Plans to push more self-employed people into pensions were unveiled today (11 July) in the government's 116-page review of working practices in the modern economy led by former Labour adviser Matthew Taylor.
The report has made seven recommendations, but here are five key takeaways that financial advisers should know about when talking to their clients.
1) The issue isn’t necessarily increased insecurity
Permanent employment as an employee still accounts for the majority of Britain’s total labour market – or 63 per cent as a proportion of total employment.
There has been a shift towards part-time working and self-employment – with 26.2 per cent choosing the former and 15 per cent choosing the latter.
But traditional full-time employment as an employee has only declined by 1.6 percentage points in the past 20 years and the report says increased flexibility in the labour market could have played a role in its success.
The key issue the Taylor Report identifies is an “imbalance of power between individuals and employers”.
The report stated: “Where employers hold more power than employees, this can lead to poorer working conditions and lower wage levels.
“This type of power could exist where individuals have little choice over who they work for – where there is a dominant local employer in an area or dominant employers of certain skills for example.”
The report points out that these issues can ultimately impact the whole country's economy.
2) The self-employed should get a pension
Mr Taylor called on the government to “explore ways to improve pension provision amongst the self-employed”.
He said this could be achieved through digital platforms and the move to more cashless transactions.
The report highlighted that as little as 27 per cent of self-employed individuals are putting money into a pension.
Mr Taylor proposed a number of solutions without necessarily endorsing any one, but he suggested that the government could auto-enrol the self-employed and administer it through the self-assessment process.
3) Tax should go digital
The report suggested that the government should make sure the self-employed have access to online tools which help them pay tax – even if they do not meet the minimum threshold.
At the moment HM Revenue & Customs Making Tax Digital programme is only available to those self-employed people with an annual turnover of more than £10,000.
But Mr Taylor pointed out that millions of the self-employed operating in the “gig economy” will have less than this.
The report said: “The majority of businesses want to get their tax right, but the most recent tax gap figures show too many businesses are finding this hard.
“In fact, over half (72 per cent) of those gig economy workers we surveyed said they would welcome an online tool to support them in paying the right tax.”
4) Flexibility is proving one-sided
While Mr Taylor found that labour market flexibility can be a good thing, there are issues when it is not reciprocated.
This arises when an employer demands flexibility from an employee but offers very little flexibility in return.