Minimum wage for the self-employed, suggests think tank

Some of the self-employed should be entitled to the national minimum wage, a think tank has urged.

The Resolution Foundation says that about half of the 4.8 million people classified as self-employed are low-paid and earn less than £310 a week.

As they have no chance to set their own wages they should be classified instead as workers, with wage protection.

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The idea received endorsement from the former head of the Low Pay Commission and CBI, Lord Adair Turner.

He told the BBC that certain companies in the gig economy have been operating successfully by avoiding paying minimum wage or employee contributions.

"I think the scale of it is probably sufficient that we should tighten up on that. Essentially we should enforce the minimum wage on those categories of the self-employed who, when when you look at them are essentially employed in the fundamental nature of how their work is organised."

The idea has been submitted by the Resolution Foundation to the Taylor Review on modern employment practices.

Mathew Taylor, the chief executive of the Royal Society for the Arts, was appointed last October by the government to lead a review into the effect of new types of businesses, such as Uber and Deliveroo, which have led to an increase in the number of people in short-term and casual work.

Conor D'Arcy of the Resolution Foundation, said: "While many [of the self-employed] are higher earners who benefit from significant flexibility, around half fall below the low pay earnings threshold of just £310 a week."

"The government can start by extending minimum wage protections to those self-employed people whose prices are set by a firm.

"This would mean that self-employed people in the gig economy would be given protection against extreme low pay for the first time ever," he added.

By law most workers are entitled to the National Minimum Wage and the rate they receive depends on their age.

Currently for 21-24-year-olds the rate is £7.05 per hour, for 18-20 year olds £5.60 and for 16-17 year olds £4.05. The apprentice rate is £3.50.

If you are over 25 the National Living Wage applies to you. That is currently set at £7.50 an hour.

The independent Low Pay Commission advises the government on those rates.

You will also hear a third type of wage referred to - the "real living wage". It is calculated annually by the Living Wage Foundation, an independent group.

The rate, which is not statutory, represents "what employees and their families need to live", and organisations that pay it receive accreditation from the foundation.

For the UK it stands at £8.45 per hour and in London at £9.75 an hour.

The Resolution Foundation argues that the test of whether people are really self-employed or simply disguised workers should be whether or not the employer sets the price for the work they do.

If applied, that test would affect some well-known industries.

"Affected firms would include gig economy-style platforms claiming to simply connect the self-employed to customers but setting the price for work done, or those with standard terms that they apply to a significant number of the self-employed," it says.

That would mean a big change for tens of thousands of workers, such as 170,000 self-employed Uber and minicab drivers, 40,000 postal and courier staff, 150,000 hairdressers and 80,000 cleaners.

Mike Cherry, chairman of the Federation of Small Businesses, said: "It would be helpful if a better distinction could be made between real entrepreneurs and those who, in all but name, have the appearance of being employed by giant corporations."

In May, the Parliamentary Work and Pensions Committee reported after an inquiry that self-employed status had left some workers vulnerable to "exploitation".

The committee said that drivers and couriers for companies such as Uber and Deliveroo needed full workers' rights and not "bogus" self-employment status.

The Institute of Directors (IoD) said it agreed that the status of workers should be clarified by the government, with the publication of easy-to-understand guidance.

But Seamus Nevin, head of employment and skills policy at the IoD, said undermining the gig economy would bring disadvantages.

"Evidence from the Labour Force Survey and the ONS suggest that easier routes into self-employment have also led to rising workplace participation for those who have historically struggled to find a job; notably single parents, disabled individuals, and the long-term unemployed," he said.

"An obligatory minimum wage would undermine the business model of many gig platforms, such as taxi, delivery or cleaning services, who would find it hard to justify paying people at times when there was no demand."