Being self-employed has its perks, but it can leave you feeling a bit vulnerable. As a self-employed worker, it's easy to feel lost regarding your rights and obligations in business operations.
In this blog, we'll cover:
The rights you have as a self-employed worker
How it differs from other employment categories
Outline the rights and legal safeguards that every self-employed worker in the UK should know about
What rights do self-employed workers have?
Some of the employment rights self-employed workers have include:
1. Discrimination
Self-employed workers can’t be treated unfairly because of things like their age, gender, race, disability or religion. They are protected characteristics under the Equality Act 2010, which make sure everyone gets fair treatment, whether they’re providing services, selling things, or finding self-employment opportunities.
These laws are in place to make sure self-employed workers can pursue their career without facing unfair treatment based on the characteristics listed.
2. Data protection
Self-employed individuals also have rights under the Data Protection Act 2019 and GDPR. This means they can ask businesses, organisations or the government to tell them what information they have about them and how they’re using them.
Self-employed workers can also put the brakes on how their data is used and withdraw consent in certain situations.
It’s worth noting, however, that the Data Protection Act and GDPR laws also outline how self-employed individuals should handle other people’s information and data too. If you’re a solo player in the business world, this means making sure you keep client and supplier information safe and up to date in line with small business GDPR laws, including having a privacy policy present on your website.
3. Maternity allowance
Self employed individuals can’t get Statutory Maternity Pay (SMP), but they can claim maternity allowance if they have been registered as self-employed for at least 26 weeks in the 66 weeks before the baby is due.
If you're self-employed you can get between £27-£172.48 per week for up to 39 weeks. This amount depends on how much you have paid in Class 2 National Insurance contributions in the 66 weeks before the baby is due.
4. State pension
Self-employed workers who pay Class 2 National Insurance contributions are entitled to a State Pension.
If you’re self-employed, the money you put into Class 2 National Insurance contributions will be treated the same as employed contributions. This means your contributions will be considered when figuring out your State Pension, the same way it’s done for everyone else.
5. Universal Credit
If you are self-employed and find yourself struggling with living costs, it is possible to claim Universal Credit.
How you claim UC when you’re self-employed differs slightly from other people. Generally, you will have to report on your income and expenses, as well as payments into and out of your business every month. It’s also likely that you’ll have to prove that self-employment is your main job or your main source of income.
Universal credit payments are worked out by looking at how much your earn each month, or an assumed level of earnings (also known as a minimum income floor).
What responsibilities do self-employed workers have?
As a self-employed individual, you also have certain responsibilities you must fulfil. These include:
Health and safety
The Health and Safety at Work etc Act 1974 (General Duties of Self-Employed Persons) (Prescribed Undertakings) Regulations 2015 say that if a self-employed workers activity includes:
Agriculture (including forestry)
Asbestos
Construction
Gas
Genetically modified organisms
Railways
Health and safety law applies to them and self-employed individuals are legally responsible for taking appropriate measures to minimise the likelihood of someone else being harmed or injured due to work activity and remaining compliant with health and safety laws.
Income tax
Record-keeping when you're self-employed is not just a good idea, it's a legal must-do.
You have to keep solid records of what you're earning and spending, especially if you're sending in a Self-Assessment tax return to HM Revenue and Customs (HMRC).Otherwise, if you're not careful with your records and tax returns, you might face penalties.
As a self-employed individual, you pay Income Tax through Self-Assessment.
if your tax return is late, you could face a £100 penalty in the first three months after the deadline. But, if you've got a good reason, you can appeal against the penalty, although it might be worth chatting to your accountant or a money, tax and debt solicitor to help with this.
National Insurance (NI)
If you’re self-employed and your yearly profits (i.e your self-employed income after expenses) hit £12,750 or more, you’ll probably have to pay both Class 2 and Class 4 National Insurance rates through Self Assessment.
There are certain self-employed workers who do not pay National Insurance through Self-Assessment including ministers of religion who do not receive a salary or people who run businesses involving land or property. In these cases, they aren’t obliged to pay NI contributions, however they can make voluntary contributions if they wish.
