Citizens Advice: ‘How reducing bogus self-employment could benefit workers, business and the Exchequer”

25 August 2015

A recent report by Citizens Advice has sought to address the growing problem of ‘bogus self-employment’ and outlines how tackling the problem could provide benefits to workers, businesses and the Exchequer.

The report describes how irresponsible firms are using ‘bogus self-employment’ – when workers are incorrectly classified as self-employed, despite being more legally aligned to being an employee, in order to cut costs.

The key findings were:
? one in ten of the people that were surveyed are bogusly self-employed, with at least three markers suggesting that their self-employment is not genuine. If scaled up, this could translate into as many as 460,000 people nationwide.
?Each of these people may be losing on average £1,288 a year in holiday pay and are paying an extra £61 per year in National Insurance that they would not pay were they classified as employed.
? The Exchequer is losing, on average, over £300 per person who is wrongly categorised as self-employed, because the National Insurance system currently incentives employers to categorise workers as self-employed, even when they are not. If scaled up, this means the government could be losing as much as £314 million annually.
? Responsible businesses, which do the right thing and want to employ their staff legitimately, face a competitive disadvantage to other employers which hire bogusly self-employed staff. The current lack of clarity around the definition of self-employment also means that many responsible employers struggle to be certain that they are categorising their staff properly.

Citizens Advice recommends a broad range of action in order to prevent such losses for the stakeholders involved, including extending employment rights to self-employed people, reviewing the tax and National Insurance system in order to ensure that self-employed workers are treated fairly, and finally supporting the case of those who suspect they are in bogus self-employment, in order to hold rogue employers accountable.