Freelancers and the welfare system

This site has carried plenty of posts about freelancing and employment status, tax status, their pension status, and it probably needs a bit more on the generality of freelancing. We often debate whether ‘freelancer’ is even a thing.

It doesn’t exist as a tax, employment, or pension status, yet, we’ve all met people with all of the different tax and employment statuses describing themselves as freelancers. I’d argue that freelancers do exist as a meaningful group with common interests as they have a lot of things in common due to the relationship they have with the people that they work for.

Firstly, because it’s not all downside, we need to remember that some freelancers enjoy the freedom and independence that their working life gives them. Periodic reports, including this one from IPSE [pdf] show that self-employed people are happier and more engaged at work than more conventionally employed workers (caveat; both of those reports were published pre-pandemic, the generality undoubtedly masks plenty of workers who feel trapped in freelance employment when they’d prefer something more permanent).

For example…

  • they have the costs and inconvenience of book-keeping, tax management, etc
  • they are more likely to have to shoulder the costs of training, equipment that they use, the expenses of doing business (the kinds of expenditure that PAYE employees would expect to fill out an expenses claim for
  • their working relationships with employers/engagers is often very ‘management-lite’ – they would be expected to hit the ground running and the intensity of the work that they do
  • they are vulnerable to more unexpected periods of unemployment
  • any technical right to employment protections that they have may not exist in reality – or be impossible to exercise due to qualifying periods (Parental Rights, unfair dismissal, etc)
  • there is no guarantee of job security – particularly following parenting breaks
  • they have less predictable working hours and terms which (among other downsides) makes childcare and family life harder to manage.

On the subject of pensions, in most cases, their contributions are more expensive (due to fewer tax incentives) and less ‘automatic’ meaning that many freelancers have very low pension savings.

Welfare benefits

On top of this insecurity, they have a very thin ‘safety net’ in times of difficulty. When we look at the way unemployment is treated by the welfare system – particularly the issue of Universal Credit and the Minimum Income Floor, the concept of ‘freelancer’ is very much a thing. Earlier this week, the actor’s union Equity published a report – ‘Not here to help’ – based on their own members’ experience. As their summary put it…

“Our research has found that serious flaws in Universal Credit, the government’s flagship social security reform, are pushing workers across the cultural and creative industries into deep financial hardship.

Of those subject to the Universal Credit rule known as the ‘Minimum Income Floor’ (MIF), which reduces the amount of support that self-employed creatives are eligible for:

  • 41% had gone without essential items such as food or utilities.
  • Nearly half have been unable to pay the bills.
  • 5% had been forced to leave their home.”

The whole thing is well worth a look – here.

The CAB website also has a useful briefing on how the Minimum Income Floor works – here.


This entry was posted in Employment Law and Rights, Employment status, Equipment and kit, Freelance working, Freelancer rights, Gig economy workers, IR35, Management, Personal Service Companies, Productivity, Skills & capacity, Tax, Universal Credit, Welfare and benefits, Wellbeing, Work-life balance and tagged , , . Bookmark the permalink.