As expected, the discussion document for umbrella workers claiming travel and subsistence was officially launched at this week’s budget. The PSC, Umbrella and Independent Professional’s sector has reacted in a negative manner…also as expected.
But is it just a case of sour grapes? Or will the discussion’s impact have a detrimental affect on freelancing and contracting in general?
Well, let’s just qualify one thing before we go any further. It’s only intermediaries supplying contractors who’ll be under SDC who the scrapping of relief will impact. For staff they supply who are deigned not under such close guidance, the reliefs will remain.
But that doesn’t appease IPSE. Chris Bryce, the association’s chief executive, was quick to point to the advantage that large businesses will now have against smaller, one-man band independent professionals.
Is the economy losing its flexible friend?
Often, contractors will travel the length and breadth of the country to provide their service. Even scouting a job can be a costly experience if the client needs to meet the contractor in person before making the hire.
Yes, this is an out of pocket expense for the individual, as is putting a roof over their head to carry out the assignment. But as they can, for now, claim both expenses as tax relief, the only detriment is that it’s an up-front expense.
The inability to claim that money back once the reforms come into play is what’s getting Bryce’s goat. I’m sure more than a few companies and contractors are none too chuffed, either.
In his example, Bryce quotes the likes of KPMG going up against a one-man band for the same assignment. The former could swallow the expense of getting their specialist to the client without discomfort. For the independent, those travel expenses could be the difference between making the job worthwhile them taking or not.
There’s also the danger of larger businesses monopolising the supply of temporary staff. This alone would be awful for the industry. But it’s the impact on the whole of the economy that has Bryce so concerned.
The flexibility other small businesses are getting used to, employing ad hoc staff for specific projects, could also be at risk. They may now face the choice of missing the chance to progress as a business or hire someone full time for what is in fact a temporary position. It’s not ideal.
Let’s hope that the rules are implemented with the care the IPSE chief believes is necessary to dampen these foreseeable negative affects.
There is a silver lining (but nothing to do with the budget)
PPH, the online digital freelance agency, has projected that as much as half the UK workforce could be self-employed by as soon as 2020.
This has been the prediction of the US for the last two years (at least on Google+ – keep up; where have you been?). The question was always going to be whether the UK would follow suit. Based on PPH’s figures and research, the answer is quite possibly in the affirmative.
According to their research, self-employment is growing faster than any other single type of employment at the rate of 3.5% per annum. REC‘s job reports for the last one-and-a-half to two years support that research.
The rate of people turning to self-employment has slowed down in recent months. Even so, 80% of respondents are on record as employing temps to overcome short-term issues or strategic implementations.
Do the two, more freelance vs less umbrella contracting, add up?
I’ve seen the story from both sides. IMHO, online freelance work will, in no way even close, take-up the slack of the hole left by umbrella contractors limited to working locally.
Freelancing from home is a great way to fill time between assignments. But you expend so much time bidding on projects that you have to increase your hourly rate to compensate.
You cannot issue standard job responses, either. Companies who use online freelance agencies are, in the main, more savvy than you think. They can spot a generic job application before the digital ink is dry on the proposal.
The problem then, for the freelancer, is that your increased rate (which is only a reflection of what you should be earning) excludes you from doing business with companies on a tight budget.
Son, you’re on your own
And the proposal problem’s before you even start to consider:
- the lack of support sites like PPH give the freelancer, siding with the client always (yes, read the comments from ‘sellers’ on their blog);
- the overall value of a digital project and a client’s perception of the work involved compared with the exponentially greater value of turning up on site to complete your assignment;
- you are on your own, offering proposals for a job with only your [digital freelance agency] profile as a reference;
- self-employed rights – the freelancer has none. Moreover, they’re exposed to the ability of the neurotic client or agency’s tendency to say, “I’m the paymaster; you do as I say or pay the forfeit”.
In contrast, brick and mortar recruitment agencies tend to know which contractors are the best fit for their clients’ work. They know the laws that govern them, including mediation without bias, which don’t quite make it to online sites.
Also, PPH, Upwork, etc. – they can become a Dutch auction in a cattle market in no time at all. No one from the sites get involved in setting the price. Nor do they ensure that the price for the job is a liveable one. Nor that the freelancer is not, in fact, undercharging for their services.
So, yes. 50% of the UK’s labour market may be self-employed by the time 2020 gets here. But the way the Treasury is headed, those with the real skills companies need will have returned to full time employment. That’s because the benefits of running a limited company has also taken a massive hit in this budget.
Those left freelancing? They’ll not be the cream of the crop, by any stretch.
That’s neither good for the temp industry nor the economy. It’s such a shame as the prospects for both appeared rosy until the manure hit the fan. Best duck, quick.
