When Chancellor Philip Hammond unveiled his Spring Budget earlier this week, including the government’s plans to increase the National Insurance contributions made by self-employed workers, the suggestion that ‘the gig economy’ could be under threat was realised; within this, we include the freelancers that fill the marketing industry. The tax changes will see class 4 NIC rates increase from current levels of 9% to 10% next year and 11% by 2019, a clear stand against the freedoms of the self-employed and for many, a hint towards further changes.
Alongside this, there is increasing pressure on the government to examine the rights of self-employed individuals, with commentators demanding that they benefit from ‘workers’ rights. This contentious issue is at the forefront of policy makers’ minds following a significant legal ruling against Uber, but marketers must realise how this could impact them as well.
The future status of freelancers
Self-employment allows freelancers to offer their services to a wide number of agencies on highly flexible terms, removing the need to commit to a fixed contract or base oneself in a physical office space. This flexibility, however, is likely to be compromised by the two prong attack we are witnesseing on the self-employed: the Uber ruling and the Spring Budget tax increases.
The court ruling on the employment status of Uber drivers means that many freelancers risk losing some of the main advantages associated with self-employment, such as the choice of work, freedom of hours, location and uninhabited holiday time. As such, these individuals might be tempted to pursue a permanent position with an organisation, capitalising on the benefits provided to full-time workers which cannot be accessed by freelancers: paid holiday, sick leave and receipt of the minimum wage.
For many freelancers, the combination of more taxation and the threat of being considered a ‘worker’ may mean it is more difficult to operate on their own terms, having to become much less selective in the work which they take on as a result.
What does this mean for agencies?
Freelancers provide agencies with a cheaper, more flexible alternative to permanent staff. Moreover, the specialist knowledge provided by freelancers lends itself to the demands associated with the project-based work done by the majority of creative agencies.
Because of this complementary relationship, it is not uncommon for companies and freelancers to become dependent on one another, to the extent that it is sometimes difficult to distinguish between a self-employed recruit and a permanent member of staff within an agency.
This symbiotic relationship is likely to be impacted by the change brought about in the Budget. If a freelancer does choose to pursue full-time employment, they are likely to first contact the company with whom they have developed a strong working relationship. Naturally, this places said agency in a difficult position. Recruit the freelancer on a permanent contract and they will have to acquire the added costs and commitments associated with the employment of a full-time worker; reject the
freelancer and they risk damaging relations with an individual who has played a significant role in the prior success of their organisation.
What for the future?
While it might still be too early to begin making predictions, we must imagine that the increasing caution of freelancers will cause a number of difficulties for the creative industry and the organisations which operate within it.
Consider, for example, long-term projects. When agencies are overseeing campaigns which can take a year to complete, they tend to use the same freelancers throughout the duration of the process. In the current climate, this is not a problem, but as the legal landscape adjusts, this may change. With the vast majority of their time and resources being consumed by the work of one company, these freelancers might start demanding fair compensation in the form of a fixed-term contract and the benefits which come with it.
With this in mind, agencies must start thinking far more strategically before recruiting the services of freelancers in the future. To ensure that hiring a freelancer remains financially viable, businesses must be clear from first contact that the freelancer is self-employed and that they will not be entitled to worker benefits such as pensions or paid holiday. To compensate for this, agencies will need to invest far more energy in ensuring that they enjoy supportive and reciprocal relationships with their freelancers.
As a final thought, we should be careful not to fear the legal changes ahead or the tax implications of the Budget, as although these will undoubtedly have an impact on the creative community, agencies and freelancers can overcome this through well-managed administration and effective communication.