Amid pressures from the self-employed community to match the Job Retention Scheme support announced for employees, the UK government have announced that self-employed workers impacted by coronavirus will be eligible for UK Government grants worth up to 80% of their average monthly earnings from June.
The self-employed support package, announced by Chancellor Rishi Sunak, means that self-employed workers and freelancers who have lost work due to the coronavirus pandemic will be able to apply for a grant from the UK government to replace any lost earnings.
Cabinet Office issues guidance for public sector workers
The Cabinet Office has now issued guidance notes detailing the support for contingent workers (freelancers, consultants and other non-permanent workers) in the public sector. It includes those working under PAYE, Umbrella Companies and Personal Service Companies. They will be entitled to 80% of their pay up to a maximum of £2,500 per month if they are unable to work because of COVID-19.
During these tough times for many individuals, any support is welcome and better than none. However, many fear that the support is unfair with freelance workers in the public sector potentially receiving more beneficial treatment than those in the private sector.
How does the support differ from public vs private sector?
Someone who owns a Personal Service Company and is not acting as an employee of their client (and therefore does not fall into the IR35 rules), will be paid a salary of around £8,500 from their limited company and the balance as dividends.
However, a public sector worker, working in the same way, could benefit from almost five times the support under the latest Cabinet Offices guidance.
They both operate the same way, but, the only difference is who their client is. Should it matter whether their client is in the public or private sector if they are operating in the same way?
If they are unable to work as a result of the Coronavirus, the private sector worker will receive 80% of their salary but no contribution for dividends. It could be as small as £566 per month under the COVID19 Job Retention Scheme. However, the public sector worker’s limited company will receive up to £2,500 per month.
The only difference between having a public and private sector client is who decides the tax status of the worker, but the considerations are the same. For that reason, it’s difficult to understand why the government is providing greater support to public sector workers compared to those in the private sector.
Limited company owners whether they are freelancers, business consultants, store owners or builders, feel as though they are being left to fend for themselves just because they have chosen to operate as a limited company in the private sector and not the public sector.
What do private sectors workers do now?
In recent days the government have faced pressure from these individuals including petitions being circulated online to give them the same treatment, so we wait to see if they listen to concerns and make it fair across the freelancing community. Many will struggle financially unless they receive similar support to those that are self-employed, employed or have a public sector client.
More advice and information on COVID19 for the self-employed:
- Guidance Notes on Contingent Workers | UK Cabinet Office
- Government support for Self Employed during COVID19 | Ellacotts
- IR25 Delayed until 2021 due to COVID19 | Ellacotts
- Claim a mortgage payment holiday | Ellacotts