whole.