The rise and rise of part time self employment

Tom MacInnes, Head of Data Analysis

The labour market figures for the last couple of years have tended to show similar patterns with small rises in employment most months. Today’s were more of the same – a small rise in the number of people in employment leaving the employment rate at record levels.

All types of work have risen – full and part time, employed and self-employed. The biggest proportionate rise has been among the smallest group – those working part-time in self-employment. The size of this group has increased from 1m to 1.35m since the beginning of 2010, a change that accounts for around 15% of the total growth in employment over that period.

Labour market statistics

What’s behind this growth?

This growth is worth splitting into two parts. Around two fifths is among those aged over 65, continuing to do some work beyond retirement age. This is well worth noting, regardless of whether this change is through choice as people prefer not to retire completely, or through necessity as pension pots are not providing for a comfortable retirement. It also reflects what we found in our ‘Approaching retirement’ research, that many older people consider self-employment as a stepping stone towards retirement.

Around three fifths of the increase is among people aged under 65 – an increase of around 205,000 since 2010. A couple of trends are worth pointing out.  Firstly, the rise has been much greater for women than men. Women were already the majority of this group, but three quarters of the rise among working age part time self employed people has been among women, who now make up around two thirds of the group. This contrasts with full time self employment, where women make up only 20%.

The second notable trend is the increase among parents. Two thirds of the increase is in families with a dependent child, meaning that parents now make up just over half of the group. Our previous research on self employment showed that, compared to a decade ago,  200,000 more children were living in families with a self employed adult.

Any changes in the labour market inevitably lead to discussions as to whether they are ‘good’ or ‘bad’ – are people doing this out of choice, or because they have to? Would those people working in part time self employment prefer to have full time employee jobs? It’s hard to answer that question completely but analysis of the Labour Force Survey tells us that over 80% of those in this position do not want full time work. Moreover, it’s easy to see how the flexibility of self employment could be attractive to parents or those looking to move into retirement.

What are the implications?

At the same time, though, the number of people coming to Citizens Advice with problems relating to self employment has been growing in recent years and we know many people face challenges setting out on their own. Now that part time self employment is a significant, if still relatively small, part of our labour market picture, we need to make sure that the kind of security most full time employees can expect from their work is available to everyone.

In February the government-commissioned Deane review of self-employment highlighted the need for more support for self-employed people, for instance recommending enhanced maternity pay and the introduction of an adoption allowance. Our previous work on self employment supported these recommendations,  but there is more that could be done. For instance, self-employed fathers currently receive no paternity pay, whereas employees do. The level of pension saving among self employed people is also incredibly low compared to employees. Our research showed that even among self employed people with a relatively high income of £1,000 a week, only 24% are paying into a pension.

Today’s labour market stats show once again that self-employment, and part-time self-employment in particular, is a big part of the growth in employment. This is to be welcomed, as for many people it is a positive choice which enables them to keep a good work life balance. But as this change to the labour market is here to stay the government needs to keep a keen eye on how it can ensure those working for themselves can have the same chance at income security as those working for an employer.

What do you think of this post?
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8 comments

  1. Stuart Anderson

    Although I agree with large parts of this post, I do think it misses an important point. While self-employment is a good choice for many people, the government needs to keep a close eye on the fact that self-employment, particularly part-time, does not create job opportunities for people to step into as others leave. Therefore, in terms of a continuously positive job market ( ie over years, decades etc ) I don’t think the government should be slapping themselves on the back too hard. Companies aren’t just going to continuously grow and continuously create new job opportunities so we need a good flow of career progression to open up opportunities as well as creating new opportunities. Self-employment does not seem to lend itself to this.
    I am no economist and know little about the patterns of how the job market works so I may be missing some relevant issues here, but it seems to me that potential negatives of any circumstances should always be considered as well as the positives in order to prevent problems arising further down the line, where we can.

  2. Graham

    Many are forced into “self employment” when they are abandoned by the revamped welfare system. Being no longer officially unemployed the government classifies them as employed or self employed. It’s all just manipulation of the figures to make the government look good. The medically unwell (particularly those with intermittent illness), disabled and mentally ill who are deemed fit for work and loose benefits must seek any means to make money. Anyone in this group faces employer discrimination as there are always more able bodied job seekers to choose from. Some companies only employ contract workers on zero hours contracts and these are often classed as self employed so that the company can avoid tax and NI. Many people lost pensions in 2009 as companies went to the wall and these often over 50’s find they are discriminated against for employment so again must become self employed, it’s their only chance. The genuine willing self employed face huge challenges such as remortgaging their house to fund a business, loosing it all if the business fails, competition from large companies with huge marketing budgets, increasing government legislation and red tape. Administration can take up a huge amount of time for a self employed person; taxation, PAYE for any employees, VAT collection, employment law compliance, consumer law compliance, insurance and now workplace pensions for all employees. If you don’t have or use a costly tax accountant you will come unstuck and easy pickings for HMRC. To find new business you need to invest heavily in marketing and promotion and this absorbs a lot of time and money. At the end of the 24 hr day if you are spending 40% of your time actually doing work for a client or making sales you are doing well. Forget holidays, time off, family, get distracted by these and you will likely fail. The figures may say one thing but reality is very different.

  3. Wendy

    A relevant factor is the change in hours for couples to claim working tax credit create a part time self employed job to get wtc

  4. Jack

    Could someone fix the blog subscribe link please? It seems to be broken.
    https://blogs.citizensadvice.org.uk/newsletter/
    Thanks

  5. Tom MacInnes

    Ben – we’re focusing on health and work in our research over the next few months. The specific issues for self employed people are definitely something we’ll want to reflect.

    Tracey – that’s a really interesting point on late payers. I think that’s a risk of self employment that tends to be underplayed.

  6. Ben

    A good analysis raising important points but you omit the impact of illness or hospitalisation on the self-employed, which I believe is significant and unrecognised. They have no access to sick pay, may struggle to access ESA and may only be able to access contribution based JSA which denies them additional benefits such as support with NHS fees and charges. The majority are forced to fall back on savings, if they have them.

  7. Tracey

    One area of support you have not mentioned is ensuring the customers of self employed people pay their bills on time. I believe the provisions for charging late payer interest are ineffective for the vast majority of self-employed people who might have only one or two customers and no real power to collect interest. They have accepted all of the risks of illness and lack of notice, and at the same time have very little comeback when they are mistreated – other than the withdrawal of their services, which is often not possible. Unfortunately there are some morally reprehensible businesses (many of whom are SMEs) who regularly withhold payment. I know all businesses may suffer temporary cash flow issues, but where a self-employed person is reliant on one or two sources of income, the stress, financial hardship and cost (they actually end up funding their debtor by taking out overdrafts or resorting to credit cards) is substantial.

  8. sheena

    Can part time self employed pay a reduced fee autonomy?

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