The UK has become increasingly dependent on the self-employed workforce. The pandemic caused the freelance industry to grow, with almost 50 per cent of businesses increasing their use of freelancers in 2020, and 60 per cent of business owners planning to use more freelancers in 2021.
The gig economy has enabled workers with the tools to chart their own career path without the need to rely on employers. When the gig economy first began expanding and more people started working as self-employed for companies such as Uber or Deliveroo, experts predicted we would change the way we think about employed vs self-employed. There is yet to be a significant shift, but could the pandemic have signalled a change? What can we expect for freelancers in 2021?
An inquiry by Prospect found 75 per cent of self-employed workers do not believe they have sufficient workplace rights compared to employees. The pandemic cast a new light on the equal rights between freelancers and employed workers. Freelancers often fall through the gaps of Government categorisation and thus receive less support.. The level of rights and benefits freelancers receive does not always equate to the risk they take as self-employed workers.
Earlier this year, a landmark ruling signalled a step in the right direction. In February, Uber drivers became formally recognised as workers rather than self-employed. This ruling is expected to have a significant impact on the gig economy and freelancers. Already other rulings have followed suit, with the court deciding Addison Lee drivers should also be classed as employees, not self-employed workers. This change in employment status entitles workers to more rights, including National Minimum Wage, protection against unlawful dismissal and statutory paid holiday. It is hoped this ruling will help strengthen the safety net for self-employed workers.
Changes to status
New changes to tax legislation affect the status of self-employed workers. IR35 determines whether a worker is viewed as self-employed or employed. This applies to workers who provide their services through an intermediary, rather than working as an employee. The intermediary will often be the contractor’s own limited company or personal service company but can also be an individual or partnership. IR35 will now mean some freelancers will be considered as employees and will not enjoy the tax efficiency self-employment brings.
The lack of clarity surrounding IR35 also has the potential to create confusion for businesses and freelancers. Some firms may decide that navigating IR35 requires too much work and will be less keen to hire self-employed workers.
The pandemic pushed one in six people out of work and into freelancing. Despite concerns over IR35 and workers’ rights, optimism about freelancing remains strong with 71 per cent of freelancers reporting life is better as a freelancer than a permanent employee. As the world begins to open up, freelancing looks set to stay.