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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.

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