The nature of employment in 21st century Britain, and the need for equitable government policy

The Chancellor’s response to the pandemic helped many businesses – but not all. This highlights that we need a better model of work and employment for the 21st century. The diversity in employment models is an economic strength. However, the Treasury, the TUC, most political parties, public-sector employers and most private-sector employer associations think with a “big organisation” paradigm, in which employees are paid salaries on standard terms, and get a range of benefits (a pension is usually the most important). This model is poor at dealing with the “self-employed”, a term in urgent need of redefinition. Around 15% of the workforce are now “self-employed”, and many of these received no government support in the pandemic. The number of micro-organisations (limited companies with a handful of employees, sometimes none), usually owner -operated, has grown rapidly. Often these pay their “employees” dividends, rather than a salary; there are some taxation advantages in this, but sometimes this is to avoid the overhead of a salary for which no funds are available until the business is successful. These owner-operators are usually treated as “self-employed”, but are they any more self-employed than, say, the CEO of Tesco? The Treasury seems to conflate such small businesses with sole traders, a different class of employee. The Chancellor has announced he is taking aim at the “self-employed” and their supposed taxation advantages; the IFS supports this. We have the paradox of large organisations trying to convert many of their employees into gig workers (although the Uber case may stop some of this), while the government insists, through its IR35 legislation, on making many external suppliers into internal (usually inferior) employees.

The whole thing is a mess, a patchwork of partial reforms with detrimental side-effects. Time to sort it out, starting with a blank sheet of paper.

 

 

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