Recruiters have given a cautious welcome to the chancellor’s U-turn on an increase in National Insurance Contributions for the self employed.
Addressing Parliament yesterday, Chancellor Philip Hammond reversed a planned 2% increase in Class 4 NICs announced in his Spring Budget Statement. In a letter to Tory MPs, Hammond said: "There will be no increases in... rates in this Parliament."
In the latest issue of Recruiter, out this week, agencies accused the chancellor of failing to support Britain’s business owners and entrepreneurs, and damaging future job creation.
Jonathan Ellerbeck, founder of technology and insurance recruiter Gravitas Recruitment Group, warns under the chancellor’s original plans, a typical Gravitas contractor who earned £100k a year, would mean they would be £2.5k a year worse off, while James Ballard, managing partner at HR recruiter at Annapurna HR, tells Recruiter the planned NIC hike would have negative “psychological as well as fiscal effects” on entrepreneurs.
Speaking to Recruiter yesterday, Ballard said the chancellor’s U-turn is recognition of an “ill thought-through” policy that has been “hounded down” by all sides as a breach of manifesto policy and an “unnecessary economic and psychological” burden to people running or thinking about running small businesses.
“I'm glad to see the government have rethought their stance,” he added. “It does cause real concern, though, how well thought out their economic policy is, or will be into the future.”
Meanwhile, Ellerbeck told Recruiter contractors had raised concerns with him about the chancellor’s planned increase over the past week, with some talking about moving into permanent work.
And while welcoming Hammond’s announcement yesterday, Ellerbeck suspects the chancellor will follow through with his plans at a later date.
“With everything that’s happening in the contract market – zero-hour contracts, the whole gig economy – I think any government is going to try and get a level playing field for taxation regardless of status of employment, whether they are fixed term, or full time.
“In the short term, it’s nice to see the prime minister has listened to other members of her party to put it on hold. However, as with most things, once it’s been raised on the agenda, I don’t think it’s going to disappear; I think it’s just going to be delayed.”
The planned increase in NICs received widespread condemnation from organisations representing both the recruitment and freelancer and contractor community last week.
And yesterday Mike Cherry, national chairman at the Federation of Small Businesses, issued a statement welcoming the chancellor’s announcement.
“The army of self-employed make a massive contribution to the UK economy. We’ve consistently argued, since this measure was announced last week, that a tax-grab on the genuine self-employed – the hairdresser, electricians and plumbers – makes absolutely no sense,” Cherry said.
Meanwhile, Julia Kermode CEO of the Freelancer & Contractor Services Association (FCSA), an independent trade association whose members are self-employed freelancers and contractors, said she was pleased to hear that government has used some “common sense”, having now realised that its argument that the increase would level the playing field between employees and the self-employed was flawed.
“Self-employed workers do not have access to NICs-funded statutory benefits like unemployment benefit or sick pay, and when it comes to maternity allowance, employees receive at least 57% more than self-employed workers, based on our analysis of a 2012 XpertHR survey,” she added.
Daniel Callaghan, CEO at Talmix, a platform for independent consultants, also welcomed the chancellor’s U-turn. The ability for companies to access a growing pool of independent professionals brings significant talent and operational advantages to businesses across the UK in this time of heightened uncertainty and constraints.
“Any actions that limit professionals to grow and contribute across multiple businesses due to increased costs and bureaucracy will not only backfire in terms of the country's productivity, but also show an outdated understanding of the clear trends in the modern world of work."
Meanwhile, Dave Chaplin, CEO and founder of ContractorCalculator, an online portal providing advice and information to freelancers and contractors, said he was initially amazed to see a Conservative government break a manifesto pledge adding it was not so surprising to see the U-turn.
“While many people choose to take the risk and be self-employed there are still those in false self-employment, and the government needs to focus on clamping down on firms that force vulnerable workers into low paid self-employment due to the inequality of bargaining power they have as workers.”
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