Self-Drive Worker: The Truth About Jobs
Updated June 2017
Introduction from Working Free Ltd
Of the current 32 million working people in the UK at the end of April 2016 only 54% are purely full-time employees on a payroll. The rest – 46% – are what can creatively be described as Self Drive Workers – who are a mix of many other working formats and arrangements – but NOT full time employees on a payroll. See charts.
In broad terms, this 46% have to find their own work – if they want to. Having to sell their own professional services is very different to finding a permanent job and is relatively unsupported. The UK has been moving away from this traditional work model for many years, – and now this level of flexibility has become significant and entrenched. How best to manage this, and to work out where it is heading to is important.
Overview & Key Points from the Technical Topic Partner
The Lead contact here is Charles Russam. Charles Russam is Managing Director of Working Free and led the creation of this website, liaising with a broad range of supporters and collaborators in the process.
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Understanding this area needs to start with the ONS.
Office for National Statistics – UK Labour Market Statistical bulletins.
Estimates of employment, unemployment, economic inactivity and other employment-related statistics for the UK.
The Labour Force Survey (LFS) is an ONS survey of the employment circumstances of the UK population. It is the largest household survey in the UK and provides the official measures of employment and unemployment. The panel consists of 45k to 50k households covering about 100k people, polled monthly and deemed, with some statistical adjustments, to be statistically representative of the whole UK population.
The ONS definition of self-employed needs to be noted.
The self-employed figures are self-classified – which means that the responders personally decide which category they fall into, from guidelines from ONS. These guidelines (quoted from ONS here) attribute “self-employed” to those who are:-
- paid a salary or wage by an employment agency
- a sole director of their own limited business
- running a business or professional practice
- a partner in a business or professional practice
- Working for themselves
- a subcontractor
- or doing freelance work
Also quoted from ONS:
“ A person is self-employed if they run their business for themselves and take responsibility for its success or failure. Self-employment can be in the form of a sole trader, a partnership (two or more people who run a business), or an owner of a limited liability company (also responsible for running the business). The split between full-time and part-time self-employment is based on respondents’ self-classification.”
According to Companies House, the number of new limited companies being formed has increased significantly over the past few years. What is not fully known with any accuracy is how this increase splits over being a vehicle for the self-employed or a genuine new business, or part of an established business, and if so, of what substance – and for what purpose.
The HMRC approach to self-employed status is different. They are very wary of those who claim to be self-employed but, in their view are, realistically, employees. Their judgement is based on a piece of tax legislation called IR35. This is because, if HMRC judgement is correct, they get more tax and sooner than otherwise would be the case. This is one of the issues that muddies the waters.
EXAMPLE – Headline in the Daily Telegraph on 23.7.16 – “ BBC puts 85 stars on staff after tax bill row” A 2012 Report found that the BBC paid more than 124 people £150k plus a year through PSCs (Personal service companies – limited companies formed specifically for that purpose but which may also have other transactions going through them.) The point to be noted here is exactly how would these workers have been categorised by the ONS, by the BBC, by the HMRC and, maybe, by Companies House? Both before and after this change?
Item No 4 above – a partner in a business or professional practice – This applies to all the professional partnership practices in the UK – including most accountancy practices, law firms and some Consultancy Practices and some estate agents – and which are run under Partnership law as opposed to company law where they would categorise themselves as employees. To the extent that the responders to the Labour Force Survey categorise themselves as “self-employed” in their monthly returns, the ONS will include them in the “self-employed” figures. Otherwise, they would be categorised as “employed”.
EXAMPLE – Partners in the big four accountancy Practices – indeed, in all accountancy Practices operating under partnership law – excluding those who operate under company law – are technically self-employed. They are certainly treated that way by HMRC for tax purposes, but tax is generally collected more frequently than other self-drive workers.
The ONS statistics do not differentiate between the various levels of “worker” – whereas this website looks only at “Management” levels – seen as those who would routinely see themselves as earning about £50k and upwards, based on their previous work roles. It is felt that this differentiation does not materially alter the analysis.
The ONS retrospectively alter published figures as more information emerges – so some which are available now may differ from those stated in our schedules which we generally compile from information published as soon as it became available.
Please see the ONS comprehensive Report “Trends in Self-employment in the UK: 2001 to 2015”.
This can be found on their website www.ons.gov.uk/ons/rel/lms/labour-market-statistics/index.html
The ONS figures are not reconciled with HMRC’s figures for “self-employed” nor with the figures from Companies House relating to the creation of new limited companies.
Please also note the following comments made by the ONS – from this Report and elsewhere – in compiling these figures. (quoted from ONS). “The level of self-employment increased by around 730,000 between 2008 and 2015: rising from 3.8 million to 4.6 million. Around half of this absolute change was accounted for by full-time self-employment, and around half by part-time self-employment.”
Temps are included in both full-time and part-time workers on the payroll. These figures are also recorded separately by ONS and in the figures quoted in this website are deducted.
(quoted from ONS). “Around a third of full-time self-employed workers are located in the South East and London. (This includes a marked increase in Financial and business Services.) The share of full-time self-employed accounted for by London has risen from 14.6% to 17.0% between 2001 and 2015.”
