19th August 2015
As many as 460,000 people could be ‘bogusly self-employed’ meaning they miss out on holiday pay, the government loses tax revenue and responsible businesses could be undercut, a charity has warned.
In its new report, Neither one thing nor the other, Citizens Advice highlights how unscrupulous employers can compel staff to be self-employed when they should in fact have employee status. This means employers can avoid paying the minimum wage, employers’ National Insurance, sick pay, holiday pay and pension contributions.
Citizens Advice surveyed 491 people who identified as working for themselves, but found one in ten of them could be wrongly self-employed. Based on this figure the charity reveals bogus self-employment could cost the Government up to £314m a year in lost tax and employer national insurance contributions.
Responsible employers can also lose out as firms forcing people into self-employment means the savings they make can be used to undercut competitors’ prices.
A combination of factors including work hours set by the employer, using the business’ equipment and having tax deducted from their pay by their employer could mean an individual should be an employee rather than self-employed.
The research also identifies specific financial losses felt by the bogusly self-employed and the Government:
Last year local Citizens Advice helped over 30,000 self-employment people, with the most common problems being debt, employment rights and benefit entitlements.
Gillian Guy, chief executive of Citizens Advice, says: “Working for yourself should be an empowering experience not an opportunity for rogue firms to siphon away benefits like sick and holiday pay.
“With our research finding two in three self-employed are happy with their work status, it is clear the majority are thriving in start-up Britain. But there are workers who are missing out on over a thousand pounds a year because they should legally be official employees.
“Not only does it cost workers, it also costs the Government through lost tax revenue and undermines businesses trying to do right by their employees. The Government’s review into self-employment is a welcome opportunity to look at how these workers can be more supported.”
As part of Citizens Advice’s self-employment campaign it is calling on the Department for Business, Innovation and Skills to use the Government review into self-employment to address key issues including:
Government departments, including the HMRC and the Department for Work and Pensions, have different definitions of self-employment, making it hard for workers and businesses to be clear about employee status.
The only way to prove employee status and secure the rights this provides is to go to an employment tribunal, a lengthy process which many cannot afford since fees were introduced in 2013. Last year research from Citizens Advice showed 7 in 10 potentially successful cases are not pursued by people at Employment Tribunals.