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Self-employment has seen rapid growth since 2001, particularly among women, young people and those aged 65 and over.

This rise in self-employment has been seen by some as part of a wider trend towards low paid, insecure work, but the picture is far from clear. Some people indeed struggle to make ends meet. But, as Bright Blue research has shown, the majority of people, even those living in low income households, are attracted to, and have high job satisfaction in, self-employment as a result of the flexibility and professional fulfilment it offers.

The self-employed have historically had fewer employment rights compared with employees, justifying their lower tax liabilities. However, over the last 50 years there has been a convergence in their employment rights with the employed. Today, the self-employed are entitled to “over 99% of public spending entitlements” and “most welfare entitlements” according to Matthew Taylor,  author of the Government-commissioned Taylor Review into modern working practices. However, the balance between rights and responsibilities of the self-employed is a contentious issue, as the Chancellor’s failed attempt to increase Class 4 NICs in last year’s Spring Budget demonstrated.

The Taylor review was tasked – among other things – with examining this balance and recommending where the employment rights of the self-employed should be enhanced. There is a need to tackle gaps in current protections. An obvious area for reform is maternity pay. While self-employed mothers are entitled to Maternity Allowance, this is less generous than the Statutory Maternity Pay (SMP) employees typically receive. For self-employed fathers and adopters there exists no equivalent to the Maternity Allowance.

A second area for reform is pensions. Employees are auto-enrolled into their workplace pension and employer contributions provide an incentive to save. There is no such scheme for the self-employed and statistics show that the self-employed are much less likely than the employed to save. The Office for National Statistics (ONS) estimated that among those aged 35 to 54, 45.1% did not have any private pension wealth compared with only 16.4% for those employed. The Conservative Party committed to auto-enrolment for the self-employed in its 2015 and 2017 manifestos but is yet to provide detail.

The legal and tax definitions of ‘self-employment’ are different. This enables someone to be classed as a ‘worker’ in employment law but ‘self-employed’ for tax purposes. This enables ‘bogus self-employment’, where both employees and employers can minimise their tax liabilities. One potential solution the Taylor Review recommended is the introduction of a new category of ‘dependent contractor’ for those who work in the gig economy and are neither employees nor self-employed. ‘Dependent contractors’ would be entitled to certain rights – such as holiday and sick pay – but not all rights. This would, in effect, create a category of worker between the employed and self-employed with these workers contributing more in tax than the self-employed to cover the greater rights they will access. The government has initiated a further set of consultations on these proposals.

Despite obvious political sensitivities, it would be reasonable to ask the self-employed to contribute more in tax if their rights were to be enhanced.

Rohit Bansal is a Graduate Intern at Bright Blue. The views expressed in this article are those of the author, not necessarily those of Bright Blue.