Coronavirus: Poverty charity highlights plight of self-employed people

National poverty charity Turn2us has reported a huge spike in self-employed workers using its online benefits calculator tool – a 1,800% increase from the previous week; and is warning that current support will leave many substantially worse off than employees.

The surge in self-employed visitors came after Chancellor Rishi Sunak announced that the Coronavirus Job Retention Scheme, where 80% of a workers wage will be guaranteed by government*, does not include support for self-employed workers. This means that many self-employed people in need of financial assistance currently have no other option than to apply for Universal Credit. 

Turn2us analysis has shown that:

• If self-employed households have to stop working due to Coronavirus, 82% would be better off if their income was guaranteed in same way as employees
• On average, each household will see their take home pay reduced by £781 per month, if they have to claim Universal Credit, compared to an 80% wage guarantee
• That means 3.3 million self-employed households will have to make the decision between a huge cut in earnings (as well as a 5 week wait), or continuing to work and endangering the lives of vulnerable people in their local community 
• Self-employed people who apply for Universal Credit will have to choose between waiting 5 weeks for their first payment or, getting into debt through a Universal Credit advance.

Recommendations:

1. Put in place measures to ensure self-employed workers’ earnings are protected on an equal basis to employees under the Coronavirus Job Retention Scheme.
2. Immediately end the five week wait for Universal Credit by making advances non-repayable, or at the very least offering a 12 month repayment holiday.

David Samson, Welfare Benefits Specialist, said:

“The removal of the Minimum Income Floor for self-employed claimants of Universal Credit is a welcome move to equalise the amount of support self-employed workers can receive to the same as Statutory Sick Pay. But the exclusion from the Coronavirus Job Retention Scheme creates a huge disparity between salaried workers and the self-employed, penalising self-employed people by hundreds of pounds simply because of the nature of their employment.”

“We urge the government to put in place measures to ensure self-employed workers are protected from the economic repercussions of coronavirus on an equal footing with employees. At this critical time our society needs to stand together and provide security for everyone”

Current coronavirus support announced for self-employed people:

• Removal of the Minimum Income Floor** within Universal Credit for the duration of the outbreak. This means that self-employed people will receive Universal Credit at a rate equivalent to Statutory Sick Pay.
• Deferral of Income Tax payments due in June 2020 to January 2021
• Deferral of VAT payments, though most self-employed people earn below the £85,000 threshold to pay VAT in the first place.

Breakdown of disparity by household type:

*capped at £2,500

**The Minimum Income Floor meant that if you were self-employed and had low earnings your Universal Credit may have been calculated based on you having higher earnings than you actually earn. The MIF was set at the national living wage based on how many hours you were expected to work (for many this would be 35 hours a week