The Citizens Advice Bureau (CAB) today issued an excellent report on the parlous state of workers who are forced to accept ‘self-employed’ status by hirers who hope to avoid their obligations as employers to pay National Insurance contributions or to provide a range of required employee benefits like holiday and sick pay.
The CAB rightly points out that the balance of power as between hirer and worker is heavily weighted to one side. Often workers feel they have no choice but to accept the terms dictated by the hirer, and can do little to about this. The case studies show how worried people are that if they query the arrangements they are at risk of losing the work altogether. And importantly, their only real option to establish their position definitively and get their rights to leave, holiday pay etc is recourse to the Employment Tribunal — which with the introduction of higher fees means a thousand-pound bill for starters.
The CAB makes recommendations about helping change the balance which not unreasonably are at a fairly general level. I’ve got a little concrete proposal that might help too.
At the moment, people in self-employment aren’t eligible for Universal Credit, as its slow rollout is still restricted to the simplest cases. But the structure and intent of Universal Credit policy towards self-employment is clear, and based on a presumption that anyone who cannot consistently earn the equivalent of full-time minimum wage from self-employment will have to spend their time looking for work as an employee instead or lose their benefit. In many cases this is not obviously to the benefit of the worker (though that theme is for another time)and is in many ways a bizarre reversal of policy, the previous interest of the DWP being to prove that people with even occasional low-level earnings are in gainful self-employment (e.g. from window-cleaning), so that they didn’t have to pay them out-of-work benefits.
However, once the ostensibly self-employed are admitted to Universal Credit, this means that each and every case will be scrutinised to see whether the relationship between hirer and worker is actually one of self-employment and an official decision will be made about the status of the worker. In circumstances where the decision is that the worker is an employee, the DWP should communicate their decision to the employer as well as the employee. The onus (and thus cost) of disproving this would then move from the worker to the hirer. They should also inform HMRC of their decision to alert them to the possibility of non-payment of Employer National Insurance contributions and National Minimum Wage.
For obvious reasons (low pay for starters) it seems likely that a considerable proportion of those in ‘bogus self-employment’ could be affected. But even if it were only a small proportion, the knowledge that the possibility of such scrutiny and action exists should have strong ‘nudging’ effects and add a chunky weight to the workers’ side of the balance.
Government should ensure that the examination of employment status it will carry out for Universal Credit is leveraged in this way to implement wider employment (and tax) policies to everyone’s benefit. The mild tweaking this would require to proposed operational procedures (and perhaps legal provisions for information-sharing) would be well worth it.