Freelancers provide a flexible, scalable workforce that is vital to supporting the fundamental competitiveness of the UK economy, allowing companies to manage risk and changing patterns of work in a fluctuating and often volatile market.

Freelancers come in a variety of guises from ‘sole trader’ to partnership to limited companies.  Most are workers who have chosen to be, ‘in business on their own account’, prepared to take the risks associated with being in business and hoping to enjoy the benefits of success.

Freelancing can be unnecessarily complex, often regulated and taxed in an inconsistent fashion leading to confusion and instability.

One of the great challenges facing a variety of governments is defining freelancers and establishing their status within our corporate environment.  Some of the key challenges facing the freelance workforce are outlined below:

Lack of clarity in the tax system

Ambiguous rules such as Employment Status, IR35 and S660A lead to disputes with the tax authorities due to differing interpretations of case law.  This makes it impossible for freelancers to plan for their tax liability with certainty. Disputed liabilities and penalties can be applied retrospectively.

Finding and retaining clients

PCG members often tell us that, once they decided to take the plunge and go freelance, they never looked back. However, this recession has hit particularly hard and we have had reports of members enduring extended periods out of contract for the first time in twenty years.

Agency and client behaviour

Anecdotal and empirical evidence reveals cases of freelancers being offered IR35-caught contracts by both clients and agencies.  With recruitment of freelancers often handled by HR departments, the engagement can have “employee-like flavours” attached to it, in which the freelancer is treated more like a temporary staff member than as a genuine business-to-business supplier.  Freelancers also experience reluctance to amend contracts to reflect a more appropriate business relationship. The most serious behavioural issues among agencies seem to be the practises of trawling a freelancer’s referees for business, which more than a third of members had encountered at least “occasionally” in 2007.  There have also been reports of unlawful pressure on freelancers to opt in or out of the Agency Regulations.

Late payment

Late payment is a perpetual commercial risk, and the majority of respondents to PCG’s surveys have experienced it from both clients and agencies; interestingly, clients seem to be seen at fault more often than agencies.

Abuse of the Work Permit system

There are allegations of large companies exploiting a loophole in the immigration system, the Intra Company Transfer Visa (ICT), allowing them to replace hundreds of skilled contractors with lower cost migrant workers.

 

To find out more about issues affecting freelancers and how PCG is fighting for freelancers' rights, see PCG's Policy work.

If you have any questions please call PCG on 0845 125 9899 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .