Self-employed to miss out on National Living Wage, SMF warns

Research conducted by the Social Market Foundation (SMF) has found that 1.7 million people will earn less than the new National Living Wage when it is instated in April.

Currently, the government’s national minimum wage is £6.70 per hour, with the minimum pay set to increase to £7.20 for over-25s. The study cautioned the number of people earning under the minimum wage was likely to rise even further to 1.9 million by 2020.

The SMF’s research, funded by the charity Trust for London, claimed the introduction of the higher National Living Wage could act as an incentive for firms to outsource services to self-employed people rather than recruiting employees to carry them out.

Nina Broughton, the SMF’s chief economist, said: “Policies such as the National Living Wage make it artificially more attractive for firms to engage contractors rather than employees, and ignore a large section of low paid workers.”

Statistics show that one in seven UK workers is now self employed, with figures from the Family Resources Survey suggesting that self employed workers earn much less that their counterparts on both an hourly and monthly basis. The survey found that 49 per cent of self employed people earned up to two-thirds less on an hourly basis than employees. The occurrence was more apparent in London, where 18 per cent of workers are self-employed.

However, a spokesperson for the Department for Business, Innovation and Skills, said: “This government is committed to backing enterprising self-employed people through initiatives like start up loans, tax allowances and by cutting red tape by a further £10 billion.

"Our new National Living Wage will give a boost to over one million low paid workers when it takes effect next week.”