The UK’s freelance community of more than 5 million people have a vital role to play in the future of the economy but have been some of the hardest hit by COVID-19 through a sudden loss of business opportunities. Their entrepreneurialism, agility and propensity to innovate will be key assets as the UK looks to recover and grow. However, the pandemic has brought to light just how vulnerable this part of our workforce is and the importance of doing more to support them.

The Self-Employed Income Support Scheme is estimated to have excluded 3 million self-employed workers across the economy as a whole1 with many of these being personal service company directors, PAYE freelancers and the newly self-employed in the creative sector. Securing fairness in the benefits and social security for self-employed workers, and incentivising and enabling entrepreneurs to start their own portfolio and business, is crucial.

Working on a freelance basis provides significant benefits to individuals and businesses through allowing the development of expertise across a wider variety of work and projects. Freelancers are just as likely to go through the same major life events as others in the UK but are unable to receive the support and time from government that they need to properly manage these situations. In particular, freelancers are provided with minimal maternity pay, are not entitled to paternity or adoption pay, and are not provided with compassionate leave or carers’ leave.

Moreover, in sectors such as the creative industries, work as a freelancer is intermittent and there are gaps between finishing one project and finding the next requiring an individual’s specialist skills. This outbreak has shown that it is imperative that we create greater financial resilience among our freelance workforceto ensure that they are able to withstand income shocks and continue their vital role in sharing their expertise across the economy and boosting productivity.

Tailored Business Support

It can be very challenging for many businesses to reach their full potential without dedicated business support (incorporating mentoring, grants and advice) and this is a particular barrier for the self-employed who do not have the luxury of a large team to help them plan the development of their business. Such challenges can be exacerbated within certain sectors such as the creative industries where a combination of intangible IP and a frequently innovative rather than demand led business model can make it difficult to access finance or investment.

Given the lack of dedicated options for the self-employed among existing government sources of business support, it is vital that a new programme is created to guide the self-employed workforce to recovery from the severe impacts of COVID-19. Such a programme should seek to both signpost financial resources open to individuals as well as provide mentoring, advice and resources to support freelancers to adapt their business models to highly changed circumstances. In doing so, government should work with bodies representing freelancers across the economy to ensure that business support is not only enhanced but is made accessible to freelancers who may often lack the time and resources to engage with these services.

Targeted business support can make a significant difference in enabling the self-employed to boost the UK’s economic recovery and ensure that there is not only business growth but also the development of resilience to future risks.

Access to the training and skills revolution

The pandemic has refocused attention on the issue of training and skills. The need for flexible and remote working places a premium on digital skills which will become increasingly valuable. Moreover, a strong recovery necessitates businesses and individuals taking the opportunity to grow their expertise and becoming more highly skilled. This will be particularly important for young people facing a challenging job market with far greater competition than before the outbreak.

It is vital that the self-employed do not miss out as part of this renewed focus on training and skills. New skills and qualifications are a gateway to higher earnings and career progression for the self-employed, but finding the time and money to undertake training is difficult. The government’s skills and apprenticeships system has traditionally been overly focused on traditional employees and does not account for the training needs of the self-employed. Only 12 percent of the UK’s solo self-employed have received job-related training in the last three months, compared to 26 percent of employees.

One way in which this can be achieved is to make the cost of training and skills development tax-deductible for the self-employed. This would enable freelancers, particularly in sectors where demand has slowed or disappeared, to gain new skills and adapt their business offer to new markets.

Fast-track plans to tackle late payments to freelancers

The last thing freelancers and small businesses need during the current crisis, when cash flow is their top concern, is to lose time and money chasing late payments.

Research from IPSE has shown two-thirds of freelancers have experienced late pay and it is regularly cited as one of the biggest issues for self-employed workers. Lengthy payment delays can cause talented, profitable businesses to fold and this impact is particularly acute for the self-employed. Individuals make significant upfront investments to make their businesses successful but in doing so they often don’t have the financial reserves to be able to cover long cash-flow gaps.

One way in which this issue could begin to be resolved is for the government to advance previous measures it has announced and provide the Small Business Commissioner with more resources and powers, including fines and the ability to compel companies to attend mediation. Such action will be vital to protecting freelancers, boosting the UK’s productivity and incentivising entrepreneurship.

Maintain flexibility in Universal Credit

The suspension of the Minimum Income Floor has been a vital source of support for the freelance

workforce during COVID-19 given the sudden impact on incomes and revenues. In order to maintain the long-term resilience of the self-employed within the economy, government should start to consider removing the minimum income floor on a permanent basis.

However, in the meantime, we would recommend the following changes to the operation of Universal Credit:

  • Extend the start-up period where the Minimum Income Floor is suspended from the current 12 months to 3 years, on the basis it normally takes 3 years for a business to get up and running and generate profit.
  • Change the Minimum Income Floor assessment to be carried out on a quarterly basis. This will enable the system to work for those whose monthly income is more volatile and who are not paid regular or fixed amounts every month in arrears.

Enabling freelance saving

Greater financial resilience is vital for freelancers in supporting themselves against future economic shocks and in managing the intermittent nature of specialist freelance, project-based work, particularly in sectors such as the creative industries. This goal could be supported by government through the creation of a savings product designed specifically for the self-employed. Products such as the Lifetime ISA have made a significant contribution to incentivising saving for a new home and retirement. A similar tax-free savings product for freelancers could use financial bonuses to encourage saving while being more flexible in enabling withdrawals where necessary to mitigate the risks and intermittent nature of freelance work.

Moreover, as more and more freelancers look to retirement, as with the general population, it is key that action is taken to protect their subsistence through old age. We must ensure that in the absence of auto-enrolment onto a workplace pension that a greater number of freelancers are protected by taking out personal pensions. Enhanced government communications and incentives for freelancers to open a pension or start to increase their pension contributions would make a significant difference to freelancers’ income security and the long-term health of the UK’s public finances.