Self-employment in the Covid crisis
The Supreme Court began once again to consider the thorny question of employment status on 21 July, as Uber submitted its case against the appeal court’s ruling that its drivers are “workers”. But it followed four months in which insecure self-employed and freelance workers were among those hardest hit by the Covid lockdown. Fortunately – and perhaps surprisingly – an estimated 385,000 are trade union members, and their unions have thrown themselves into the fray.
Having lobbied hard for the Coronavirus Job Retention Scheme (furlough, which provides support worth 80% of pay capped at £2,500 per month), they helped secure a similar deal, the Self-employment Income Support Scheme (SEISS).
While furlough, aimed principally at the UK’s 28 million employees, provided support for 8.7 million, nearly half of the self-employed (2.4 million) claimed an SEISS grant. That, coupled with a record quarterly decrease of 178,000 in self-employment (to 4.85 million) confirms how vulnerable the self-employed have been.
But campaign group Excluded UK estimates that 3.1 million have “fallen through the cracks” between the SEISS and CJRS schemes, most of them self-employed of one type or another. The whole experience has focussed attention once again on the way that workers’ status is assessed for tax purposes.
Among those excluded were:
• 1.175 million earning less than 50% of their income from self-employment;
• 710,000 limited company directors;
• 390,000 “PAYE freelancers” – a distinct contingent within the workforce (see box)
• 225,000 self-employed earning more than £50,000 in trading profits; and
• 200,000 newly self-employed.
PAYE freelancers
Exclusions from government income support during the Covid crisis have drawn attention to ambiguities that exist between the self-employed and employees. In particular, “PAYE freelancers” are extensively used in some sectors, when HM Revenue and Customs says strictly in tax terms there is no such thing: “You’re either employed or self-employed for tax purposes and everyone paid PAYE is employed for tax purposes”.
Entitlement to CJRS and SEISS has been decided primarily on whether a worker is paid through Pay As You Earn (PAYE, the HM Revenue and Customs system where employers collect income tax and National Insurance “at source”) or by declaring their business earnings to HMRC:
• employers were able to furlough “employees” on any type of employment contract (including part-time, agency, flexible or zero-hours) provided that they were employed on 19 March 2020 and on PAYE payroll on or before 19 March 2020. It also depended on “real time information” (RTI) being submitted in time; and
• self-employed workers wanting to qualify for SEISS had to have traded in the tax year 2018 to 2019 and submitted their self-assessment tax return on or before 23 April 2020 for that year; traded in the tax year 2019 to 2020; intend to continue to trade in the tax year 2020 to 2021; and have trading profits that were no more than £50,000 and at least equal to their non-trading income (based on their 2018 to 2019 self-assessment tax return).
So where do freelancers and PAYE freelancers fit in? According to the NUJ, media employers have a very well established practice of engaging genuinely self-employed workers (self-assessed for tax purposes) but they also take on PAYE freelancers, who are taxed as employees but don’t have employees’ rights. It’s a practice the union traces back to the 1980s.
In a survey of its freelance members, 20% were PAYE freelancers. Getting these members retained or furloughed, on grounds that they are in a PAYE scheme, has been a priority: “The dehumanising effect of how PAYE freelances have been treated in this crisis cannot be overemphasised and to then find themselves ineligible for government support under the various Covid-19 related compensation schemes has left them in financial crisis and treated as second-class citizens”.
Part of the problem is that the tax and employment regimes use the same language but mean different things. For employment rights purposes, the self-employed are effectively defined by being neither “employees” (working under a contract of employment) or “workers” (with a contract to perform work personally for another party – as long as that’s not a “client or customer of any profession or business undertaking carried on by the individual”).
These definitions are set out in section 230 of the Employment Rights Act 1996, and have been tested at courts and tribunals. They’ve been central to legal challenges at companies like Uber, Pimlico Plumbers and CitySprint, as they determine whether workers described as self-employed should lose out on statutory rights like the National Minimum Wage, statutory sick pay (SSP) or pension auto-enrolment (see LRD’s The Law at Work and Case Law at Work).
But if you look at the government’s web page on “employment status”, it defines the self-employed as workers who “aren’t paid through PAYE, and … don’t have the employment rights and responsibilities of employees”. Yet furlough scheme guidance says there are some workers who are “paid via PAYE, but who are not necessarily employees in employment law”.
HMRC only recognises employees and the self-employed. Its Check Employment Status for Tax tool (CEST) and Employment Status manual consider employment status in great detail, but only for tax purposes.
