Government programs interact very differently with independent workers, who face a greater risk of falling through the social safety net. For example, Employment Insurance (EI)—apart from a few special opt-in benefits—is unavailable for the self-employed. This can leave them financially vulnerable should the worst happen, like a serious injury or illness. Meanwhile, in order to save for retirement through the Canada Pension Plan (CPP), self-employed individuals have to pay double the amount: the employer and employee contributions.
Taxes are another major area where the self-employed can face significant hurdles. Compared to full-time employees, who pay tax through regular payroll deductions and receive end-of-year T4 slips, tax season is far less straightforward for independent workers. The process often includes complex calculations about what expenses you can claim, understanding tax credits that change regularly, and waiting for refunds if you have overpaid due to a fluctuating income.
The gap also extends to the types of support offered from employers. Independent workers usually lack a number of benefits that full-time employees tend to enjoy, such as employer pension contributions, health and dental benefits, and paid sick days. In 2011, 3/4 of workers in standard employment in Ontario had medical insurance, compared to less than 1/4 of workers in non-standard employment, and in Germany a study found that independent workers take around three times fewer sick days off work.
Many traditional life steps are designed for full-time workers, such as renting an apartment, or borrowing money to buy a car or a house. Given the complexities of their work status, it is far more difficult to assess an independent worker’s credit: they don’t fit into the box of conventional lending. This can create a longer, confusing, and stressful process, requiring greater proof of reliability. Reliability is often connected to traditional employment, as many landlords still ask for employment letters to secure a rental agreement.
For freelancers who serve clients, variability of income is a major challenge. Delayed payments are common, and many freelancers even experience wage theft from clients who refuse to pay. A study by TransferWise found that at the end of 2017, 50 percent of Canadian freelancers had at least one unpaid invoice, and the average freelancer was owed around $1,700. They often lack a place to work or a sense of connection: a survey of US freelancers found that 56 percent felt isolated. While many workers enjoy their new-found flexibility, these things all add up: the same survey found that 63 percent reported feeling anxious because of all of the logistics they must manage as a freelancer.1
The bottom line is that working independently means falling outside of the many systems that exist to support and protect Canadian workers. From navigating a difficult tax system to getting paid on time, they take on a great deal more risk than their full-time counterparts. Whether choosing to start their own business, or forced into independent work due to changes in their sector, many independent workers are contributing to the economy but not receiving security in return.
There have been some promising attempts to protect independent workers. In New York, for example, the city government introduced the Freelance Isn’t Free Act in 2017 to bolster the protection of freelancers, including the right to a written contract for larger contracts, and timely payment. Within a year of being enacted, freelancers in the city had recovered a quarter of a million dollars in payments.
In particular, initiatives are offering alternative ways of attaining benefits by making consumers pay extra to support workers. For example, the Black Car Fund in New York gives for-hire drivers access to injury compensation using a small surcharge, and a similar structure is used by artists in Berlin to provide a range of social security protections including pensions and healthcare.
Recognizing the rise of remote work, some jurisdictions around the world are looking to improve access to communal space for the self-employed. In Singapore, for example, Smart Work Centres have popped up to create workspaces closer to people’s homes, which they can use on a pay-as-you-go basis. In Seoul, South Korea, meanwhile, the government has granted access to nearly 800 public buildings during idle hours for members of the public to host events and meetings.
These solutions usually tend to be small-scale, though. Governments need to do more to analyze how their programs interact with workers outside of the traditional employment relationship, and look for ways to help support workers without restricting their flexibility.