03 March 2016

By Professor Mark Freedland

In May 2015, the researchers of the House of Commons Library identified the United Kingdom’s ‘self-employment boom’ as one of the key issues for the 2015 Parliament. They pointed to a growth of self-employment to a (then) ‘record high of 4.5 million in 2014’ (now apparently increased to 4.6 million), a growth which was ‘likely to reflect both temporary and permanent changes to the economy, together with government policy, particularly on tax and welfare’, and which meant that ‘currently around one in seven people in employment are self-employed in their main job’. They linked this to the growth of a ‘grey economy’ of tax evasion and pointed to ‘the implications of growing numbers of individuals with less predictable income and weaker job security’. (The same implications could also be drawn from the parallel and not unconnected phenomenon of the rise in zero-hours contracting for employment.)

This ‘self-employment boom’ and those implications are worrying to those who are concerned about the reach and integrity of our system of employment rights. Labour lawyers reflect this concern in debates about the proper definitions of the ‘employee’ and the ‘worker’, and about the control of ‘sham self-employment’ or ‘disguised employment’: terminologies which describe the evasion of those rights by the re-engineering of some employment contracts as relations of self-employment. Those for whom these are real and pressing issues will find few echoes of their anxieties in Julie Deane’s recently published ‘Self-employment Review’ (‘The Deane Review’).

The Deane Review is expressed to be ‘an independent report’ and there is no doubt that the author has formed and stated her own independent conclusions; the review is nevertheless one which Julie Deane says in her Foreword that she was chosen by the Prime Minister to conduct, and the report is published under the government imprint. The report draws quite heavily for its statistical basis upon the recently published BIS Enterprise Analysis research report ‘Understanding Self-employment’. The Deane Review, for its part, gives the strong impression that the purpose of setting it up and the effect which it has achieved has been to garner the views of self-employed entrepreneurs and present them back to the Government as an aid to policy formation in this area by the Government. Moreover Julie Deane, herself originally a self-employed entrepreneur and now the CEO of the Cambridge Satchel Company which she founded, is a declared enthusiast for the growth of self-employment: she strongly believes that ‘much of the growth seen over the last few years has been driven by this sector’ and that ‘the majority of the self-employed have made a positive choice to be so’ and ‘have found a good balance with work/life commitments and are often happier’ (Executive Summary, p 4). Furthermore, it is strongly evident that the main focus of this review has been upon the self-employed in the kind of higher skilled managerial or professional occupation in which Julie Deane is herself engaged. All the case studies are of that character, and virtually no attention is given, for example, to self-employed workers in the construction and hospitality industries where the traditional and continuing problems about self-employment have been specially concentrated.

In those circumstances, it is perhaps unsurprising to find that the labour lawyers’ concerns have received short shrift in her report. The report devotes chapter 3 to the subject of ‘Security and Peace of Mind’, and recognizes that ‘the decision to become self-employed is not without its own challenges and risks’ and that ‘working for yourself should not be confused with an easy option’ (page 17); but its identification of the risks to security and peace of mind – such as that of ‘volatility of income’ (p 18) – lacks a tone of urgency, and the ameliorations which are recommended are somewhat marginal ones:- the need for a more flexible type of mortgage, p22; the evolution and development of pension products specifically for the self-employed, p 24, the enhancement of the level of Maternity Allowance for the self-employed in the first six weeks, and a new Adoption Allowance for self-employed adopters (p 26).

The crucial topic of the legal employment status of workers described as self-employed is only briefly addressed on page 27 of the report, which expresses concern about the unclarity of the employment status of many groups of self-employed workers such as ‘farmers, taxi and cab drivers, those running their own businesses, freelancers and contractors', but does not question whether the categories of ‘employee’ and ‘worker’ are sufficiently widely drawn. The report is content simply to assert that ‘it is clear that simplification and clarification of a single definition for tax and employment law is highly desirable’. At a time when, for instance, the denial of employment status to Uber taxi-drivers is the subject of urgent controversy both in the UK and internationally, this does seem rather a lame conclusion to draw. (As to employment status for tax purposes, see the March 2015 Report from the Office of Tax Simplification; as to working for Uber, and ‘crowdworking’ more generally, see the recent Working Paper by Jeremias Prassl and Martin Risak.)

It seems all too likely that the Government will be content with that review; the purpose of this note is to draw attention to the agenda of concern which the Deane Report has in the view of this writer scarcely begun to address. At least it can be said that this report recognizes that the self-employed form an increasingly significant component of the working population who have ‘jobs’ and are ‘in work’, and are indeed very often in low paid and highly insecure work or jobs. It is highly important that this recognition should extend to a full reflection upon the labour law dimension of this state of affairs. There needs to be a serious and searching discussion of the access of the self-employed to employment rights, especially in the areas of freedom of association and collective bargaining, discrimination, health and safety, and working time, holiday pay and minimum wage regulation. This note invites a more general engagement with these questions than the Deane Report has provided.