Value Added Tax (VAT)
If your business turnover goes over a certain threshold, you may need to register for VAT. You will be responsible for charging VAT on your products/services, maintaining VAT records, and submitting VAT returns to HMRC.
Employer responsibilities
If you are self-employed and you also employ other people, you also have responsibilities to those employees including:
Protecting employees against the risk of harm;
Paying employees and making tax deductions on their behalf (PAYE);
Drawing up legally binding employment contracts.
Employment law can be complex and it’s important to know your responsibilities in relation to anyone you might employ.
How do you know if you're self-employed?
Being self-employed comes with a distinct set of characteristics. Firstly, you have ultimate control over your work, making independent decisions, and managing tasks on your terms.
You're not tied exclusively to one employer; instead, you may take on clients or customers at the same time, supported by contracts defining work terms and payment structures.
Financial risk is also part and parcel of self-employment. Self-employed individuals are responsible for buying their tools and equipment, and shouldering potential profit or loss based on their decisions. They provide their own work gear, sign contracts with clients, and can even send a substitute to cover their work.
Differences between self-employed workers and contractors
While a contractor can be self-employed, not every self-employed person is a contractor.
Contractors usually work for someone else, without being an official employee. For example, they might have a contract with a company to take on work from them, but instead of charging the customer for the work, they bill the company.
On the flip side, self-employed individuals work directly with customers and invoice them directly.
Much like self-employed individuals, contractors don’t have the same employment rights (e.g. sick leave and holiday pay), and they’re also responsible for paying their own taxes such as National Insurance contributions.
Can you claim unfair dismissal if you are self-employed?
In the UK, genuinely self-employed individuals are not entitled to claim unfair dismissal.
Employment rights, such as the right to claim unfair dismissal, primarily apply to employees, however it may be possible to make a claim for discrimination against a protected characteristic in the context of providing or looking for work.
How to protect yourself as a self-employed worker
Protecting yourself as a self-employed worker ensures financial security and peace of mind. Here are some key ways to protect yourself:
Insurance
Public liability insurance: This insurance protects against injury or property damage caused by your work. It covers legal costs and compensation claims for third parties.
Professional indemnity insurance: If you provide advice or services, this insurance protects you if a client claims financial loss due to your advice or service.
Employer's liability insurance: If you have employees, this insurance is legally required in the UK. It covers compensation claims from employees injured or becoming ill due to work.
Critical illness cover
Critical illness cover provides financial protection in case you are diagnosed with a critical illness, such as cancer or a heart condition. It pays out a lump sum that can help cover medical expenses, ongoing bills, or any necessary adjustments to your business.
Savings
Self-employed individuals must build savings. An emergency fund assists in covering unexpected expenses, low-income periods, or business setbacks.
Recent changes to the law for self-employed workers
The legal landscape for self-employed workers is constantly changing. Staying informed about recent law changes is crucial for compliance. Here are some recent changes affecting UK self-employed individuals:
IR35 reforms
In April 2021, the government implemented changes to IR35 rules, impacting contractors working through personal service companies. The new rules transfer responsibility for determining employment status and tax liability to the end client, affecting self-employed individuals working with medium or large-sized clients.
Employment rights
Recent legal cases and rulings also have the potential to stir things up in the UK gig economy.
For example, in 2021 the Supreme Court ruled that Uber drivers must be treated as workers rather than self-employed and, as such, they had a right to benefits like minimum wage and holiday pay.
While this decision only applied to the drivers involved in the case, the ruling may have a knock on effect to other gig economy workers, specifically how much control they have over how they earn and other protections.
Get legal help for your small business
Understanding your rights as a small business owner or self-employed worker in the UK is crucial for protection, empowerment, and success. With the gig economy reshaping work, grasping its unique challenges and opportunities is vital. Freelancers, contractors, or part of the gig workforce know your rights and legal protections for a strong defence against pitfalls.
It’s essential to be clear on the different employment statuses in the UK and how they relate to you or your employees. Suppose you’re a self-employed worker in the UK dealing with an issue pertaining to contract breaches, or you feel that you have been treated unfairly. In that case, our experienced team of employment law and small business solicitors can help.