Extend minimum wage to cover self-employed, says think tank

Minimum wage legislation should be extended to cover self-employed workers who do not control their own rate of pay, according to a think tank.

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The Resolution Foundation claims that of the 4.8 million people defined as self-employed, around half earn below the low pay earnings threshold of £310 a week.

The group argues that the government needs to do more to protect certain groups of self-employed workers, such as those operating in the so-called ‘gig economy’, as they do not have the opportunity to set their own wages.

If enacted, the change could also bring greater protection to those operating in more traditional sectors such as hairdressers and minicab drivers.

It proposes that companies who set the rate of pay for independent contractors would be required to calculate whether a person working at an ‘average’ pace would be able to earn at least the minimum wage after expenses.

The body has submitted its recommendations to Matthew Taylor, who is leading a government review into modern UK work practices.

Conor D’Arcy, a policy analyst at the Resolution Foundation, said: ‘By extending minimum wage protections to those self-employed people whose prices are set by a firm … self-employed people in the gig economy would be given protection against extreme low pay for the first time ever.’

However, Seamus Nevin, head of employment and skills policy at the Institute of Directors, warned that an ‘obligatory minimum wage would undermine the business model of many gig platforms … who would find it hard to justify paying people at times when there was no demand’.

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FSB calls for government to rule out national insurance rise for self-employed

The Federation of Small Businesses (FSB) has urged the new government to rule out a national insurance rise for the self-employed.

The business group has suggested that self-employed ‘strivers’ were concerned during the General Election that a ‘tax grab’ could be sprung on them in the form of higher national insurance contributions (NICs).

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To help support the UK’s strivers, the FSB has called for the government to bring the Maternity Allowance closer in line with Statutory Maternity Pay, and explore the ‘feasibility of Statutory Paternity Pay’ for all eligible self-employed parents.

Commenting on the issue, Mike Cherry, National Chairman of the FSB, said: ‘The self-employed community is an increasingly critical driver of economic growth in the UK. As the self-employed battle spiralling inflation and a new wave of political uncertainty, the last thing they need is for the government to revisit failed plans for a national insurance hike.’

Following the announcement of an increase in NICs for the self-employed at the 2017 Spring Budget, the FSB launched a ‘stop the 2%’ campaign.

It has also previously compiled a list of problems facing the self-employed. Some of these issues include a lack of sick and holiday pay, late payment from large businesses and a high tax administration cost.

Avoid hitting self-employed with extra costs, warns FSB

The Federation of Small Businesses (FSB) is calling on all political parties to avoid targeting the UK’s 4.8 million self-employed with post-election tax rises.

With the General Election approaching, the business group has published its manifesto, ‘Small Business, Big Ambition’, which sets out a number of key steps that it believes the next government should take.

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This includes avoiding increases in taxes such as national insurance and offering the self-employed greater recognition in the welfare system by, for example, bringing the Maternity Allowance closer in line with Statutory Maternity Pay.

‘The UK’s army of 4.8 million self-employed are the backbone of this country and should be recognised for the value they add both to the economy and their local communities,’ commented the FSB’s National Chairman, Mike Cherry.

‘Small businesses and the self-employed will be vital to a successful post-Brexit economy. Politicians seeking their votes should be on their side and against hitting them with extra costs.’

With Britain’s departure from the EU likely to dominate much of the political debate, the FSB has also put forward its suggestions for securing a pro-business Brexit. This includes creating small business export vouchers alongside export tax credits, to help small firms trade with new markets for the first time.

However, the FSB warned against overlooking the importance of domestic issues.

‘Brexit is clearly going to feature heavily in the election campaign, and rightly so. But it must not dominate debate at the expense of other important domestic issues for small businesses,’ said Mr Cherry.

‘There are a series of decisions required by new government ministers in their first 100 days in office. From export support to tackling our late payments crisis, to co-funding apprenticeships and a new consensus on the future of business rates, to the survival of small businesses on our high streets and in our communities.

‘Our manifesto sets out what small businesses want to see from all major parties and candidates standing on 8 June. Millions of votes are at stake’.

HMRC publishes Making Tax Digital consultation response

The initiative is intended to create a ‘transparent and accessible tax system fit for the digital age’, and is due to be implemented between 2018 and 2020.

HMRC sought the opinions of businesses, the self-employed and landlords, who are amongst those likely to be the most affected.

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The government published a raft of proposals, taking into account the views of consultation respondents. These include:

  • providing free software to those businesses with the ‘most straightforward’ tax affairs
  • allowing businesses to use spreadsheets for their record-keeping, which can be linked to the software in order to send updates to HMRC
  • excluding charities from the requirement to keep digital records
  • deferring MTD until 2020 for partnerships with turnover exceeding £10 million
  • giving taxpayers at least 12 months to familiarise themselves with the changes before any late submission penalties are applied.