The employment rights remit falls to the Department for Business, Energy and Industrial Strategy (BEIS). Its advice on contract types and employer responsibilities says that if an employer hires a freelancer, consultant or contractor it means that:
• they are self-employed or are part of other companies;
• they often look after their own tax and National Insurance contributions (NICs);
• they might not be entitled to the same rights as workers, such as minimum wage; and
• they are still responsible for their health and safety.
In evidence submitted to the Taylor Review on Good Work, Citizen’s Advice Newham showed how many employees and employers are unaware they don’t “decide” what an individual’s employment status is, it’s a factual assessment of the nature of their relationship.
But there are also employers who deliberately circumvented the rules “in full knowledge of how they work”, usually by drafting a contract that purports to create a contract for self-employment.
If this seems confusing, it is. A 2017 parliamentary Select Committee enquiry on self-employment and the gig economy concluded that while the different entitlements of employees, workers and the self-employed are clear, “we heard much to indicate, however, that the boundaries between the categories are not”; a wide range of practices “blur the line” between employment and self-employment.
Unions weigh in
Unions with the most self-employed members have been well placed to respond. The biggest concentrations are in health and social work (72,000); arts, entertainment and recreation (58,000); education (53,000); professional, scientific and technical industries (36,000) and information and communication (31,000)(ONS estimates).
The College of Podiatry represents two thirds of the UK’s 15,000 podiatrists (half in private practice) and has almost 2,800 self-employed members. They saw delays and loss of income under the SEISS scheme, while many business owners among them also had employees’ furlough to manage (unable to work even for urgent patients). The union provided support throughout and saw an increase in membership.
Journalists’ union the NUJ says one-third of the UK’s creative workforce are self-employed, which is much higher than the national average of 15%, and unions in that sector have detailed evidence on exclusion:
• in a Musicians’ Union survey 38% did not qualify for either the SEISS or furlough scheme;
• in a survey by performers’ and creatives’ union Equity, SEISS only provided grants to around 60% of members; and
• in a survey by media and creative industries workers’ union Bectu, 82% of those operating as limited companies didn’t think they could access the SEISS scheme, and neither did 45% of sole traders.
Bectu says a huge proportion of its members “float between PAYE and self-employment” but only 33% of PAYE feelancers reported being furloughed. Unions, including the NUJ, have been successful at getting some PAYE freelancers furloughed (except at the BBC, see box) and where that has been refused the NUJ has taken a number of unfair dismissal claims.
Pamela Morton, NUJ national freelance organiser, said: “There is no justification for these self-employed individuals to be purposely excluded in the way that they continue to be, many simply for the way they have been taxed”.
The BBC attracted huge criticism for its decision not to furlough its PAYE freelancers, but says it was advised by the government that the BBC public service was not eligible to apply to the CJRS (something the unions contest).
Instead it says it has focused its efforts on developing support packages from its own resources, honouring the value of cancelled work through to the end of May (capped at £3,000 per month). In April and May, over 60% of its PAYE freelance population (some 2,500 individuals) were still being engaged in employment.
A BBC spokesperson explained: “PAYE freelancers receive statutory benefits rather than employee benefits as they aren’t part of the permanent workforce. These include statutory sick pay and maternity/paternity amongst other entitlements that those who are self-employed for tax purposes (given gross payment) are not entitled to. To reflect this differentiation, we have pay frameworks to ensure PAYE freelancers are paid a higher day rate than their equivalent employed roles to ensure they receive the benefit of flexibility and equivalency in compensation.”
It has also used its own hardship fund, contributed to other hardship funds, opened up its Employee Assistance Programme and remote GP service to freelancers, and worked with other broadcasters to press for changes to the government schemes.
Equity, together with Bectu, has launched a campaign on the issue, #NoCreativeLeftBehind. A number of unions, including Community, supported Pregnant then Screwed’s campaign to persuade the government to make amendments to the SEISS scheme.
Changes to SEISS proposed by the NUJ include:
• basing it on sole trader turnover, not net profit;
• taking account of specific expenses which it says can frequently be greater than the sum identified as profit;
• not excluding individuals in their first year of being self-employed;
• supporting self-employed individuals who have been forced to become self-employed through redundancy and casualisation; and
• scheme assistance for those who have had time out for having a baby, caring duties or illness, and also maternity (women are disproportionately affected).
Unions have been quick to praise the £34 million Self-Employed Hardship Fund introduced by the Scottish government. Managed by Scottish local authorities, it is allocating £2,000 hardship grants to the newly self-employed who are not eligible for the SEISS scheme.
