In a new study supported by Umbrella Company trade association PRISM, the Social Market Foundation (SMF) think tank has found that significant numbers of self-employed workers not only have a worse deal on the job than conventional employees, but are also failing to enjoy the usual benefits associated with self-employment, including greater autonomy.

The study, entitled The employment divide: is it possible to simplify the distinction between self-employment and employment?, revealed that while many self-employed workers superficially resemble employees in workplace appearance and behaviour, they are less likely to receive overtime pay, have none of the protections and rights of employees, and often don’t have the autonomy conventionally associated with their work status.

The research concluded with a series of recommendations for the government to consider, which are aimed at lowering the incentives for companies to treat lower-skilled workers as self-employed rather than as employees. These include:

  • Levelling national insurance contributions over time.
  • Reserving the option of self-employment for higher-paid, higher-skilled workers, such as contracting professionals, who have the bargaining power to secure the benefits of self-employment, even though they trade off the protections and rights of employment.

The study’s lead author, SMF Director Emran Mian, said its findings suggest many self-employed workers get the worst of both worlds, not even benefiting from the tax treatment of higher-end 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,” Mian explained.

The SMF’s work in this field will shortly extend to collecting evidence from end-clients, recruiters, contracting professionals and other providers, Mian added, so that the issues raised in the study can be better understood.

Commenting on the findings, PRISM CEO Crawford Temple said they reveal how far the conventional distinctions between employment and self-employment have been eroded and how methods of engagement are becoming vastly more complex and varied, with employment legislation failing to keep up with these changes.

“Many changes made are no more than sticking plasters and fail to address the underlying issues,” Temple commented.

“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.”

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