The many faces of self-employment

The many faces of self-employment

New research reveals nine segments of the solo self-employed sector

What does it mean to be self-employed? It’s a big question, and one that might have different answers depending on who you are.

In recent times, self-employment has been associated with the controversy surrounding the gig economy. This has meant that rather than focusing on the complex reality of self-employment in the UK, everyone who works for themselves is seen as part of a single, uniform sector.

But a new report, launched last month, has dispelled this myth of uniformity. Research conducted by the Centre for Research on Self-Employment (CRSE), in conjunction with the Institute for Employment Studies (IES), has found that this lucrative sector is incredibly diverse.

The report, titled The True Diversity of Self-Employment, has identified nine distinct groups of the self-employed, based on these key elements: how much they earn, the level of control they have over their work, and how much security their working situation provides. 

Why is it important to consider this now? The past decade has seen a surge in the number of people opting to go it alone. Around 84 per cent of the self-employed workforce in the UK are those who work on their own without employees; known as ‘solo self-employed’. The remaining group are those who run a business with employees.

The rise of the gig economy, alongside the advances in technology have been two of the driving forces behind the rise in self-employment and this has created a fundamental shift in the make-up of the UK’s labour market.

However, the government has not kept up with the pace of change and instead has continued to apply a single-minded “one size fits all” approach to the industry, which could have negative consequences, according to the study.

The report by the international think tank argues that the media’s portrayal of “exploitation in the gig economy or any other small part of the self-employed sector” has created an assumption amongst the public that these issues apply across the board, from IT contractors to freelance photographers, engineers and medical consultants.

Nigel Meager, director of IES said: “Coverage of this group in the media and political debate often focuses on the gig economy, which in reality, is only a small part of a dynamic and far broader self-employed workforce. 

“The findings show huge differences between segments of the self-employed in many areas including earnings and job security, as well as work/life balance and overall satisfaction.

“I hope the findings encourage policymakers to take this diversity into account when developing support for the self-employed as well as any regulations that could affect them.”

More and more people are choosing to go into self-employment irrespective of the industry they are in, because of the flexibility, autonomy and general work/life balance it can offer.

But the level of independence, the earnings and security will often be dictated by the industry. For example; builders fall into a low pay category but have a high degree of independence and security, while a locum doctor would be in the high pay category, which although is secure, it is regulated.

The report found more than half (53%) of all solo self-employed people have a high level of independence and security. People falling into one of these segments are “much happier in their work than employees in similar roles and have a high degree of control over their working practices”, according to the study.

Of the nine segments, the two largest groups – three and six – exhibit high levels of independence and security.

Segment three is characterised as low pay, independent and secure. It is likely to include occupations such as farm workers, builders, traders and tutors.

Despite the lower pay bracket, self-employed people falling into this group reported significantly high levels of job satisfaction compared to employees in similar jobs.

Mark Baker is an arable farmer, who fits the characteristics of this segment. The 43-year-old said he “chose to go self-employed to have more control” over his work. He admits that the weather is always a challenge and despite the risk of potentially not earning anything in a year, he does not regret being self-employed and nor would he consider being an employee again.

Segment six is the mid pay, independent, secure group and those that are likely to fall into this category include IT professionals, financial advisors, photographers, hair and beauty workers, restaurant owners, trainers, and manufacturing managers.

People in this group reported one of the highest levels of job satisfaction compared to other segments and around one in five (20%) have a private pension, which is close to the average across the entire solo self-employed sector. 

Photographer Ed Telling fits the characteristics of segment six. He said he is much happier being self-employed; he has a lot of control over his work and is able to save for the future. As a photographer, he also believes it would be hard to find employed work.

There are around 1.66 million people working across these two segments – this is equivalent to 42 per cent of the total solo self-employed workforce.

At the more vulnerable end of the solo self-employed spectrum, the study found there was a level of uncertainty for 15 per cent of those in this sector. This was where the individuals’ self-employed status is unclear due to low levels of autonomy in their work.

Those likely to experience this uncertainty include drivers, cleaners, childminders, carers and building labourers (segments one, four and five).

Around one in five (21%) solo self-employed people were characterised as being in insecure work, according to the report. Again drivers, cleaners, labourers and carers may fall into this category, alongside those in artistic occupations (segment two).

The report stated that those in insecure work, which is more than 825,000 people tend to be “less qualified”, have “limited autonomy” and are “less likely to have financial security”. 

Suneeta Johal, who is head of research, education and training at IPSE as well as director at CRSE said: “The research not only helps IPSE gain a further understanding of the challenges faced by this growing sector of the UK workforce, but will allow us to better represent the wider self-employed population. 

“Different segments of the self-employed workforce need specific support to ensure they have a fair deal. These findings offer more vital evidence that will help inform our engagement with policymakers.

“For example, those who lack independence and are financially insecure need urgent support and incentives to save for their future. 

“The groups with little independence in their work would also benefit from a statutory definition of self-employment, to help clarify their status.”

The report highlights that any policy recommendation put forward by the government should not hinder the independence, autonomy and job satisfaction enjoyed by the majority of self-employed people.

Johal added: “All segments of self-employment could really benefit from better access to training and skills development opportunities. 

“Not only does skills development improve pay prospects, it also allows the less autonomous self-employed to move into more independent roles or build themselves a broader base of clients.”

Read the full report, The True Diversity of Self-Emlployment, here.