Until the COVID-19 crisis, London’s large self-employed workforce was growing rapidly. In 2019 around 15 per cent of jobs and 18 per cent of people in London were self-employed, compared to 12 and 15 per cent nationally.
A lot of work has been done to explain this growth in self-employment. Authors point to changing technology and industry structures, some of which are cyclical. These may include a lack of vacancies for employees since the global financial crisis of 2007-8, as well as a longer-term shift towards flexible employment and agile service delivery. 3
A key policy debate around the growth of self-employment is about whether it is a positive development that should be encouraged or not. Self-employment can offer freedom and flexibility, as well as the satisfaction that comes with running a business – and many workers are indeed generally happy to trade tax advantages for lower welfare protections.
Others see self-employment as a way for clients to reduce their wage and tax bill. 4 The lack of protections and safety net means self-employment has a dark side. It risks pushing living standards and wellbeing downwards – particularly in sectors where quality of work and pay are low, and workers tend to have little or no savings to rely on.
This debate has been the subject of some high-profile reviews – notably the Taylor Review of Modern Working Practices, 5 which focused on changes to the tax and benefits system that could be enacted by central government. However, we know much less about how businesses and city governments could support self-employed workers at a local level.
The coronavirus crisis has in many ways demonstrated the point that self-employed people are left too vulnerable to economic shocks. Many saw their work pipeline collapse overnight, and will end up losing at least a year’s worth of earnings.
This report focuses particularly on Londoners who are self-employed with low earnings, since they more exposed to the risks of a self-employed career. We look at how self-employment has been working for them, what barriers they are facing, and how these can be tackled. As more and more people work outside traditional employment structures – by choice or necessity – how can we deliver a better deal for self-employed people?
The report is based on analysis of surveys and literature on self-employment in London. We also used qualitative research, holding a focus group with 12 low-paid self-employed workers in November 2020. Participants were recruited from a social media call-out, and were screened to ensure that the focus group was diverse in terms of gender, ethnic background, sector and occupation. Participants included a videographer, cycle instructor, writer, actor, teacher, stage manager, producer, and healthcare worker. Our recruitment method made it easier to recruit from some sectors than others: therefore, in some areas where we lacked participants, we conducted expert interviews with organisations providing support to self-employed workers in that specific sector. These interviews also informed our policy recommendations.
We define self-employment as working flexibly with several clients rather than for a specific employer who pays a regular wage. As such, self-employment comes with different risks and benefits than employment: self-employed people may pay less tax, but cannot claim employment protections such as sick pay, maternity/paternity pay or pension contributions. They can also face other risks such as personal liability.
The experiences of self-employed people are varied. Amongst other factors, they depend on the legal status under which they operate, on whether they also receive income from employment, and on whether they work as sole traders or through a limited company.
The definition of self-employment is not always a clear-cut one. For example, in recent years UK government legislation has tightened the rules for operating as self-employed, in order to reduce the number of workers claiming self-employed status to lower their tax liability.
The distinction between employment and self-employment is also made more complicated by the growth of the gig economy, in which workers have generally been regarded as independent contractors. However, the debate as to whether they are employees continues. 6 Though they have flexibility over their working hours, the platforms they use to obtain work set their prices and allocate customers, and for this reason the Supreme Court ruled in February 2021 that Uber drivers are employees and as such are entitled to employee rights. As this is a matter for national regulation, these workers are not within the scope of this study.