Thursday, 12 July 2018

The Decline of the Self-Employed.

Way back when (within my lifetime), it was easy to spot the difference between an employed person and a self-employed one.

The employed person took a weekly pay packet and job security over higher earnings. There was a mutual contract between the employee and the employer: the employee would work for the company full time and exclusively with minimal time off and in return the employer would provide a decent weekly wage, job security and decent working conditions including things like sick pay and pensions.

The self-employed person took a risk: they had no security of employment but instead leveraged a specialist skill against the risk of no work. They earned more than an employed person, but this was generally used as a buffer against the lean times. They had no security of employment, no sick pay, no pension (unless they paid for it themselves). They also had to stump up extra expenses like accountants. The trade off was being able to offset expenses against tax and other perks through the tax system. Hopefully once you have paid for goods, heating, lighting and all other expenses including pension and put a little aside for rainy days, you have some left over. It's called making a profit and is the raison-d'etre of any self employed person. To make a profit to re-invest in getting better equipment so you can do the job better and faster, or maybe some training. Of course you may take that profit and pay yourself a crafty dividend at low, low corporation tax rates. But the choice is yours. Don't forget it's unlawful to run a company in an insolvent state, so making a profit is key.

Recently the lines have been blurred. The GIG economy and zero-hours contracts make employment with no job security look very similar to long-term self employment.  In fact the self-employment option can look significantly more attractive than employment, given the flexibility it affords.

But now the courts and the Inland Revenue are crashing in and blurring the lines even more. Self-employed contractors that work on the client's premises are classed as employees and stung for tax and employees and employer's national insurance (how you can be classed as both employer and employee stumps me). Not only in the I.T. field. Now the NHS is moving towards a crisis as the I.R. start go go after the self-employed in the NHS. Agency nurses that work on the premises and can be at any niumber of different wards, hospitals and scenarios are still classed as employed, despite their flexibility over and above that which an employed nurse would have. Docotors that work for the NHS one day and private the next are being stung as well. 

Employers are offereing ever more stripped-down contracts with no job security, no time off, no sick pay but demanding loyalty for up to 12 months at a time.

The lines are blurred enough that self-employed contractors are sucessfully climing employee rights in court. How someone for instance who is self-employed can claim sick pay from a client still eludes me. That's the risk you take when you opt to go self-employed and the fee you charge goes partly to fund you for the off-days. If you happen to take a contract that does allow you to afford to see you over the lean times, you don't really deserve to be self-employed. Instead head for the comfort blanket of employment.

Of course there is a reason for all of this: tax. The government is using the Inland Revenue to grab ever more tax from people that have no means to agrgue against them. In virtually every case where the defendant has had the means to mount a decent rebuttal if the IR case, courts have found in favour of the defendant. The IR is a tax-grabbing steamroller that will not be satisfied until everyone is classed as an employeee and in the case of the self-employed employer too. Two lots of National Insurance to pay and collect.

Government sanctioned daylight robbery.

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