Senior people retiring as soon as possible on two thirds pensions are mostly well set up – but their numbers are decreasing as pensions schemes change – and also, as, current employer and government action starts to chip away at their value. Older people who need to keep earning and also keep working for other reasons need to be supported. ONS reports that the increase in part time working is partly mainly due to older people.
Who are Self Drive Workers?
Self Drive Workers are the converse of “purely full time employees on a payroll. Self Drive Workers are those who need, either wholly or in part, to find their own work, their own “clients” – their own things to do – with their infinitely variable and often uncertain levels of reward. They are not usually dependant on one employer for their income. (Please bear in mind previous comments re the ONS statistics.)
Self Drive Workers are a varied and mixed group of part-timers, self-employed, contractors, freelancers, Interim Managers, Temps, Consultants, Management Consultants, Semi-retired people, Portfolio Workers, Off-payroll workers, etc. (Portfolio Workers include a broad mix of Professionals who have more than one source of income and work-type activity (whether on the payroll, freelance and non-remunerated)). “Redundant Executives” very often position themselves – often unknowingly – somewhere in this 46% category. Some see themselves as (working) Consultants and some see themselves as unemployed and this might vary from month to month. Unemployed statistics from ONS appear elsewhere.
At management levels, most Self Drive Workers get to this status through having been on someone’s payroll as permanent employees. They stopped being an employee either through their employers’ action or their own. Where through employer action, many opt to stay in the independent lifestyle because they find that it works and sometimes because they can’t get a “proper job” (a traditional permanent employee role on a payroll.)
It is wrong of the Government to think that all Independent workers want to get back into permanent employment. Many Self Drive Workers quote lifestyle as the main reason for becoming independent. This seems to happen more frequently with women and, whilst there are more men than women operating as Independents, women are catching up.
Conversely, many employers – maybe the majority – welcome the flexible employment patterns afforded by Self Drive Workers and are increasingly building the use of independent workers into their resourcing strategies.
One of the contentious elements in current flexible employment patterns is Zero Hours Working. It is a salutary exercise debating the pros and cons of Zero Hours working but the practice should be seen as just part of the flexible remuneration patterns currently active in UK businesses, particularly now that most of the perceived unsatisfactory elements have been removed and responding to increasing demand for 24/7 working. It falls into the same flexible arrangements context as profit related payments – whether alongside a salary or retainer, bonus/ commission schemes and share incentive schemes and, indeed, wherever outcomes are dependent on personal deliverables or the company’s performance – or both. And why not?
Additionally, and importantly, there are many individuals operating on an independent basis, setting up and/or running micro businesses or entrepreneurs chasing their ideas and not currently earning much, if anything. New patterns are emerging including more people with second jobs, zero hours workers, greater numbers of contractors and interim managers, independents teaming up with others and individuals trading through a myriad of business formats.
This burgeoning rhetoric around Entrepreneurs and Entrepreneurship – the glamour people in the Self Drive Worker market – reflects the significance of this phenomenon as between the different stakeholders – Government, businesses and the swelling ranks of individuals now operating as Self Drive Workers. Part of the reality of this is very likely to reflect that there are many Self Drive Workers who do not see themselves as Entrepreneurs and, in fact, are. Many see themselves as Entrepreneurs and, in fact, are nothing of the sort. But the underlying reality is that this sector is vital for the future of the UK’s economy. It is growing. And the Government wants it to grow. Sometimes it is not apparent exactly what the Government is actually doing in this area.
Self Drive Working is a direct linear outcome of the UK’s move away from factory-based manufacturing/ industrial activity – going back to the Industrial Revolution – towards technology-driven knowledge working and 24/7 response times. These changes – set to continue indefinitely – demand flexible labour and risk taking – all of which will increase.
Generally, there is an oversupply of goods and services in the UK and it looks like this gap will widen. This means, amongst other things, that many workers have to find different things to do. These people need to be resourceful, trained and supported. Inevitably, some don’t find a market for their professional product – mainly because there is not one or was one that has now disappeared – or because they are not good enough. This is the entrepreneurial risk. Self-drive workers need to continuously re-invent themselves.
What are the implications for Government?
Traditionally, all the Political Parties have always talked about Jobs and about employers. The reality is that they are only talking about half the current working population. If they fully realised that, today in the UK, the other half of the 32m – the Self Drive Workers – do not want to talk about jobs and they don’t want to talk about employers or employment – they certainly do not want to hear about legislation, restrictions and accusations about tax-dodging.
They want to talk about work. They want to see a broadly based successful economy growing steadily and creatively, in new industries, in new technologies, in new places and creating opportunities for work and actively encouraging individuals in all these directions including, importantly, exporting and working overseas.
The Government needs to recognise that this is major change. Governments somehow feel compelled to want to control and tax Self Drive Workers in exactly the same way in which full time employees are controlled and taxed – not recognising that Self Drive Workers are separate businesses, have no employment protection (limited social and legal protections, no sick pay, no holiday pay, no redundancy pay, no PHI, no other benefits) and have to pay for their own direct costs of running their businesses and take the full risk in finding their next assignment. This needs to change. It needs to change in the direction of everyone being winners
Example – when Government reduces public sector headcounts either after a recession – or reflecting political ideology – with the aim of reducing costs, where do these people go and what do they do? Indeed, are any costs actually saved?
