This campaign was active during 2018
Introduction
Self-employment has played a valuable role in opening up employment to those who otherwise might not be in work. More older people, younger people, women, service leavers and others are increasingly seeing the benefits of striking out on their own, and being their own boss.
This growth has had huge benefits for many and for the wider economy. Helping to drive the record levels of employment and local economic growth, and reducing economic inactivity among those who struggle in traditional, full-time employment. There is clear evidence that the vast majority of the self-employed are happier than they would be as an employee and that most start up in business out of choice, often in search of more flexibility and meaning at work.
Despite the benefits of self-employment those that choose to ‘go it alone’ face a number of challenges which have long been ignored by successive governments. If the self-employed fall ill they are dependent on their own savings (or lack of) while sick. When they start a family, self-employed mothers receive a lower level of parental support, fathers and those adopting a child receive no parental support. Their fluctuating incomes and desperate need to save for a ‘rainy day’ means they often struggle to save for retirement.
They face significant difficulties accessing mortgages and insurance products. The Universal Credit (UC) and the benefits systems designed with employees in mind often lead the self-employed to ‘round pegs and square holes’.
The self-employed enjoy fewer rights and, fundamentally, by setting up in business they face much higher risks than those in employment do. For far too long they been an after-thought in policymaking from Government and all political parties.
The time has now come for the Government and all political parties to start thinking about the self employed and do more to support the 4.8 million to climb higher.
What are we asking for?
Simplifying the Tax System
The tax system for the self-employed is currently complex and difficult to navigate. This includes the National Insurance system, where the self-employed pay both Class IV and Class II National Insurance Contributions. Simplify contributions helps increase understanding and ensures understanding of entitlements.
The Government should maintain their commitment and abolish Class II National Insurance Contributions for the Self-employed in April 2019, to simplify the tax system and remove the arbitrary levy.
The Government should maintain their commitment and abolish Class II National Insurance Contributions for the Self-employed in April 2019, to simplify the tax system and remove the arbitrary levy.
Saving for the future
For employees, saving into a pension has become quite simple with the introduction of pensions auto-enrolment. This ensures that employees and their employers are making contributions towards retirement. Unfortunately these changes didn’t include the self-employed, who traditionally find it harder to save for the future.
To better support the self-employed save into a pension, the Government need to use the annual self-assessment process as a means of promoting pensions savings for the sector. The Pensions Dashboard is crucial for the self-employed, workers and small business employers. The Government should place these groups at the heart of the Pension Dashboard to make sure as many people have accessibility to their pensions and can have faith to invest for retirement.
Giving new starters a step up
The introduction of Universal Credit (UC) has radically changed the UK welfare system. Despite this massive overhaul, the new system has created a number of challenges for self-employed recipients.
Under UC the self-employed, after a year, will see their UC award capped in line with a Minimum Income floor (MIF). The Start-up Period should give newly self-employed on UC the time and space to focus on creating a growing business that provides them with a sufficient income. Viable and ultimately successful businesses often take longer than a year to start up, with evidence pointing to many businesses taking 3 years to establish.
For many the application of the MIF after a year could prevent people from going on to lead successful businesses. The Government should extend the start-up period from 12 months to at least 24 months.
Starting and growing your family
Unlike employees, the self-employed do not have access to the same level of parental benefits. This includes Maternity Allowance, Statutory Paternity Pay and Adoption Pay.
Many individuals choose self-employment because it provides them with greater flexibility, however, for many the flexibility isn’t enough when they are trying to meet the initial financial challenges of parenthood.
The Government should introduce Paternity Pay to the self-employed and an Adoption Allowance based on the current Maternity Allowance. The Government should also review the Maternity Allowance, and the level of support for the self-employed new mothers.
Preparing for the worst
One of the biggest challenges facing the self-employed is not being able to rely on a secure income. Incomes can fluctuate when the self-employed are growing a business, or when business takes a downturn. It can be even more challenging when their family or they experience certain life events.
Under one in ten (9%) have income protection insurance to support them during periods of illness or when they are struggling for income9. The Government should work with the insurance industry to support the development of more affordable income protection insurance options for the self-employed.
The Government should also explore the role of new technologies in creating new models of collective insurance to address the challenges faced by the self-employed.
Experiencing the loss of a child is one of the most difficult things for any parents. Families and parents need time to grieve for the loss of a child. The current Parental Bereavement (Pay and Leave) Bill, is an example of government recognising the need to allow parents time to grieve.
FSB supports this Bill, to provide support for employees, but believes it should be extended to include the self-employed. Particularly as some parents of children with severe disabilities may choose self-employment as more flexible work.
Under one in ten (9%) have income protection insurance to support them during periods of illness or when they are struggling for income9. The Government should work with the insurance industry to support the development of more affordable income protection insurance options for the self-employed.
The Government should also explore the role of new technologies in creating new models of collective insurance to address the challenges faced by the self-employed.
Experiencing the loss of a child is one of the most difficult things for any parents. Families and parents need time to grieve for the loss of a child. The current Parental Bereavement (Pay and Leave) Bill, is an example of government recognising the need to allow parents time to grieve.
FSB supports this Bill, to provide support for employees, but believes it should be extended to include the self-employed. Particularly as some parents of children with severe disabilities may choose self-employment as more flexible work.
Training
Learning new skills can help increase business competitiveness, efficiency and longer-term effectiveness. Essentially, keeping our skills current is an indispensable part of growing a business. The self-employed are less likely to be training than employees just under half of self-employed have taken off-the-job or on-the-job training over the last 12 months.
For the self-employed when they choose to undertake training not only do they have to pay for the cost of the training they also have to forge the income for any of the time spent training instead of working on their business. The Government should introduce tax relief for training courses for the self-employed that develop new, not just refresh existing, skills. The Government should also use the findings of its Digital Skills Partnership research to inform its approach to upskilling the self-employed.
Equal access to finance products
One of the biggest challenges the self-employed face is not being able to rely on a secure income. Income volatility is not just a concern for their family finances but can add additional barriers to accessing finance products such as mortgages, bank loans and insurance.
This can often be due to not being able to verify past income or demonstrate a regular future income, with lenders legitimately concerned over the ability of borrowers to afford repayments.
The Government should work with the insurance industry to support the development of more affordable income protection insurance options for the self-employed. The Government should also explore the role of new technologies in creating new models of on collective insurance to address the challenges faced by the self-employed.
The Government, and the FCA should bring together industry leaders to address barriers that prevent many of self-employed from accessing mortgages.
Local support to set-up and grow
The self-employed value support not only to set-up but also grow their business. Our research showed that relatively few have accessed government-backed business support schemes, and only 16 per cent have undertaken training to help them run their business.
One reason for this includes a lack of visibility of the schemes available, resulting in part from the complexity of the business support landscape with overlapping and competing schemes both at national and local level. The needs of the self-employed should be a priority for the business support offering at all tiers of governance.
To improve the provision of support to the self-employed the Government should provide the full business population statistics at a LEP level.
Read the report
Think Self Employed: Supporting the 4.8 million to climb higher
The UK has seen huge changes to the world of work in the last decade, one of the biggest shifts has been the rise in the number of people of people who have decided to move into self-employment.
