The number of people who are self-employed has been growing in recent years. According to the RSA (2015) that growth has been quite tremendous. In fact, it is estimated that one in seven of those in the workforce are self-employed. The number of people that are self-employed is reported to have increased by 40 per cent since the turn of the millennium. What this means is that it is possible that the number of people who are self-employed is likely to outstrip the number of those working in the public sector before too long. This has led various political parties to make proposals to help those that work for themselves. These include a StartUp Loans scheme and the introduction of tax incentives, among others. As the RSA argues however:
“While each of these moves should be welcomed, they are overwhelmingly centred on supporting businesses as entities in themselves, rather than the individuals that sit behind these businesses.”
This means they are focused more on helping small organisations be profitable, rather than improving the lives of those that are self employed. This led the RSA to examine what the self employed would benefit from – what would make their lives better. Among the challenges that were faced by search workers include the fact that self employed people have a more volatile income. This is not aided by the fact that they are not able to get statutory sick pay or statutory maternity pay, among others. This means that they face risk in the case of unforeseen events. It leads to an overall lower earning for self employed people of 2.5 per cent.
The findings of the report led to three different suggestions to help support self-employed people that have low incomes. The poorest 20 per cent of self-employed people were found to earn a quarter less than the poorest 20 per cent of employees. This means that some can end up falling below the poverty line. In fact it was shown that 30 per cent of households that have just one self-employed worker and no other workers face poverty. Suggestions for improvement proposed in this area include putting in place a more progressive National Insurance contributions system to help generate revenue for protection of the self-employed. The second recommendation is redesigning Universal Credit so that it really helps with self-employed work. Finally, a third recommendation was made of establishing a universal self-employment service to aid those that want to start, sustain and formalise their own business. One of the key concepts to bear in mind here is that the service should be one port of call, rather than the varied services offered at the current time. Self employed people were found overall to be more satisfied with their work than those working for companies. However, they also were found to face higher risk. One problem identified was that those that are self employed may not have savings and this means that they do not have a cushion if there is a problem with work in any given month. This could create problems in particular with mortgage payments, for example. It was also explored how the self employed could potentially spread risks between them, such as through working collectively to handle shocks to their income. This is a particularly difficult problem given the lack of welfare entitlement for these workers. Minimising risks in the short term was another area of review through putting in place interventions. However, in the longer term it was found that to minimise risks, incomes would need to be increased. Health and safety risks were found to be particularly problematic, given that these workers do not have support in this area. Personal development was also difficult and self employed workers were half as likely as the rest to have had training in the past 12 months.
Other recommendations were made to support the self employed generally, rather than just those self employed people that face poverty. These include help by introducing financial products and services that can increase abilities with income forecasting, providing self employed people information about their welfare entitlements, and reviewing possibilities for opening up statutory maternity pay and statutory paternity pay to the self employed. It will be interesting to see what happens with the next election and if any of these suggestions get implemented.
The following infographic summarizes the findings of the report:Infographic done by RSA
summarizes the information gathered by the report:
Paula Newton is a business writer, editor and management consultant with extensive experience writing and consulting for both start-ups and long established companies. She has ten years management and leadership experience gained at BSkyB in London and Viva Travel Guides in Quito, Ecuador, giving her a depth of insight into innovation in international business. With an MBA from the University of Hull and many years of experience running her own business consultancy, Paula’s background allows her to connect with a diverse range of clients, including cutting edge technology and web-based start-ups but also multinationals in need of assistance. Paula has played a defining role in shaping organizational strategy for a wide range of different organizations, including for-profit, NGOs and charities. Paula has also served on the Board of Directors for the South American Explorers Club in Quito, Ecuador.