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Coronavirus: Why we need to support all self-employed people

Lydia Smith
Writer, Yahoo Finance UK
Britain's chancellor of the exchequer Rishi Sunak speaks during a news conference on the ongoing situation with the coronavirus disease in London. (Matt Dunham/Pool via Reuters)

The COVID-19 crisis has turned the world upside for everyone. Millions of people are sick or quarantined and worried about vulnerable loved ones, businesses have shuttered and many are out of work. It is a difficult time, to say the least – and particularly for those self-employed.

While some self-employed workers are highly paid, many live hand-to-mouth. And the majority have seen their income disappear in the space of just a few weeks because of the coronavirus pandemic. Small business owners, musicians, childminders, consultants and more have been left with nothing – and the future looks uncertain.

More than 5 million people work for themselves and the number has been rising gradually since the financial crash just over a decade ago. Yet despite this, government support for the self-employed appeared to be an afterthought – after chancellor Rishi Sunak announced his plan to subsidise the wages of employed workers.

Read more: Entrepreneurs 'falling through cracks' of UK coronavirus wage schemes

The self-employment income support scheme – a taxable grant worth up to 80% of earnings and capped at £2,500 ($3,100) a month for three months – is a welcome and essential lifeline for self-employed people. According to Sunak, the scheme will cover 95% of those who make most of their money from self-employment. But what about the rest?

The Institute for Fiscal Studies has warned millions will fall through the gaps in the COVID-19 wage subsidy plan for those working for themselves. In fact, 2 million people who are self-employed will not be protected. This is because they do not earn enough from self-employment to be eligible, they earn more than the £50,000 threshold, or crucially, only started working for themselves within the past year. Therefore, they will miss the threshold to prove their past income to receive wage subsidies.

“Inevitably, for schemes that had to be put together quickly and deliver support as fast as administratively possible, the temporary measures are not as well targeted as we would expect in normal times,” the researchers wrote. “Many of the self-employed will be left financially better off as a result of this crisis, while some will get no support at all.”

Those eligible for the grant will be paid a lump sum in June. For those who have lost all income pretty much overnight, then, the next few months will be tough.

And although the government advises those who can’t wait for the scheme to apply for Universal Credit, the system has been completely overwhelmed with nearly a million applications in the last fortnight. Under normal circumstances, there are around 100,000 applicants in any given two-week period. After a huge bottleneck of phone and application queues for new claimants, it’s likely people will have to wait five weeks for the first payment.

It is essential to better protect self-employed workers – and not just because it is morally right. During economic downturns, many businesses stop hiring and increase lay-offs, but self-employment jobs can continue. Two years after the end of the recession that began in 2008, the number of people in employment in the UK was almost half a million below the pre-recession peak. However, the jobs shortfall would have been much worse without a substantial increase in self-employment, the CIPD found.

Read more: UK government set to hand lifeline to 'one in three' self-employed workers

“The rise in self-employment is obviously good news in that it helps keep the lid on unemployment and will be an important source of the extra private sector jobs needed to offset large-scale public sector downsizing,” a report stated. “In this respect, more self-employment might also be interpreted as evidence of the kind of ‘get up and go’ entrepreneurial zeal that will drive the UK economy towardS a lasting recovery.”

Self-employment comes with a whole host of challenges, the most obvious is perhaps the precarious nature of living without a monthly salary. Despite this, though, being self-employed allows many women and single parents to continue to work and pursue careers while raising a family. According to IPSE, the number of freelance working mothers has also increased by 79% since 2008. For non-parents, the flexibility of self-employment vastly improves their quality of life by giving them a better work-life balance. It also allows people to work while caring for sick or elderly relatives.

Supporting self-employed people through the coronavirus outbreak isn’t just about protecting 15% of the working population from financial hardship. It’s about safeguarding the economy and making sure hard-working entrepreneurs, freelancers, gig economy workers and contractors – who may be window cleaners, hairdressers, builders, cleaners or gardeners – aren’t forgotten about and left to struggle on in silence.

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