Contractor body doubts 'bogus self-employment' claims

A new report claiming that half a million workers are bogusly self-employed and cheated out of thousands of pounds a year in staff benefits has been criticised by contractors’ supporters.

Published by Citizens Advice, the report and its headline finding that one in ten of the 4.5m self-employed are ‘confused,’ ‘unsatisfied’ and ‘exploited’ is an “oversimplification”, says the Freelancer & Contractor Services Association.

Citizens Advice arrived at the figure by finding out that 10% of independent workers it polled from its network (including local offices, its website and internal system) were “suspect” employees or “could be classified” as staff.

It used its own employment indicators to make the conclusion, and said that if the 1 in 10 proportion was scaled up, then it “could translate into as many as 460,000 people nationwide.”

The FCSA emphasised that, reassuringly, Citizens Advice acknowledges that its calculated figure for bogus self-employment is disproportionately skewed towards lower paid workers.

The association also points out that because its own research shows almost half of the self-employed to be at the “professional end” of the occupations spectrum, it thinks the true figure of bogus self-employment is likely to be lower than 460,000.

“We are concerned that today’s report may lead to pressure for a knee-jerk response to what is actually a very complex issue,” warned FCSA’s chief executive Julia Kermode.

Nevertheless, said FCSA, it is “positive” that Citizens Advice is exposing poor practices, such as “rogue employers” – hirers who make their workers independent just to avoid giving them staff benefits (£1,288 in holiday pay is said to be lost per year, per ‘bogus’ freelance).

But the consumer body doesn’t seem to think that status is a “very complex issue”, as stated by Ms Kermode. In particular, the report says “defining self-employment status is straightforward.”

In line with legal and IR35 commentators who indicate status to be far from straightforward, the FCSA reflected: “[The] research study issued by the Citizens Advice Bureau is an over-simplification of the real self-employment situation.”

Yet the association will likely support one of the report’s recommendations – to review the tax and NI system to ensure that independent workers are “treated fairly”.

Both of the groups should be pleased, then, as consultations on National Insurance for the self-employed are incoming, and a review into the obstacles and opportunities for people who work for themselves is already underway.