From understanding expenses to starting a limited company, our downloadable business guides can help you.
The UK is home to 5.4 million business owners – a fact politicians are (we would hope) very much aware of. Despite making up around 15% of the workforce, self-employment has accounted for nearly half of the increase in total employment since the recession.
The Government announced an independent review last July which was finally released last week, highlighting the contribution the self-employed make to the UK economy and how they can be helped. With growing unrest surrounding policies affecting SMEs, any advice for the Department for Business Innovation & Skills on how best to drum up some support is very timely indeed.
Developed by entrepreneur Julie Deane OBE, (founder of The Cambridge Satchel Company), the document yields a giant wad of stats and findings, but probably won’t be bringing home any literary awards. In a nutshell though, the major recommendations it came to were as follows.
Learning about finance, cash flow, bookkeeping and taxation would benefit many adults regardless of their employment status, but this information is lacking from our Curriculum. Receiving and processing this information at a young age would prepare people for future self-employment.
The review criticised the GOV.UK information hub, stating the Government needed to review how well it currently signposts the self-employed to available resources.
To reflect the increase in self-employed people, there needs to be a wider range of financial solutions, from mortgages and insurance to pensions. Deane adds that “the financial institutions that choose to address this need stand to benefit enormously”.
A particular noted concern was that self-employed people starting or extending a family are not given the same support from the Government as those who are regularly employed.
It was proposed that the level of Maternity Allowance provided to the self-employed in the first six weeks should be brought in line with the Statutory Maternity Pay received by regular employees (with similar amendments for Statutory Adoption Pay).
When new policies are devised, an Impact Assessment is carried out to calculate the impact they will have on different sectors – but this (to the chagrin of those surveyed) does not currently include self-employment.
In addition, the description of ‘self-employed’ applies to a wide variety of individuals and sectors and there is currently no clear clarification of the employment status, leaving people who would fall into this category feeling underrepresented.
Overly complicated legislation and administration is a burden for business owners and needs addressing with less jargon. Tax, in particular, was described as “an administrative burden, a barrier to growth, and an issue that could benefit from improved simplicity and better advice”
Deane called for better communications of the whereabouts and accessibility to shared work spaces, going as far as proposing that such spaces could be created in underutilised libraries and community centres.
With the blink-and-you’ll miss it nature of technology in today’s world, it is up to trade and professional organisations to keeping members up to date with technological advances, says the review. It also advocates combining ‘disparate age groups’ and again, underutilised existing community resources to get business owners up to speed with advances in technology so they aren’t left behind.
Further to the recommendations, some key conclusions were drawn from the collected data:
A very significant majority (84%) of those in self-employment considered being self employed a positive choice, compared with being a regular employee. 7% on the other hand said they were worse off as they are.
Less than a fifth of those surveyed planned to give up self employment in the next three years, with over half of them citing retirement as the reason. Notably though, around two fifths of those who anticipate leaving self employment behind (making up 6% of all those in self-employment) said they will seek a regular employee job, most commonly under the belief that such a job would offer more security.
An encouraging 52% of those surveyed opined that they are better off financially than they would be as a regular employee. A third reportedly believe they are financially worse off, although most appear to have made a conscious choice to prioritise other factors, with 74% of them saying their life was better overall.
When asked about the main advantage of being your own boss, less than 10% of respondents answered earning more money. The benefits reported most often – unsurprisingly – were having flexibility, independence, and job satisfaction.
“Wellbeing amongst the self-employed appears to be at least as positive as it is for employees” claims the review, “so there is no obvious problem with self-employment as a labour force choice and little evidence that conditions are getting worse”, although the bulk of this study took place before the implementation of auto-enrolment and dividend tax changes, so perhaps this conclusion is somewhat time-sensitive.
56% of those asked said they experienced a ‘big problem’ in at least one area, but the area specified varied. Not getting paid when ill or taking time off was a big problem for 30%, and 26% had a big problem with not being able to save enough for the future.
Most worryingly, a fifth of respondents said not having enough customers or work was a big problem, and just over 30% indicated that their earnings from self-employment do not allow more than a basic standard of living, or that they were reliant on benefits or tax credits.
The RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) and others have raised particular concerns about the extent to which being self-employed may be making it difficult for people to get mortgages. The research found that around half of those applying for a mortgage in the last 5 years felt that being self-employed caused difficulties with their mortgage application.
Overall, these key findings probably won’t cause too much of a shock for the experienced micro-business community, but those who will gain the most understanding from it will hopefully be the Government officials who work on legislation.
Crucially, this research also gives us even more vital and up-to-date data to cite when meeting with MPs as we continue to stand up for micro businesses.