Britain's self-employed 'in urgent need of new deal'

Policymakers have not kept up with changes in the labour market and need to urgently take action to deal with the concerns of the self-employed over tax, burdensome regulations, pensions, and a general lack of support, according to a new report.

Commissioned by IPSE, the Free Radicals study by Demos says "the steady rise of self-employment since the turn of the millennium is arguably the most significant labour market trend of the past two decades".

Britain's self-employment sector is almost as big as the public sector with 4.77m self-employed workers, around 15% of the total workforce, up 12% in 2001.

This rise, Demos claims, means self-employment is no longer on the "margins" and should be brought into mainstream debates and given more attention by politicians.

The study says a "new deal" is needed to bring policy up to date.

It makes 30 recommendations including:

• a statutory definition of self-employment. This will help crackdown on 'false self-employment' and exploitation

• introduce a new 'engagers tax' initially levied at 2.5% on a firm's annual expenditure on contracted self-employed labour, rising to 5% in 2021 and 7.5% by the end of the Parliament

• explore a range of flexible pensions options to help the self-employed save for later life

• draw up a legal definition of 'platform work' and issue licenses to operate in the platform economy contingent on each platform submitting deliverable mechanisms for ensuring the national minimum wage is paid to its workers and that each platform does not discriminate between different employment statuses

• extend self-employed tax relief on training to investment in new skills, expertise and professional development

• relax business rates relief for co-working hubs in areas where business start-up numbers are low

• strengthen the Prompt Payment Code and specifying that payment terms should not exceed 30 days. The Small Business Commissioner should be equipped with the power to levy fines on large businesses that fail to comply with agreed 30-day payment terms

• comprehensively reform how Universal Credit works for self-employed workers

• Make maternity allowance fall into line with statutory maternity pay and introduce a paternity allowance for self-employed workers that is equal in worth to statutory paternity pay. Shared parental leave rights should be extended to self-employed workers

Alan Lockey, Demos' head of modern economy and the report author, said: "The rise of self-employment is one of the biggest changes to the modern economy in the last couple of decades.

"We need to think pragmatically about whether we should actively encourage it. It could be that it is the British solution for a more flexible, less rigid approach to life and work in the future, as it already is for millions of people.

"That means we need a new deal to boost security for the self-employed."

The Demos report follows the 10-point manifesto from the Small Business Taskforce, of which Enterprise Nation and IPSE are members. It also called for a new, legal definition of self-employed.