Auto-enrolment 

Gig economy workers lose £182m in pensions

Gig economy workers lose £182m in pensions

Workers in the gig economy could be missing out on £182m of employer pensions contributions annually, according to figures from Now: Pensions.

The workplace pension provider calculated this value by considering the auto-enrolment 3 per cent rate that becomes the minimum for companies to pay into their employed workers pensions by April 2019.

The Work and Pensions and the Business, Energy and Industrial Strategy committees published yesterday (20 November) a joint report and a draft bill to “close the loopholes that allow companies to use bogus ‘self-employment’ status as a route to cheap labour and tax avoidance”.

Giving employees a presumed ‘worker by default’ status would help ensure firms are not exploiting staff for cheap labour, the document stated.

This would require these firms to prove their workers are self-employed, reducing the number of staff enduring the “unacceptable burden” of expensive and risky court cases to obtain their rights, according to the report.

Adrian Boulding, director of policy at Now: Pensions, said giving these employers a worker status “will mean that a greater proportion will have the opportunity to save into a workplace pension helping to improve their quality of life in retirement."

Currently, these 1.3 million workers -  according to estimates from the Chartered Institute of Personnel and Development (CIPD) - have “few rights and are entirely excluded from the auto-enrolment programme due to their self-employed status,” Mr Boulding added.

He said: “For a full-time worker in the gig economy, active for 30 to 40 hours a week and earning a typical £10 per hour, they would gain between £300 and £400 a year of pension contributions from their employers.”

However, the research undertaken by the CIPD found that full time gig workers are the minority.

Three out of every five have a traditional job as well, and are simply using their gig earnings as a top up.

Mr Boulding said: “Part-timers in the gig economy will find the auto-enrolment rules are stacked against them.

“They would need to earn £10,000 a year at their gig job to get auto-enrolled, and the rule that excludes the first £5,876 of annual earnings from pension contributions will be applied twice, by both their traditional job and their gig work.

“Not only that but, as one in five gig workers have been in their current job for less than three months, their employer can postpone paying pension contributions until they reach that point.”

The government is currently reviewing auto-enrolment, with a report expected to be published before the end of the year.

Pension minister Guy Opperman has recently confessed that “there is no simple solution” for including self-employed people in auto-enrolment.

According to Tom McPhail, head of policy at Hargreaves Lansdown, only around one in 10 self-employed people are currently saving in a pension for their retirement.

He said: “This is in stark contrast to employees, over eight million of whom have recently joined a pension thanks to the workplace auto-enrolment scheme.

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