HMRC also stated that it will introduce changes gradually, and that any such changes will be thoroughly piloted with businesses before they are fully implemented.

The government hopes that pilot schemes will help to ensure that the MTD software is ‘user-friendly’, and will give businesses and individuals time to prepare and adapt.

Jim Harra, Director General of Customer Strategy and Tax Design, commented: ‘MTD will help businesses to get their tax right first time; it will help reduce the likelihood of errors, lower the chance of unwelcome compliance checks and give them greater certainty that they are getting things right.’

The government’s response to the consultation feedback can be viewed here.

Self-employed ‘earning less than they did 20 years ago’, report suggests

Average wages for self-employed individuals are lower than they were in 1994/95, a report by the Resolution Foundation has revealed.

Data published by the think tank showed that, whilst the number of self-employed workers has grown by 45% since 2001/02, their weekly earnings have fallen by £60.

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The report revealed that self-employed individuals’ typical weekly earnings grew during the late 1990s and early 2000s, but fell in the wake of the financial crisis.

Earnings have recovered over the last year, and, according to the Resolution Foundation, are ‘almost back to levels last seen in the late 1990s at around £240 a week’.

However, this is 15% down when compared to typical weekly earnings in 1994/95.

Adam Corlett, Economic Analyst at the Resolution Foundation, commented: ‘Almost five million workers across Britain are now self-employed. But while the self-employed workforce is getting bigger, typical earnings are actually lower than they were 20 years ago.

‘With so many self-employed workers earning so little, it is right that the Government investigate how public policy should catch up to meet the needs of these workers.’

A Government spokesperson stated: ‘The Government is committed to building an economy that works for everyone and while the National Living Wage has given one million workers a pay rise, the Prime Minister has made clear the labour market must support and protect all workers.’

New report suggests the self-employed require ‘more support’

Self-employed individuals should receive more help and support in the running of their business, a new Government-commissioned report has suggested.

The review, which was led by businesswoman Julie Deane OBE, calls for self-employed workers to be given similar rights to traditional employees.

‘It is important that with the increased growth in self-employment, and the subsequent benefits that this group brings to the economy, that there are systems in place to support the self-employed in the same way as the employed,’ the report stated.

Researchers found that self-employed people now account for a record-breaking 4.6 million, or 15%, of the UK’s workforce.

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The review states that choosing to become self-employed ‘should not mean that people are disadvantaged in the support that they receive from the Government’.

Specially, the report says that the Government should consider increasing the first six weeks’ maternity allowance rate paid to self-employed workers. This would ensure that it is in line with the statutory maternity pay that employees currently receive.

The document also calls for the creation of a new ‘Adoption Allowance’ for self-employed parents who choose to adopt. The allowance would operate on the same basis as the existing statutory adoption pay scheme for other employees.

Other recommendations include increasing awareness of the advice and support that is available to self-employed individuals, along with details of shared work spaces, and offering more flexible financial solutions for those running their own business.

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New Enterprise Bill to help small businesses settle late payment disputes

20 May 2015

In his first speech as Business Secretary, Sajid Javid has announced that a new Enterprise Bill aimed at tackling problems faced by small businesses will be brought forward and included in the Queen’s Speech.

Speaking at a business centre in Bristol, Mr Javid said: ‘Small businesses are Britain’s engine room … As Business Secretary one of my first steps will be to bring forward an Enterprise Bill that helps them to succeed and create jobs. We will sweep away burdensome red tape, get heavy-handed regulators off firms’ backs and create a Small Business Conciliation Service to help resolve disputes.’

The proposal for a Small Business Conciliation Service was included in the Conservative Party’s manifesto. The new body would assist in settling disputes between small and large businesses, especially over late payment practices, and would help companies to avoid costly legal expenses.

Mr Javid said: ‘There’s a situation familiar to small business owners up and down the country. A letter turns up from a larger customer changing payment terms, or charging them to remain a supplier and in some cases even deducting that charge on the spot against payment owed. This pattern of behaviour is an outrage. It’s bullying – pure and simple.’ He said that in 2008 late payment cost British business £19bn but this year the figure is set to exceed £40bn.

Chris Bryce, chief executive of the Association of Independent Professionals and the Self-employed, welcomed the announcement of the conciliation service, saying: ‘[This] could play a key role in making sure the smallest businesses have somewhere to turn when they are being paid late and could help deliver a better payment culture where small and large businesses work more harmoniously together.’

Other measures to be included in the Enterprise Bill are: plans to cut red tape for business by at least £10 billion over the next five years, which involves targeting independent regulators for the first time; an extension of the primary authority scheme, which allows businesses to get advice on regulation from a single local council; and a review of the business rates scheme.