Reducing bogus self-employment and supporting the genuinely self-employed

Alison Blackwood, Senior Campaigns Officer

Self-employment is now a mainstream part of the UK labour market: around 15 per cent of people work in this way. For most people, working for themselves provides welcome flexibility, independence and the reward of growing their own business. However, for some people who are self-employed, the reality is very different.

What is bogus self-employment and why is it important?

Research we published today highlights our estimate that as many as 460,000 people in the UK could be bogusly self-employed. These are people whose work has all the hallmarks of employment but who have been classed as self-employed by their employer.

This means the employer avoids their National Insurance and any pension contribution, whilst also claiming they do not have to provide basic employment rights. In some cases the employer doesn’t even tell people they’ve been classed as self-employed, and, because the self-employed are usually responsible for their own tax arrangements, this can result in surprise tax demands, often years later.

Who loses?

The bogus self-employed can lose out on wages, holidays, sickness pay and some benefits, such as statutory maternity and redundancy pay which they would be entitled to as employees. They also often don’t see any of the advantages of true self-employment, such as more flexible hours, self-direction and control over their work.

However, they are not the only ones who suffer. The Office of Tax Simplification has estimated that confusion around employee and self-employed status costs UK businesses who want to follow the law a total of £51 million per year (for compliance audits, inspections and legal advice).

They estimate the loss to the government is an extra £314 million through underpayment of tax and National Insurance. So bogus self-employment means good employers are put at a competitive disadvantage by rogue employers who try to avoid their responsibilities, while we all suffer the losses to the public purse.

Why does this continue?

Currently the only way to prove bogus self-employment, and secure the employee rights this provides, is to go to an employment tribunal. Bringing a claim in the employment tribunal is costly to both the employee (who has to pay between £390 and £1,200 to progress a claim) and the employer (who has to pay to defend the claim). It is also legally uncertain because the law is complex and there are grey areas, meaning that there is no guarantee of success.

Our own research last year found that 82% of people with problems at work said the current tribunal fee prices make them less likely to, or completely stop them from, going to tribunal. This suggests employment tribunals are a costly, inefficient and ineffective way of reducing the problem of bogus self-employment.

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What can we do?

Fortunately, the Government is currently reviewing support available to self-employed people, and we are about to launch a new national campaign to help the growing number of people coming to Citizens Advice for help about this type of work. Our campaign will emphasise the positive opportunities self-employment brings for people to be more flexible and to have more control over their work.

We will argue that we should remove barriers that stop people working for themselves, if this is the form of employment that best fits with their lives. We will also campaign for more help, particularly during the first years of starting a business, to ensure the growing number of self-employed have enough security to develop their business to its full potential.

However, we will also use this campaign to highlight the practice of bogus self-employment and identify the employment rights and responsibilities of individuals. We want to make sure that people know the benefits and costs to themselves when they choose genuine self-employment but are not fooled by job offers that have none of these advantages.

Apart from reducing harm to those who are caught up in bogus self-employment, this would also bring significant cost savings to employers who comply with the law (including many small and micro-businesses) and the government itself.

Please let us know what you think

If you would like to become involved in our national self-employment campaign, please get in touch with me. For more information on the ‘Neither one thing nor the other’ research on bogus self-employment published today, please contact SJ Jacobs.

What do you think of this post?
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  1. Jonny

    Organisations such as IPSE are doing their best to support the self-employed as much as possible and they have noticed an increase in the self-employed but their recent findings have indicated that a number of people who are thinking about becoming self-employed are doubting the idea of it as it has financial repercussions.

  2. Amanda

    1/ hope the campaign will also point out the effect on the change to the State Retirement Pension, if your employer is not paying your National Insurance stamps under PAYE and the bogus self-employed are not paying for them either they will be shortchanged on any entitlement in the future.
    2/ HMRC (Taxes not tax credits) have units called Employer Compliance who are interested in Employers using bogus self- employment to avoid statutory duties and fail to operate PAYE. Suggestion:- that they publish a hotline number for any number of employees willing to provide evidence that they should be in PAYE. Referred to a master/servant relationship:- if their hours and conditions are dictated, they do not bid for work/ contract, supply their own materials or piece work and cannot substitute a sub- contractor if they have to be elsewhere they meet HMRC definition for being in PAYE

    1. Alison Blackwood

      Hi Amanda,

      Thank you for your very helpful comments.

      We are currently doing some research on pensions and the self-employed which we will use to inform the campaign as it develops and this will obviously need to realte to recent changes.

      We are also keen to look at how enforcement can be improved, and will be linking with local Citizens Advice to look at that further, particualrly through the Employment Advisors Network. The hotline you suggest sounds similar to the National Minimum Wage hotline. However, some people I have spoken to have said that has not been as effective as they would like.

      I’m also keen to try and hear more around general HMRC problems, as already brought to our attention by the work on delays in getting through on phonelines.

      Thank you for taking the time to post this it has definitely made me think some more.


  3. cowboy builders

    I employed a builder name les evans of evans and evans solutions (and was made super value for cash up front£750 reduction of £400 if we had recycled slabs) to re-fence and slab(one side) my back garden in woodgate valley south, from day one a single workman turn up to take down my old fence, this took most the first day, in these sorry feeling sorry for bloke or pat as les called him , I let him use my tools electric and manual tools after 3 days les turned up, to re work the 40 feather fence, because les said it was not right, les used a lot of excuses that he was in the territorial army. I was amazed how they told us they never worked if it rained, so they both had the next two days off , to have a long week in the first week there total hours(17) week2 les evans left pat on his own to unload the load of 48 slabs 54 man who other wise waiting for couple of serious medical , which he broke at lease 4 slabs, les had another 3 days off on ta duty but he was there for a couple. getting sick of this I had a go at les and the manage 20 between them with no tools relayed are patio took a week, week3 pat only turned up les said he had no hours left,i query this with because he quote a fixed price for the job. never seen les evans to this day. Thursday week three pat said much the same and moved to on to a consevery , job local

  4. Bob Langley

    What a terrible indictment of the way that individual employment rights are being eroded. This whole business of bogus self-employed status needs addressing at the highest level. The difficulties in unionising the workplace and the increased cost of employment tribunals contribute to this – good job the CAB exist and are on the case.

  5. Magdalen grzelak

    I am magdalena . I get one hotel job by agency . That agency head one woman . She give me contract every hour £6.50 . I work every day 8 hours . One month I worked there. When I told him you not pay my all money . Some where wrong . I told I wanna meet with you . And I do not do with you work, but she refuge that she will not meet with me . Now she not pay my money she told she will pay today tomorrow. But till not pay also i told give me p45 paper . She told why i will give you .I have all prove ..what can I do sir /madam

    1. Alison Blackwood

      Hi Magdalena, That’s terrible to hear. I think it would be best if you made an appointment with your local Citizens Advice who can provide free support to help you with this problem. You can also look at our webpages which provide advice on your rights to pay I hope you get it sorted out, Alison

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