How might The Taylor Review affect UK self-employment?

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After nine months in making, the long-awaited Taylor Review into Modern Working Practices has been released. And as expected, it focused heavily on the role of freelancers and contractors in the new economy, along with suggestions on how the Government can build an environment in which any kind of worker can thrive.

Cutting to the chase, it was a mixed bag for freelancers and contractors. And since its grand unveiling there has been a growing feeling that while the review clearly understands the strength and importance of the UK’s flexible workforce, it does not offer many new or innovative ideas for the Government to consider. 

Support the UK’s ‘special’ self-employed workforce

“It is time the Government reconsidered how self-employment is treated and what it can do to support those who choose to be their own boss.”  The Taylor Review

Given that recent Government plans for the self-employed have come under huge scrutiny, anything to urge Theresa May and her Cabinet to reconsider their support for this UK’s independent workforce will be widely welcomed.

Seb Maley, CEO of Qdos Contractor, adamantly agreed.

“The new-look Government has an opportunity to rethink the support they offer to the UK’s 2million freelancers and contractors. This should start with a change in attitudes towards the self-employed, some of whom - particularly contractors - have been unfairly tarnished as tax-avoiders.

“The majority of independent professionals choose to work for themselves to enjoy more freedom and a better worklife balance, not to unfairly exploit the current tax system. Furthermore, in the case of contractors, the majority have been forced to incorporate because of the demands of big business.”

Balance the tax-system

Recent changes to public sector IR35, along with the slashing of tax-free dividends have outraged the UK’s independent workforce, who feel as though the benefits of working this way are slowly being removed.

“Currently, the different rates of National Insurance in particular mean that the UK system of taxing labour is not neutral – a self-employed person doing the same work as an employed person can pay a different amount of tax or National Insurance despite receiving similar contributory benefit entitlements in return.” The Taylor Review

The Taylor Review calls for National Insurance Contribution (NIC) to be the same rate for employees as it is for the self-employed. And while the report recommends that the companies engaging self-employed workers could in-fact pay these workers’ NIC, any move towards balancing the tax system is not expected to be popular among freelancers and contractors, regardless of whether employers were to pick up the bill.  

“The self-employed simply do not enjoy the same benefits as employees, so to call for a balanced taxation system, seems shortsighted”, argued Qdos Contractor’s Seb Maley.

“While the review suggests companies engaging with self-employed workers could perhaps make these NIC contributions themselves, many contractors would feel as though an element of their independence is being taken away. The beauty of the flexible workforce is that both contractors and companies benefit from a completely flexible working relationship,” he added.

End employment status confusion

As the IR35 debacle rolls on, The Taylor Review urged for simplification and clarity around employment status.

“The way in which employment protections are applied relies on individuals and employers understanding the type of relationship that exists between them – most basically, deciding whether the individual is an ‘employee’, a ‘worker’ or genuinely self-employed. For a number of reasons, this is becoming more complex for an increasing proportion of the workforce.” The Taylor Review

So it’s simple. For contractors and public sector engagers to truly understand and make more accurate, well-informed decisions on employment status, there is a need for clarity. Put politely, the current situation is confusing, and contradictory as to whether a worker should be considered an employee, or self-employed.

Andy Vessey, Head of Tax at Qdos Contractor welcomed the recommendation; “Status tests should be more distinct and not open to wide interpretation, so as to give certainty to both worker and engager.”

The review calls for change in legislation, to ensure Government, the courts, workers, employers and agencies are – metaphorically speaking – on the same page. It emphasises the need for key factors which the Government typically use to make employment status decisions to be incorporated into the legislation.

These key factors include; Personal Service (which is judged on whether the individual is required to do the work themselves), whether a working arrangement falls under SDC – Supervision, Direction and Control, and Mutuality of Obligation (which considers the contractual agreements the worker must keep to).

Protection for ‘gig economy’ workers

The incredible rise of gig economy workers, and self-employed workers such as Uber drivers, Amazon deliver drivers, Deliveroo and JustEat riders, led to the Taylor Review to suggest a measures to protect this new type of worker; the ‘dependent contractor’.

“Government should introduce a new name to refer to the category of people who are eligible for “worker” rights but who are not employees.” The Taylor Review

The general response from leading industry voices, is that the review was right to recognise ‘gig economy’ workers. But it cannot be stressed enough that in the vast majority of cases, these workers have a very different set of characteristics and needs compared to your typical, genuinely self-employed freelancer or contractor.

“When people talk about the gig economy, there is often the mistaken assumption that the services operating in it are all the same. Each relationship has to be judged on its own particular merits, and it would have been a huge error to simply place everyone in the gig economy within the revised worker status. This is why it’s essential to enshrine what it means to be self-employed in law.

“Renaming workers ‘dependent contractors’ might bring some benefits, but government will have to be absolutely clear who falls into this group. It will still be up to the courts to rule on employment status,” explained IPSE’s Director of Policy, Simon McVicker.

While the review is right to touch on the evolution of the labour market and in it, the rapid-growth of ‘gig economy’ workers, The Taylor Report overlooks what is perhaps a more pertinent issue; the need to redefine ‘self-employment' itself:

“It’s essential that Government refines its own definitions of self-employment, so everybody’s thinking is aligned. Policymakers must then put the Taylor Review’s recommendations into action. The Government-commissioned Deane Review on self-employment, which made a number of suggestions for better policy last year, has thus far been ignored. The Taylor Review has to be different,” Simon McVicker added.

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