Growth in self-employment placing increasing pressure on outdated government policy & regulation.
In response to today’s Uber/GMB employment ruling Nida Broughton, chief economist at the Social Market Foundation (SMF), commented:
“Today’s ruling shows how the growth in self-employment is placing increasing pressure on government policy & regulation, which is largely based on the traditional employee-employer model.
“The self-employed do not have the same rights, protections and support as other workers. In the transport sector (which includes taxi drivers) we estimate that almost 60% of self-employed workers (142,000) are paid below the National Living Wage.
“This compares to around 45% of self-employed workers (1.7 million) across the UK economy currently paid below the National Living Wage (aged 25+).
“The government must recognise that differences in tax policy and regulation across employee and self-employed create artificial incentives for firms to move towards a self-employed or contractor relationship. Given the lack of clarity on the boundary between self-employed and employee it’s unsurprising that we’re seeing cases like Uber’s having to be resolved by an employment tribunal.”
The SMF’s recent report Tough gig: Tackling low paid self-employment in London and the UK – funded by independent charity Trust for London – calls on the government to address the tax and regulation gap between employees and self-employed by:
- Establishing an employment status review with a view to setting statutory employment status tests for both tax and employment regulation purposes.
- Examining how it can minimise tax gaps between employees and self-employed, and avoiding any future changes to the tax system that widen the tax differentials between employment statuses.
- Creating an accessible online portal to inform workers about their rights and allow them to confidentially submit concerns about false self-employment to HMRC.
- Extending the Low Pay Commission’s responsibilities to ensure that it is explicitly required to take into account the effects on self-employment in making recommendations on future National Living Wage rate rises.
Mubin Haq, Director of Policy & Grants at Trust for London, commented:
“With 1 in 7 workers now self-employed, and with this number rising, the Government has taken its eye off the ball in regulating this sector. Much needed policies to improve pay and protection for employees are creating unintended incentives for companies to push more of their workforce into self-employment. Often, as in the case with Uber, worker terms and conditions are being severely eroded. We welcome the tribunal ruling that Uber drivers are entitled to holiday pay, rest breaks and the National Living Wage. This has significant implications for other workers employed in the gig economy.
“The difference between employees and the self-employed is particularly stark in relation to pay. In the transport sector, the self-employed were 3.5 times more likely to be in low pay compared to employees even before the National Living Wage came in. We need to address this head on and need much greater corporate responsibility to tackle low pay, as well as improved regulation by government. This includes the need for a clearer test to identify when someone is an employee and when they are self-employed; and a more accessible way for workers to raise concerns about false self-employment to HMRC.”
Notes to editors:
- A copy of our report on low paid self-employment is available here Tough gig: Tackling low paid self-employment in London and the UK – is attached to this release. This research was kindly supported by Trust for London. The Social Market Foundation retains full editorial control over all of its outputs.
- About the Social Market Foundation:
The Social Market Foundation (SMF) is an independent, non-partisan think tank. We believe that fair markets, complemented by open public services, increase prosperity and help people to live well. We conduct research and run events looking at a wide range of economic and social policy areas, focusing on economic prosperity, public services and consumer markets. We engage with policymakers and opinion formers, including Ministers, MPs, civil servants, regulators, businesses, charities and the media. The SMF is resolutely independent, and the range of backgrounds and opinions among our staff, trustees and advisory board reflects this.
- About Trust for London:
Trust for London is one of the largest independent charitable foundations funding work which tackles poverty and inequality in the capital. It supports work providing greater insights into the root causes of London’s social problems and how they can be overcome; activities which help people improve their lives; and work empowering Londoners to influence and change policy, practice and public attitudes. Each year it provides around £7 million in grants and at any one point is supporting some 400 voluntary and community organisations.