Up to 460,000 people across the UK could be “bogusly self-employed” and missing out on benefits such as auto-enrolment pensions and holiday pay as a result, Citizens Advice warns.
Office for National Statistics figures show the number of people self-employed has grown rapidly since 2008, from around 3.8 million to 4.5 million today.
But in a report published last week Citizens Advice says there has been a sharp increase in the number of people asking for help on determining their employment status.
The charity says it is “very difficult” for employees to determine whether they are legally considered as employed or self-employed without going to an employment tribunal.
It also warns there is increasing evidence of “rogue employers” who “intentionally exploit the vagueness of the rules in order to take people on as self-employed when they should be employed”.
A survey of 491 Citizens Advice users found 10.4 per cent believed they were self-employed but could actually be classified as employees. Scaled up to a national level, around 460,000 people nationwide may be bogusly self-employed, the charity says.
These workers are not entitled to benefits such as holiday pay, sick pay, parental leave and pension contributions through auto-enrolment.
Citizens Advice says there needs to be more support for employers and employees so people are not wrongly categorised and calls for an investigation into bogus self-employment akin to the Government’s work on zero hours contracts.
It adds the Treasury is losing an average of £300 per person wrongly categorised as self-employed, totaling around £300m annually.
Pension Playpen founder Henry Tapper says: “Employers need to be more careful about their workforce assessments when enrolling employers. The rules around eligibility are clearly laid out at The Pension Regulator’s website.
“Excluding self-employed contractors from auto-enrolment is a real problem for the self-employed who rely on one source of income from one employer. They are missing out on contributions to a workplace pension and are likely to have a claim against the ’employer’ at some stage in the future.
“We would rather see employer’s get this right first time than risk being the subject of claims from ‘workers’ – typically stirred up by ambulance chasers.”