Apart from being given varying amounts of money from the public purse (unlikely to be recovered by savings for a number of years) outcomes include – some of these people do nothing, drawing unemployment pay and other benefits or go back into their former organisations as Independent Consultants. The real questions are around whether they find appropriate work elsewhere and do the organisations benefit commercially from them NOT being there?
Over the past decade, Economists and the Government have not been sure why GDP was going down whilst employment levels remained relatively stable and did not get anywhere near reflecting this drop in GDP. To a material extent, this will have been due to permanent employees simply earning less – partly through bonus/flexible pay schemes paying out less than before or not at all. But, in part, this has much to do with Self Drive Workers including those made redundant. These people are still in the labour force but with much reduced earnings particularly in the early part of a recession.
The allocation of public sector contracts should be reviewed to include more Self Drive Workers – not easy – but the principle of “using all the talents” is a good one. The recent practice of awarding contracts to larger companies with the provision that a stipulated volume should be passed onto small businesses has not largely worked.
The impact of the Self Drive Worker on Trade Unions is an interesting one. Most Self Drive Workers do not belong to Trade Unions – and see little reason to want to. In fact, most trade unions rarely think of Self Drive Workers and where they do, treat the concept as they do Zero Hours Contracts. There might be a case that they should recognise the relevance of Self Drive Workers but the traditional trade union focus is on their members being paid more and working less – not appropriate to Self Drive Workers. Beyond this, Self Drive Workers recognise the need for a process of improving levels of knowledge, modern technical skills, added value attributes, soft skills and the personal ability to contribute to the success of the organisation.
Employment legislation, as it affects Self Drive Workers, has been over-complex for too long in terms of differentiating between Self Drive Workers and employees. Whilst the volume of new Employment legislation has generally reduced over the last year or so, it is still quite complex for employees. However, for Self Drive Workers, there has been virtually no relevant employment legislation as they are not employees. But things are changing.
Tax legislation around Self Drive Workers has been muddled for years. There is a sense with many that HMRC sees Self Drive Workers as tax dodgers. No doubt there are some. Generally, Self Drive Workers pay less tax than “purely full time employees on a payroll.” Those who run their own “businesses” know how to tax-plan to best effect. This cannot realistically been seen as tax dodging, although there will be some. It reflects risk and the uncertainty of work – both as regards the level of charge and the volume, the marketing cost of finding this work and other matters that need to be paid for which would have been paid for by the employer, had the worker been an employee.
Support for Childcare provision seems to be improving in recent times. This is welcomed and is particularly important in enabling women back into the (interim) workforce
What are the implications for businesses?
There is a certain irony in that the quest for greater efficiency – whether through technology or better management – has resulted in much reduced corporate headcounts over the years. Whilst technology has had a major impact, what has happened, we would contend, is that much of this headcount reduction has been disguised by the external use of consultants, interim managers, contractors and outsourcing. There is a core level, below which the only result is that the work does not get done – either in part or wholly or badly.
EXAMPLE – The NHS?
Additionally, over the years, businesses have been seeking flexibility and immediacy. To a large extent Self Drive Workers have provided this, either singly, through intermediaries, as part of consultancy teams or working for outsourced organisations.
“Disintermediation” (getting rid of the middleman) whilst always more of a threat than a reality can get nearer to being a reality through Self Drive Workers. Greater emphasis on key drivers to the business are increasingly being either handled or managed in-house through external parties being contracted into the organisation.
The concepts of loyalty and team building are becoming opaque and, to a certain extent, self-contradictory. Loyalty is being seen less as a laudable and traditional characteristic and more of a contractual obligation. Good pay-offs make being fired “acceptable” for many and a convenient launch pad into Self Drive status.
What does it mean for Individuals?
Massive changes so far. Massive changes to come.
In many ways, this aspect has to be seen as the most important one. It’s about how people earn their livings, how they live their lives and how these change when they don’t have a direct employer.
What has changed for the good in recent times is the arrival of “choice” and “lifestyle”. Broadly, people can choose what to do with their working lives – although on many occasions it does not feel that way!
Because career development is not an issue with Self Drive Workers, higher risk work is likely to be undertaken as long as payment is more or less assured – even being “paid” in ways other than money – such as equity in a business is involved.
Some observers, many with talent management remits, see the Self Drive community, broadly defined, as a key source of specific skillsets and experience that would support aspects of corporate and business development projects.
This website aims to be a signpost guide to success as a Self Drive Worker. Knowing about the background is important. Routes to market can be complex and unexpected. Skillsets need to sharp and up to date and relevant. Ability, interpersonal skills and personality need to match the role and the task.
More Research is needed.
Working Free calls for more Research aimed at creating a base for more and accurate statistical information. Working Free calls for better informed and creative assessments to be made of the implications and opportunities. There is a small number of other organisations who have an involvement in this 47% area and who may be able to offer research material.