Self-employed would value receiving sick pay above other benefits

UK micro-business owners and freelancers would be more interested in receiving sick pay than any other statutory benefit, according to new research carried out in collaboration between cloud accounting software firm FreeAgent and The Freelancer & Contractor Services Association (FCSA). A poll of nearly 900 UK micro-business owners conducted by FreeAgent and FCSA claims that sick pay provision is the benefit that self-employed workers would most welcome, coming way ahead of other benefits such as maternity pay, job seekers allowance and pension auto-enrolment. The survey claims that 76 percent of respondents currently do not have any method of providing sick pay, maternity/paternity leave, holiday or redundancy pay in their business. Projected across the country’s 5.2 million-strong micro-business sector, this potentially equates to millions of people working without the same kind of basic entitlements that employed workers have. Notably, people’s appetites for additional benefits varied depending on the structure of their business with sole traders more likely to value benefits (rating sickness provision 8.7 out of 10) compared to those working through their own limited companies who gave a score of 6.4 out of 10 for sickness provision.

In addition, the survey revealed that more than a third (35 percent) of respondents did not currently have any plans in place to fund their retirement. And, when it comes to auto-enrolment, 22 percent of respondents said they would opt out of auto-enrolment with 28 percent unsure if they would or not. Status plays another factor in this decision, with one third of limited companies (32 percent) choosing to opt out compared to 14 percent of sole traders. It was therefore unsurprising that auto-enrolment was one of the least favoured benefits with those working through limited companies valuing it at 5.5 out of 10, compared to sole traders who valued it as 7.3 out of 10.

The findings come in advance of the publication of the Taylor Review; an official report into employment practices in the modern economy led by the Chief Executive of the Royal Society of Arts, Matthew Taylor. The review, which is expected to be published in the coming weeks, will examine how employment practices need to change in order to keep pace with modern business models – including the rights of self-employed and gig-economy workers.

Commenting on the research, Ed Molyneux, CEO and co-founder of FreeAgent, said: “The UK Government seems determined to ‘level the playing field’ between self-employed and employed workers, but this is actually very unfair on people who run very small businesses, as it does not take into account the huge amount of personal risk that is associated with being self-employed.”

“Ideally, the UK’s millions of freelancers and micro-business owners should be able to enjoy the same statutory entitlements as their employed counterparts – especially if they will be expected to pay the same level of tax. I therefore hope that the forthcoming Taylor review will be looking closely into this issue, and that the report will make suitable recommendations for how to address the current inequality that exists between employed and self-employed workers.”

“The Government needs to acknowledge the tremendous financial risks associated with starting and running your own business and bear this in mind when deciding on its future tax policies.”

Julia Kermode, FCSA’s chief executive added: “We know from recent high-profile media cases where self-employed drivers and couriers have sought “worker” status and accompanying rights, as in the Uber tribunal, that rights will undoubtedly be a focus of the Taylor Review.  With this in mind, we conducted our research to establish what benefits self-employed people might actually want, particularly given that it is such a diverse population working across all sectors within the UK.”

“For many people who work for themselves, self-employment is a career choice and those who choose it know that this way of working does not come with statutory benefits.  However, it is clear from our research that many have not made appropriate provisions to cover benefits that employees receive. I hope that our evidence helps to inform policy decisions, particularly if the Government intends to increase tax or NICs for self-employed people – as there must be something offered in exchange for increasing the financial burden of the self-employed.  Not all self-employed workers want the same things so there is no one-size fits all solution, in particular those working through their own limited companies are more likely to already have provision for welfare benefits. The Government should find a way of offering additional benefits specifically to those people who want and need them.”

Key results

How many of the following do you currently have provision for in your own business? [please tick all that apply]

  • Sick pay – 19 percent
  • Holiday pay – 15 percent
  • Redundancy pay – 5 percent
  • Maternity/paternity/adoption leave & pay – 5 percent
  • None of these – 76 percent

On a scale of 1 (not valuable at all) to 10 (extremely valuable), how valuable would the following be for you as a self-employed person?

  • Statutory sick pay – 7.73
  • Statutory redundancy pay – 6.32
  • Pension auto-enrolment – 6.54
  • Job Seekers’ Allowance – 6.54

Are you currently making any arrangements for your retirement? [tick all that apply]

  • No; I do not have any plans/arrangements to fund my retirement – 35 percent
  • Yes; I contribute towards the State Pension but I’m unsure about how many more years of contributions I have to make to reach full entitlement – 25 percent
  • Yes; I contribute into a (non-employer) private/personal pension plan – 24 percent
  • Yes; I contribute through other investments such as property, ISAs etc. – 22 percent
  • Yes; I have a legacy employer pension that I no longer make contributions towards – 19 percent
  • Yes; I contribute towards the State Pension and I know how many more years of contributions I have to make to reach full entitlement – 18 percent
  • Yes; I contribute through an employer pension plan – 9 percent
  • Yes; I plan to sell my business to support my retirement – 3 percent
  • Other – 2 percent

If Pension Auto-Enrolment was introduced for the self-employed, would you opt in?

  • Yes – 50 percent
  • I don’t know – 29 percent
  • No – 22 percent

Sample size of this poll was 894 owners of UK businesses with less than 10 employees. Survey was carried out online between 2nd-26th May 2017.

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