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The unique elements of working for yourself and where help is needed

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The number of self-employed people has increased significantly over the past decade, but our legislative and support systems have failed to keep up.

There are unique elements that come from working for yourself and where help is needed.

The number of people who are self-employed in the UK is increasing, although they will continue to be outnumbered by the employed for the foreseeable future.

Figures from the Office for National Statistics show that by the end of 2016 there were over 4.8 million self-employed people in the UK, about a million more than in 2006, while the share of the overall workforce who are self-employed has also increased, from 13 per cent in 2008 to 15.1 per cent in 2016. 

But what exactly do we mean by ‘self-employment’? It comes in many different forms, including, for example, lifestyle business owners who work only the hours that they choose, taxi drivers who may work long hours most days, and well-paid IT contractors, as well as people in retail, construction, manufacturing and agriculture. 

Despite the political focus on ‘false’ self-employment and the gig economy, research from Citizens Advice suggests that just one in 10 self-employed people fall into this category, with the vast majority genuinely self-employed.

Research from the Resolution Foundation, meanwhile, suggests that almost 60 per cent of the growth in self-employment since 2009 has been in high-skilled, well-paid sectors, including advertising, financial services and management consultancy.

But despite this growth in high-income self-employment, many are not well paid. The Family Resources Survey shows that the earnings of a median full-time self-employed worker are one-third below those of the typical employee, and this gap has widened slightly during the past ten years. 

With so much variety across the self-employed, it is important that Government and policymakers do not look at them as one homogenous group, and try to tackle the different challenges these groups face. 

A limited picture

 
Our understanding of who the self-employed are and where and how they work is limited by a lack of data. FSB is seeking to remedy this. Research it is supporting includes a major study of self-employment in Wales being compiled by Andrew Henley, Professor of Entrepreneurship and Economics at Cardiff University, and Mark Lang, a freelance consultant and social economist. 

Initial findings show clear differences between the various areas of Wales. For example, the percentage of people who are self-employed is highest in rural Wales and lowest in the former industrial heartlands of the Valleys.

There are also differences between sectors: there is more self-employment in construction within the Valleys than elsewhere, while self-employment in urban Wales is focused on service sectors. 

Although FSB research shows that most people who become self-employed are making a positive choice, many First Voice readers will know how stressful it can be.

Partly this is due to a lack of protections that employees can take for granted, such as paid maternity or paternity leave, sick pay, holiday pay and a right to earn the minimum wage. 

The way these issues affect the self-employed is being considered in a review of employment practices commissioned by the Government in 2016, and still underway, led by Matthew Taylor, Chief Executive of the Royal Society of the Arts (RSA). 

FSB’s submission to the Taylor Review calls for proportionate, targeted measures to tackle false self-employment, changes to the way the self-employed are treated within the benefits system, a review of the availability of financial products suitable for the self-employed, and mitigation of the impact of income volatility. 

Although the Taylor Review is welcome, and the Government is also currently considering extending parental rights for the self-employed, it could be argued that, as Michael Mealing, Employment and Pensions Policy Chair at FSB, puts it, Government sometimes seems not to “understand the day-to-day experience of self-employed people”.

The policy to increase Class 4 NICs to 11 per cent for the self-employed, announced in the March Budget – then scrapped a week later after strong pressure from FSB and others – is an example of this tendency, he suggests. 

Helping hand

One of the difficulties in dealing with the self-employed as a single group is the wide variety of people and circumstances that exist within it. A single parent, Jane Binnion founded her social media business so she could work from home when her then 10-year old daughter was diagnosed with dyspraxia. 

Her daughter is now preparing to go to university and Ms Binnion was preparing to increase her own workload. But in January her mother, who is in her early 80s, had a fall at home and was left unable to look after herself. Ms Binnion earned very little during the next two months, until she was able to secure the assistance of carers to help her mother at home. 


“But I had to make that happen while running a business and helping my daughter to sit her A-levels,” she says. “A bit more support, a safety net, would be really useful – just something that could provide temporary support,” she says.

Planning further ahead


The RSA and FSB are working together to identify ways to offer different forms of protections to the self-employed. This has included studying schemes that operate for similar purposes in other countries. In the Netherlands, the Bread Funds offer income protection for groups of self-employed workers, who each contribute to collective sick pay funds. 

Elsewhere, SMart, a cooperative in Belgium, provides access for self-employed people to business support and advice, training and insurance. It has created a Mutual Guarantee Fund, a pool of cash that members can use while awaiting payment from clients.  

Only a minority of those who become self-employed do so immediately after a period of unemployment – roughly 18 per cent are entitled to in-work social security support – so there is a good case for increasing the support provided to those that do. 

Currently, those seeking to claim Universal Credit (UC) to complement low earnings have to prove their business has a reasonable chance of making a profit if they are to be exempted from the obligation to seek other work, and must also report their earnings each month.

After the first year, they will also have their entitlement to UC limited by a Minimum Income Floor (MIF), an assumed level of earnings likely to be set at the level of the National Living Wage. 

FSB has suggested simplifying reporting requirements and applying the MIF on a quarterly or annual basis. It also suggests the UC start-up period should be extended to three years. At present, says Mr Mealing, “the system is cutting off too many viable businesses too early. UC is not working for the self-employed”.

Another problem consistently revealed is a lack of pension savings. The link with income volatility is clear. As Mr Mealing puts it: “It’s difficult to imagine putting money away for later in life when you’re worried about what will be happening next month.” 

FSB research completed during 2016 showed that only 30 per cent of self-employed FSB members were saving into a private pension. One in five hoped to base their retirement income on the sale of their business, while 15 per cent were making no provision for retirement at all. 

The FSB recommends that the self-employed should be given an option to save into a private pension when completing their self-assessment tax return. It also suggests Government considers the creation of private pension products designed to allow self-employed people to draw upon them if they experience a fall in income. 


Despite all these challenges, many First Voice readers know that being self-employed can be hugely rewarding. FSB research saw 80 per cent of members surveyed list ‘independence’ as one of the top three benefits of self-employment. Many respondents also talked about relishing an ‘opportunity to fulfil a personal vision’. Very few mentioned the potential tax advantages.

Conor D’Arcy, Policy Analyst at the Resolution Foundation, agrees we must support those in need: “We can’t ignore the problems that some self-employed people face, in a world that is basically set up to deal with employees.” As self-employment continues to grow, the need to find effective solutions will become ever more urgent.

Case study: Playing the long game

Roger Daniels worked as a senior technician at a manufacturing company for 34 years before leaving to work full-time on something he had been developing as a sideline and was planning to use to supplement his pension in retirement: massage therapy. 

Mr Daniels, who lives near Torfaen in South Wales, first became interested in massage some years earlier, when accompanying his wife to a physiotherapy appointment and being shown some techniques that he could use to help her. 

Over the next few years he completed a series of courses and has continued to broaden his knowledge since starting to trade as a sports and aroma massage therapist in 2014. 


After a slow start, the business is delivering an income large enough to meet his needs. “I was told by someone wise, ‘don’t expect it to start paying dividends for three years’ – and they were right,” he says. 

His advice to anyone becoming self-employed is to be patient, to find out the true cost of the services you use – he saved a lot of money by switching his bank account – and to ask for advice and guidance when it is needed.

He is now approaching retirement age, but has no plans to stop working yet. 

“As long as I’m happy doing this and I can do it, I’ll keep doing it,” he says.