Freelancers are working more hours for less money, while the tax system is now seen as a bigger concern than COVID-19
Research by self-employment trade body, IPSE, has revealed that freelancers worked almost an extra week in the last quarter of 2020 compared to the previous quarter. And at the same time, their day rate had reduced by an average of £16.
The figures, which came from IPSE’s quarterly Confidence Index, also showed that while earnings were roughly stable, it was significantly driven by more work for less pay.
According to the data, associate professional and technical freelancers, such as designers, experienced the sharpest fall in day rates (from £254 to £232) in addition to managerial freelancers (from £555 to £526).
On average, the number of weeks without work in Q4 of 2020 dropped from 5 to 4.3. Professional freelancers had almost one less week without work (down from 4.5 to 3.8) compared to associate professional and technical freelancers (falling from 5.3 to 3.9).
Freelancers’ confidence in wider economy increases
For managerial freelancers, the numbers of weeks without work increased in the last quarter of 2020 from 5.3 to 5.7 weeks, meaning not only did they cut their date rates, but they also had less work. However, on a positive note, IPSE’s survey also revealed that confidence in freelancers’ businesses and the wider economy had risen at the end of last year.
Research also showed that freelancers’ focus is shifting away from COVID-19 to a degree. For the first time since the pandemic began, the two highest skilled groups (managerial and professional) cited government tax policy as having a bigger negative impact on their business than the ongoing crisis. In particular, those surveyed were concerned about the incoming IR35 changes and potential tax hikes in next month’s Budget.
Chloé Jepps, Head of Research at the association, said freelancers were “cutting their rates to competitively scoop up as much work as possible” before the lockdown and it is concerning that this could “translate to a longer-term downward trend.”
Concern over government’s ‘lack of clarity’ on tax
She added: “These worrying trends are a sign that now more than ever, freelancers need better government support and protection – not the threat of tax rises and damaging structural tax changes.”
Xenios Thrasyvoulou, founder and CEO of freelance marketplace PeoplePerHour, that contributed to the study, said:
“Whilst it’s concerning that many freelancers had to cut their rates during the last quarter of 2020, it’s perhaps unsurprising given that the second lockdown came into effect halfway through the quarter.
“Although freelancers are facing increased competition for their services, according to the reports’ findings they seem to have kept their confidence in the economy, which is at its highest level since 2017. This is likely due to the increase in demand for remote online freelance services by medium to large businesses, which is unlikely to wane in the coming months.
“There is however a legitimate concern by many self-employed consultants regarding the government’s lack of clarity and protection with the fast-approaching IR35 regulations.”