Jennifer Thomas.
Jennifer Thomas of the Federation of Small Businesses delves into the findings of nationwide research into the challenges facing the self-employed and what needs to change.
……………………………….
Published in association with
SELF-EMPLOYMENT is one of the most rewarding career paths, offering flexibility, independence and the potential for significant financial success. However, without the right support, even the most ambitious entrepreneurs can struggle. The Federation of Small Businesses recently released a major study on entrepreneurship. It highlights the key challenges facing self-employed individuals and the changes needed to help them to thrive.
The challenge of Universal Credit
One of the biggest financial hurdles is Universal Credit. While designed to provide a safety net, UC penalises the self-employed through the Minimum Income Floor, which assumes a set monthly income regardless of actual earnings.
This means that entrepreneurs receive less support during quieter months, creating unnecessary financial strain and discouraging business growth. The FSB is calling on the Department for Work and Pensions to extend the Start-up Period, which protects Universal Credit payments of newly self-employed business owners by exempting them from the Minimum Income Floor for a period between 12 and 24 months.
The skills gap and training access
In today’s fast-moving, tech-driven world, continuous learning is key to staying competitive. However, many entrepreneurs struggle to access affordable training.
Government-backed subsidised programmes could bridge this gap, equipping business owners with the skills they need to succeed in an evolving economy. The FSB recommends that HM Revenue & Customs and HM Treasury should incentivise training with tax reliefs and bodies such as Skills England should work to address the specific needs of self-employed people.
Health and financial security
The financial risks of self-employment extend beyond income stability. Nearly half (44%) of entrepreneurs and 64% of sole traders worry about losing income if they fall ill. Unlike employees with statutory sick pay, many self-employed individuals have no safety net, making illness a major financial risk.
The FSB is calling on DWP to reclassify Individual Income Protection as earned income under Universal Credit and to review whether insurance products are supporting return to work.
Late Payments
Cash flow is the lifeblood of any business yet late payments remain a significant challenge, especially for small businesses and freelancers dealing with larger clients. The power imbalance makes it difficult for sole traders to demand timely payments, with a single unpaid invoice often having a severe impact.
This remains one of the FSB’s biggest campaigning areas. It has called on the government to include retention payments within the maximum 30 days payment terms standard and set retention payments to a maximum of 3% of total contract value, as well as including them in Duty to Report requirements.
It has also called for the government to support and expand project bank accounts and ring-fence retention payments so they cannot be used for working capital in order to disincentivise abuse of the system.
Encouragingly, the government has committed to tackling this issue with the introduction of a Fair Payment Code and new legislation requiring large businesses to report their payment practices in annual reports.
These steps mark progress but further action is needed to ensure fairer treatment of small suppliers.
Supporting entrepreneurial parents
Many people start their own business to achieve a better work-life balance yet existing policies often fail to support entrepreneurs with families.
Maternity Allowance, for instance, has been overlooked in past reviews of family-friendly rights, despite a rise in female entrepreneurship. Updating these policies to better support parent entrepreneurs could help to reduce the time women spend out of paid work due to caregiving responsibilities.
A range of recommendations for the Departments of Business & Trade and Work & Pensions, for HMRC and others looks at how to overcome these barriers, including easing the pressure on childcare businesses with fair funding and business rates reliefs.
The full report and FSB recommendations can be found as fsb.org.uk or from me and, as ever, I am asking local businesses and policymakers for their support.
For too long, self-employed individuals have been overlooked in policy decisions, facing significant disadvantages compared to employees and often referred to in a derogatory way as ‘only a one man band’ (the assumption that there is anything wrong with that is my pet hate).
They are a crucial proportion of our economy, for which we need a system that enables entrepreneurs to succeed, if we are to thrive.
Jennifer Thomas is development manager for the FSB in Northamptonshire.
……………………………….
Stay connected with Northamptonshire business through Business Times. Join our exclusive community for the latest news, insights, updates, features and thought leadership.
Stay informed – subscribe now at bit.ly/437DsSm. Unsubscribe at any time.
