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A new report shows how freelancers have had to lower their rates and work longer hours to get more work and highlights growing concerns from freelance professionals about IR35.
Freelancers are lowering their day rates and working more, according to a new survey.
The survey by IPSE (the Association of Independent Professionals and the Self-Employed) shows that in the last quarter of 2020, freelancers worked almost one extra week than the previous quarter, but at the same time cut their day rates by an average of £16. The result was roughly stable earnings, although freelancers were working more for less pay.
The sharpest cuts in rates were among associate professional and technical freelancers such as designers and technicians, who dropped their average day rate from £254 to £232, and also managerial freelancers, who dropped their average rate from £555 to £526.
Across the sector, the average number of weeks without work dropped from five in the previous quarter to 4.3. This was driven by professional freelancers, who had almost one less week without work (3.8 down from 4.5), while associate professional and technical freelancers had 3.9 weeks without work – down from 5.3. Managerial freelancers, however, had more time without work in the last quarter of 2020: 5.7 weeks in the quarter, up from 5.3. IPSE says this means they cut their day rates and also worked less.
The figures come from IPSE’s Confidence Index which also showed that while confidence in freelancers’ businesses and the wider economy was rising at the end of last year, concern about taxation policy and the coming changes to IR35 self-employed taxes was rising. For the first time since the beginning of the pandemic, managerial freelancers and professional freelancers cited the government’s tax policy as having a worse negative impact on their business than the pandemic.
Chloé Jepps, Head of Research at IPSE, said: “The last Confidence Index of 2020 shows several concerning trends for freelancers. First and foremost, the average freelancer was working more for less. This is because, when they were more able to work before entering this renewed lockdown, they were cutting their rates to competitively scoop up as much work as possible. It is a worry that this could translate to a longer-term downward trend in freelancer day rates.
“Concerning, too, is that unlike the rest of the sector, managerial freelancers did not see an increase in work even before this [the latest] lockdown. While others cut their day rates to get as much work as possible while the going was good, for managerial freelancers, the going never got good.
“On top of this, managerial freelancers – along with professional freelancers – are one of the groups that will be most affected by the changes to IR35 due in April. It is indicative of the damage these changes will do that, for the first time since the beginning of the pandemic, managerial and professional freelancers said that government tax policy – not coronavirus – is having the most significant negative impact on their businesses.
“Altogether, these worrying trends are a sign that now more than ever, freelancers need better government support and protection – not the threat of tax rises and damaging structural tax changes.”
On the positive side, Xenios Thrasyvoulou, founder and CEO of PeoplePerHour, said the Index showed freelancers had kept their confidence in the economy, which could be due to the increase in demand for remote online freelance services by medium to large businesses – something that is expected to continue in the next months.