Not understood
Equity has concluded that “the financial reality of life as a freelance or self-employed creative worker is little understood by policy-makers”. And that shows up in the ambiguities surrounding the tax system and employment status.
Andy Chamberlain, director of policy at IPSE (the Association of Independent Professionals and the Self-Employed), told Workplace Report: “The coronavirus crisis has shed a light on the glaring differences between employment status and employment status for tax. While they are not strictly self-employed for tax purposes, there are many people out there who consider themselves freelancers, have several different clients and who do not have guaranteed hours. These people often term themselves ‘PAYE freelancers’.”
“Although PAYE freelancers and others on zero hours contracts can be furloughed through the CJRS, in practice many have fallen through the cracks because they do not have guaranteed hours. Again, because they do not have guaranteed hours, many do not in practice receive sick pay either. This grey area group often struggled before the coronavirus crisis, but the lack of support for them in recent months has highlighted their plight. More clarity about the status and rights of people in this group is urgently needed.”
Agenda
Unions working for and with self-employed members have had to adapt their approach, although that has not held them back in the Covid crisis. Hardship funds, mental health support services and help recovering unpaid debts and fees have been part of their response.
Bectu says many self-employed workers have self-employment “thrust upon them” and would prefer a permanent or fixed-term employment contract, but are not allowed to have one by employers who control the industry.
Campaigns against “bogus” self-employment have been a consistent theme for the trade union movement as a whole, from UCATT (now part of Unite) in the construction industry to the IWGB in the gig economy.
Community recruits self-employed members across a wide range of industries and believes it is important to address them in their own right. Kate Dearden, head of research, policy and external relations, told Workplace Report:
“It’s not just about how can we get them into more secure employment, a lot of self-employed workers have chosen that way of working in preference to traditional employment. The challenge is to see how can we make it better for self-employed workers, accepting that they are comfortable with self-employment (despite the often long hours and lower pay) and respecting their autonomy.”
Community’s offer, which it keeps under review, includes:
• access to all member benefits (discounts, savings, bursaries);
• being part of a campaigning union, making self-employed voices heard;
• weekly Zoom drop-in sessions for new self-employed members (and help with self-assessment tax returns, legal advice, and health and safety assessments);
• support with debt recovery and payments/money owed; and
• flexible on-line learning and training.
It works with like-minded charities, mentoring, and lobbying around Access to Work and better benefits, and behind-the-scenes policy work (on the Department for Work and Pensions’ retirement savings working group, or supporting disabled self-employed workers).
The NUJ told Workplace Report that union work with freelancers can be difficult and very “individual”. Even in workplaces with an NUJ chapel, they are more likely to approach the union’s freelance officers when they need assistance (although at times may themselves adopt a more collective approach).
The union publishes a freelance rates survey, but recognises that employers are not keen on the idea of collective representation. Its freelance work therefore focuses more on services than organisation, although it does have an agreement with the Guardian newspaper on minimum fees.
Casualisation
The growth in self-employment, up until the pandemic, has clearly been part of a broader trend towards casualisation. In the education sector, UCU believes it may have a small number of genuinely self-employed members who may benefit from the SEISS scheme.
But it is also aware of many members on casualised contracts who the employer does not regard as employees or workers but who will not qualify for SEISS: “If your employer is claiming that staff are genuinely self-employed then ask then to confirm that they would be eligible under this scheme – if not the employer should be covering lost income if staff are unable to work at home.”
Teachers’ union NASUWT sees the Covid crisis presenting particular problems for its supply-teacher membership: “Many agencies require supply teachers to sign up to umbrella companies through which they are paid and taxed. Some umbrella companies structure supply teachers’ pay in such a way that they are paid at national minimum wage and the rest of their pay is deemed to be a ‘bonus’.
“Some have used this as a way of seeking to furlough supply teachers at only 80% of the minimum wage, rather than their full wage. We have challenged such cases and as a result of lobbying to the government the guidance for agencies was changed”.
Working with employers
In the creative industries, Bectu says film companies have been “hugely collaborative”, trying to get members meeting on Zoom, drawing up common guides on when it would be safe to start back up, looking at tracking technology and testing, abiding by the rules. It’s a pragmatic approach, because members know how the job can be done safely, highlighting the risks, and even drawing up guidelines for themselves.
The union has also been advising government and collaborating with groups like Freelance UK TV, Sharemytellyjob, Women in film and TV, Parents in film and TV. Workers in the “unscripted” sector (like documentaries, comedy, news and sport) who recently set up a TV Freelance Taskforce Facebook group are also now joining a new Bectu branch.
