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New report suggests half a million self employed are bogus

By Contractors Weekly

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A new report by Citizens Advice titled, 'Neither one thing nor the other:  how reducing bogus self-employment could benefit workers, business and the Exchequer', speculates that around 460,000 people could be not genuinely self-employed.

Their figures are based on a survey of 491 people, from which Citizens Advice suspect that one in ten of those surveyed are not really their own boss. The survey questions, which Citizens Advice concede are an “imperfect measure”, were as follows:

  1. Are you currently saving into a pension for your retirement?
  2. Would you prefer to be self-employed or employed?
  3. Do you provide your own tools for your work?
  4. Does your employer deduct tax from your payslip?
  5. Do you pay your own tax through Self Assessment?
  6. Can you decide when you work and how you do your work?
  7. Do you have to invest your own money in your daily work?
  8. Do you get a fixed price for work (rather than an hourly rate)?
  9. Do you have a second job?
  10. Did you take your second job because you needed it to get enough income to pay essential costs?
  11. In total (across all your jobs), how many hours do you work on average per week?
  12. How much do you as an individual earn from your job(s) each month before any tax and benefits?

Two additional questions that appeared in an Online Survey that were not asked in the Local Citizens Advice Survey were:

  1. Do you think that the job you do could be an employed (rather than self-employed) position – e.g with regular hours and holiday pay?
  2. Please tell us more about why you think your job should or could be defined as an employee.

According to Citizens Advice, their report seeks to address two key research gaps. Firstly, an estimate of how many people may be in bogus self-employment. Secondly, the human impacts and effects on government and business of such false self-employment.

Other than the estimate of national false self-employment, key findings of the report were:

  • Each of the 460,00 individuals bogusly self-employed are losing an average of £1,288 a year in holiday pay and are paying an additional £61 p.a in NIC that they would not have paid in employment.
  • The Exchequer is losing, on average, an annual £314 million through the incorrect categorisation of self-employment.
  • Responsible businesses, which play by the rules and want to employ their staff legitimately, face a competitive disadvantage to other businesses that hire bogusly self-employed workers.  

Borne out of the results of their research, Citizens Advice make five recommendations:

  1. The Government should ensure that the planned OTS review of employment status is conducted across departments so that definitions of employment status are simplified coherently.
  2. Employers, businesses and workers should be better supported to ensure that no one is ever wrongly categorised as self-employed or forced into self-employment.
  3. Any proposed changes to tax or NIC should ensure that current unintentional incentives towards bogus self-employment are reduced.
  4. Access to justice for people who suspect that they are bogusly self-employed should be made easier.
  5. The Government should conduct its own research into the incidence of bogus self-employment to aid enforcement efforts.

Today, 4.5 million people are self-employed and the majority enjoy the freedom it allows but there are rogue employers who are forcing individuals into self-employment purely for their own benefit, e.g saving employers NIC, avoiding paying holiday or sickness pay or the National Minimum Wage and easier to be able to dismiss a worker.

Whilst those surveyed appear to be lower-paid workers, the report makes the point that as self-employment becomes more mainstream, it is important that the tax and legal frameworks are modernised to enable people to take advantage of this way of working. In other words, wake up and realise we are in the 21st century.

The full report can be found on the Citizens Advice website.

Published September 2015