Want to plan for the “future of work”? Help independent workers now

Want to plan for the “future of work”? Help independent workers now

From paying taxes to accessing benefits, learn about the issues facing independent workers in a world set up for full-time work, as part of our series on building inclusion into the innovation economy
March 21, 2019
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Jon Shell is Managing Director and Jack Graham is Policy Editor, both at Social Capital Partners (SCP). SCP is an independently-funded non-profit that designs and implements ambitious solutions to broaden economic opportunity in Canada.

In Canada and around the world, conversations about the “future of work” tend to be dominated by one question: what skills will people need for the jobs of the future? The federal government is investing $225 million over the next four years on a new Future Skills Centre, while international organizations deliberate over the skills you will need to adapt to technological change.

Reskilling is an important issue, but major structural changes are already underway that have yet to be properly addressed. In particular, self-employed and freelance work has become an increasingly common form of employment. It is not just the “gig economy” of Uber and Etsy: in traditionally full-time sectors like health and education, demand for freelancers has been surging in recent years. In the United States and Europe, 20–30 percent of workers are thought to be engaged in independent work already.

As technologies disrupt different sectors, people opt for more flexible arrangements, and businesses cut costs, more and more of us will spend at least part of our careers working independently. A survey by the World Economic Forum found that between 1/2 and 2/3 of employers are likely to turn to external contractors, temporary staff, and freelancers to fill skills gaps. This shift is being exacerbated by technology platforms, which allow businesses to access temporary workers on demand, eroding traditional employer-employee relationships.

The trouble is, Canada is not ready to support independent workers. From paying taxes to accessing credit and benefits, our institutions and systems are still built around the full-time employment model of the 1960s. As a result, independent workers suffer from a “support gap” where it is either harder, more expensive, or just not possible to access the same services, products, and benefits as Canadians employed on a full-time basis.

So what are the issues that independent workers face in a world set up for full-time work, and what can be done to narrow the support gap?


The bulk of Canada’s social safety net was built in the 1960s or before, when the assumed norm was traditional, full-time employment.

Weak foundations

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.

Building anxieties

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.

Encouraging developments

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.

Updating our policy frameworks and support systems to protect independent workers is not only a question of fairness, but of economic productivity. A more secure workforce can spur improvements in service, growth, and profitability.

The missing link

What makes policymaking for independent workers particularly difficult, though, is the absence of the employer as an intermediary for government programs. The bulk of Canada’s social safety net was built in the 1960s or before, when the assumed norm was traditional, full-time employment. The employer collects income taxes through payroll, along with contributions for programs like EI and the CPP.

Updating these government systems in the modern labour market, where an independent worker is both the employer and employee, may be more difficult and potentially expensive. The tax system, for example, incentivizes self-employed individuals to pay themselves in dividends rather than salary. As a result, their CPP payments are lower, which means they may be not saving enough for retirement. Lowering income also lowers the amount they can contribute to a Registered Retirement Savings Plan (RRSP).

Perhaps the biggest issue, though, comes with adapting employment insurance for independent workers: there is an intrinsic moral hazard problem with offering EI to someone who could make themselves unemployed. To try to extend some support, the Canadian government did offer access to some EI benefits for self-employed workers in 2011, including maternity benefits and parental leave, sickness, and compassionate care. However, the scheme was voluntary and interest was much lower than expected and tended—not surprisingly—to be more concentrated among people who were looking to claim the benefit in the near term, for example because they were about to become parents. As a result, in the first year that benefits were paid out, premiums covered less than 1/3 of all payments.

Many of the solutions currently being proposed are trying to tie benefits to individuals, for example through portable benefits schemes, an idea gaining traction in Canada and around the world. Accessible to those outside of a traditional employer-employee relationship, portable benefits allow for contributions from various sources. In Washington State, the government has been exploring legislation to introduce a portable system, whereby businesses are required to make contributions to a benefit plan for independent workers. It would offer a range of protections, including health insurance, paid time off, and retirement benefits.

Closing the gap

Updating our policy frameworks and support systems to protect independent workers is not only a question of fairness, but of economic productivity. A more secure workforce can spur improvements in service, growth, and profitability. During the post-war boom, supports from government and business helped to lay a foundation for Canadian workers to thrive. As our workforce changes we need new models to create a similar environment for today’s workers.  

We are creating potentially expensive risks if a significant and growing segment of our workforce isn’t saving adequately for retirement or is unable to manage periods when they can’t work. There is urgency, although the independent workforce currently skews young, that’s unlikely to be the case forever. Building a more supportive environment also fits with Canada’s innovation agenda, as taking risks often involves periods of self-employment.

Despite the complexity of the challenges presented by the independent workforce, it’s time to lean in and start to solve them. This “support gap” exists in countries around the world, but to date no country has found adequate answers. Canada shouldn’t wait for them. It should seek to be a leader in developing a new safety net for today’s workforce.

1 Our research has highlighted that information and data on self-employed workers in Canada tends to be very limited, with trends often implied from surveys and data in the United States and Europe. It would make working through these complex challenges easier if we had better information about self-employed workers in Canada.

For media enquiries, please contact Nina Rafeek Dow, Marketing + Communications Specialist at the Brookfield Institute for Innovation + Entrepreneurship.