It’s time to stand up for the freelancer.
Self-employment, or freelancing, has been a cornerstone of the British economy for years. It has provided millions of businesses and people with flexibility, and been instrumental in ensuring that the British economy is one of the largest and most dynamic in the world.
That flexibility is now under serious threat. Recent ONS data shows that the number of freelancers in the UK is falling dramatically. There were more than 5 million freelancers in the UK in 2019, but that number has fallen to just 4.2 million.
Certainly, the Covid pandemic has played a role in this drop. Self-employed workers have been hit harder than those in full-time employment. New LSE data shows that more than 25% of self-employed workers are struggling to meet basic expenses, because their incomes and profits have yet to reach pre-pandemic levels.
However, it is a change to tax legislation that is affecting freelancers most significantly. Early in 2021, changes were made to IR35, which meant that the decision as to whether somebody is defined as self-employed would rest with the business, rather than the individual themselves. Businesses are subsequently worried about falling foul of HMRC, and therefore are hiring fewer self-employed workers, while freelancers are unsure whether they still qualify as self-employed.
We need to change attitudes around freelancing. Self-employment is not a dirty phrase, and businesses need to remember the benefits of using freelancers, and understand that it is still achievable to do so.
The government also has a responsibility to ensure that freelancers are not unfairly penalized.
Generally, small and medium-sized businesses are at greater risk of intervention from HMRC. For this reason, it is essential to seek out good advice around employment law, and to understand when it is appropriate to engage freelancers.
People often think of the construction industry when discussing contractors and the self-employed, but this is a way of working that permeates across multiple sectors. A third of the entire workforce in the creative industries is self-employed, and that number remains high in engineering, hairdressing and haulage.
People in these industries need flexibility in what they do. If they cannot be afforded that fluidity, the risk is that the top talent will be driven away. And it isn’t just about flexibility, freelancers can lose out on hundreds of pounds per week if they are instead classified as employed.
Haulage is the clearest example of this, and the knock-on effect has been the supply chain crisis that we are all now experiencing.
We are yet to fully understand the ramifications of drivers being unable to designate themselves as contractors, but we must all hope that it will not mean no turkeys on the table or toys in stockings.
When implemented correctly, self-employment can be a win for everybody, helping business attract the top talent, and helping freelancers conduct their profession in a way that best suits them. For any business, I would strongly urge you to take advice before making any decision that could fundamentally damage your company.
