The cost of “bogus” self-employment contracts
Around 4.5 million people are self-employed, bringing opportunities to work flexibly, enjoy autonomy, and build up businesses and watch them grow.
However, a recent report by the Citizen’s Advice Bureau has found that many people are losing out on employment benefits and key employment rights as a result of “bogus” self-employment contracts.
To read the report click here.
The CAB surveyed 500 of its “self-employed” clients and found that one in ten would be likely to satisfy the test to be classified as an employee.
- Up to 460,000 people nationwide could be falsely categorised as self-employed.
- These individuals could be losing on average £1,288 a year in holiday pay, unnecessarily paying an extra £61 per year in National Insurance, as well as losing out on benefits such as company sick pay and pension contributions.
- Over the past year there has been an 18% increase in the number of people seeking help to determine their employment status.
The report also suggests that there is lack of clarity around the definition of self-employment which makes it easier for rogue employers to deny their staff basic employment rights.
The CAB makes five recommendations to redress the imbalance:
- The government should ensure that the planned Office of Tax Simplification review of employment status is conducted across departments so that definitions of employment status are simplified coherently.
- Employers, businesses and workers should be better supported to reduce the risk of individuals being wrongly categorised as self-employed or forced into self-employment.
- Any proposed changes to tax or National Insurance should ensure that current unintentional incentives towards bogus self-employment are reduced.
- Access to justice for people who suspect that they are bogusly self-employed should be made easier.
- The government should conduct its own research into the incidence of bogus self-employment to aid enforcement efforts.