Its six-strand Freelance New Deal covers employment rights and tax, income protection and job security, better management, welfare, negotiating terms and conditions, equality and diversity. Priorities identified by its reps include:
• an end to unpaid overtime with strict contractual rules on the length of working days that are paid and standard rates and agreed overtime terms;
• agreed union rates with no ‘buy out’ deals forcing you to work extra hours for no pay, ending the gradual shift over recent years towards longer working days with 15 hour days being the norm in the worst-affected departments; and
• respected industry ratecards where freelancers working as researchers and runners can’t be pressured to work on or below the legal minimum wage-rates.
Bargaining
Some unions have comprehensive collective bargaining arrangements covering the self-employed. Independent employers in cinema and TV (represented by Producers Alliance for Cinema and Television, PACT) seem to be willing to treat everyone the same way, on a goodwill basis, but also because it is efficient, “streamlining” their engagements.
Bectu’s Film Artistes Association branch (representing background artistes) recently negotiated an updated three-year pay deal, with annual pay rises of 2%, which it aims to have applied at all productions within 40 miles of Charing Cross. Negotiations official Emily Collin said: “We are hopeful that when returning to work after lockdown, these increases will help our members mitigate the loss in income which many have suffered during the pandemic”. It also provides that:
• night rate will be increased to time and a half (previously paid at time and a quarter);
• holiday pay, overtime, meal break penalties and shift call rates (all based on the basic daily rate) will rise by 2% for 2020 to 2022;
• holiday pay at 10.77% will now be added to overtime rates, including meal break penalties, for the first time, and there’ll be holiday pay on public holiday rates;
• “non-performance call” rises from £35 to £46.35 (half of basic day rate);
• supplementary fees increase (for example, a haircut and change of clothes, rises from £12.50 to £20);
• travel allowances will be linked to Transport for London annual rate increases. For 2020, all travel allowances go up by 2.8%, and any future uplifts will also apply; and
• meal break allowances (where catering is not provided by productions) increases in line with the applicable HMRC guidelines – £5 for breakfast, £10 for lunch and £25 for dinner.
The FAA agreement is only one of several negotiated by PACT with Bectu, Equity, the Writers’ Guild of Great Britain, and Directors UK. These are often more detailed than a normal collective agreement, addressing “behaviours” like blind casting and nudity. Some set minimum rates, others set minimum terms and conditions (like a standard nine-hour day).
But those agreements are not a substitute for more urgent action. John Barclay, head of the Recorded Media Department at Equity, said: “This unprecedented situation is one which the terms of the collective agreements with the broadcasters and PACT were not designed to address”. The union has therefore been working with all of its negotiating partners to negotiate emergency payments, and longer-term holding arrangements (to maintain contracts).
Beyond the pandemic
When the pandemic is over there may be lessons to be learned about tax and employment status, but there could also be pressure to equalise National Insurance payments. If that happens, Community says, it should be matched by improved rights like an entitlement to statutory sick pay.
Self-employment will also be high on the agenda thanks to “IR35” rules on “intermediary” companies (like a personal service company, limited liability company or “loan out” company). These were due to be extended to the private sector in April, and require employers to prove that someone would be genuinely self-employed (and not an employed earner) if their personal service company (PSC) arrangement was taken away.
Bectu, A ‘New Deal’ for freelancers and precarious workers in the creative industries (https://bectu.org.uk/get-involved/a-new-deal)
Bectu, Self-employment Income Support Scheme (https://bectu.org.uk/topic/self-employment-income-support-scheme)
Community, We are the voice of the self-employed (https://community-tu.org/who-we-help/freelancers-and-self-employed)
Equity, Available support: a quick guide (https://www.equity.org.uk/about/coronavirus-advice/available-support-a-quick-guide)
IPSE, Coronavirus Report (https://www.ipse.co.uk/coronavirus-hub/coronavirus-report.html)
Musicians’ Union, Taking Action to Protect Musicians (https://www.musiciansunion.org.uk/Home/Advice/covid-19/Taking-Action-to-Protect-Musicians)
NUJ, #ForgottenFreelances: as the scheme to support freelances goes live, a third of self-employed journalists could miss out (https://www.nuj.org.uk/news/forgottenfreelances-as-the-scheme-to-support-freelances-goes)
NUJ, NUJ welcomes Covid-19 aid scheme changes for self-employed parents (https://www.nuj.org.uk/news/forgotten-freelances-mps-back-nujs-plea-for-paye-freelances)