Why does George Osborne hate self-employed women?
The current system actively penalises self-employed women. Why?
I’m a hard-working mother of one, with number two due any day now. I work as a freelance journalist and copywriter, juggling my work commitments with caring for a boisterous toddler. I don’t think it’s an exaggeration to say that I work very hard, as most parents of young children do.
Yet the system doesn’t reward my hard work. In fact, I believe that self-employed women are penalised by the country’s current maternity leave laws, and I can’t understand why you haven’t addressed that. Maybe you haven’t noticed?
Here’s why the current maternity pay and allowance system actually incentivises self-employed women to give up work.
Different limits, different rights
First of all, let’s take a look at what employed women get. Statutory maternity pay (SMP) is currently £135.45 a week or 90% of earnings lower than that. During the Maternity Pay Period (MPP), women can work in a self-employed capacity without losing their pay.
When I had my first baby I told my employer I didn’t plan to return and took statutory maternity leave before handing in my notice. I didn’t feel bad about that, I’d paid my NI and the company could reclaim my SMP through HMRC. I’d also been very honest about my plans rather than keeping quiet and hedging my bets.
Most importantly for our family finances, there was nothing stopping me from setting up as a freelancer while I was on maternity leave. The Department for Work and Pensions states: “If you do any work in a self-employed capacity during your MPP, then such work will not affect your SMP.”
So I was able to start building up my freelancing during my maternity leave. At the end of my maternity break, I was an economically active individual who continued to pay tax.
Now I am about to have baby number two and it’s all changed. Because I am self-employed, I cannot receive SMP but I can claim Maternity Allowance of £135.45 a week or 90% of earnings lower than that. So far, so fair.
However, unlike when I was receiving SMP, I cannot work in a freelance capacity without losing that entitlement. Over the 39-week period I can claim for, I’m allowed to work ten ‘keep in touch’ (KIT) days without ending my allowance. However, if I work more than those then I’m deemed to be back at work.
Frustratingly, that doesn’t mean I can work for 80 hours stretched over the period – if I spend just five minutes emailing a client then that counts as a full day.
The DWP explains: “Any work you do as a KIT day, even as little as half an hour for example, will be counted as a whole day for KIT days.”
In short, the vast majority of self-employed women face a tough decision. Either they take a far shorter maternity leave or they shut up shop. That means that at the end of their paid leave, they have to start building up their business all over again – making it likely they will pay less tax during that period.
George, why on earth would you have a system that incentivises self-employed women to cease trading?
The numbers affected
So just how many women could be in my position? ‘Many’ is the answer. The press has extensively covered the rise of the ‘mumpreneur’; women who go it alone in order to work flexibly around their family commitments.
In fact, a survey by the Office for National Statistics back in 2009 showed that women were nearly five times more likely to cite family as their reason for becoming self-employed.
And it’s not just flexible working hours fuelling the rise; as the economy flounders more women need to work to fund their families. You may have noticed that it’s a pretty tough jobs market just now.
Many employers will hesitate to employ mothers of young children, as we do tend to need flexible or part-time hours and we have to take time off when our kids are sick. A report from the TUC found that women were behind more than half the increase in self-employment since the recession began.
We are making our own jobs, we’re making our own way and we’re paying into the country’s coffers. So why does the current system incentivise us to go out of business?
A question of fairness
Maybe some people reading this will think it’s unfair that employed parents can freelance during their maternity leave and not lose their pay. Maybe some people will say that no one should have kids if they don’t have money saved in the bank to cover their baby break – I see comments like that on news sites and blogs a lot.
Of course I disagree with that position, but it’s a separate issue really. Currently, self-employed women are worse off than employed women, despite paying NI and tax.
And on top of that, we lack job security, company pensions, death-in-service benefits or any of the perks of employment. We can’t even save money by claiming childcare vouchers as an employer has to issue those – an issue I hope the Government plans to address in the 2015 childcare voucher changes. Read Parents can reclaim up to £1,200 under new childcare scheme for more.
But I’m not complaining about that; going freelance was my choice and there are many perks. The most important one is that I can spend more time with my babies.
However, I cannot understand why the current system actively encourages self-employed mums to close down their businesses.
Mr Osborne, it’s illegal for a company to penalise a woman or harm her career because she took maternity leave. Yet under the current system, that’s exactly what the state is doing to self-employed mums every day. This isn’t fair and it can’t make economic sense – you need our taxes and you don’t want us claiming unemployment benefits.
What do you think? Is the current system fair? Would you iron out the unfairness by stopping women on statutory maternity leave from working too? Or do you agree that Osborne is preventing mums from maintaining successful businesses? Have your say in the comments below.
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Comments
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The state is over £1000,000,000,000.00p in debt. This money has already been spent and has paid for privileges and 'entitlements' to millions who have already died, and to the increasing multitude who're claiming now thus bumping up the debt.Despite so called 'austerity' measures, current government spending is actually increasing. Our government is playing with fire Unfortunately those who will be forced to pay for this debt are our children and those children yet unborn, who inherit debts yet haven't received most of the benefits the borrowed money paid for. The idea that the government should pay when individuals can't afford things is a fairly new idea, but it has certainly become the predominant thought in the last generation, encouraged by Bankers who make vast profits facilitating the projects the politicians promise will make our lives better. I'm opposed to government subsidies of most kinds, but the $64000 dollar question is 'How to cut them out? The only sounds of unanimity are the wails of protest from those potentially affected. Rather than arguing for increased allowances, we should be arguing for the exact opposite wherever possible. The tipping point will come when the entitlements are so large that more than 50% of the electorate depend on them. Majoritarianism or rather, democracy, will then ensure a financial collapse. Those who rely on benefits are as likely to vote for cuts as turkeys would vote for Xmas or Thanksgiving. Since all governments wish to get re-elected, they kick the can further down the road whispering IBGYBG (I'll be gone and you'll be gone) when TSHTF! Give them what they want. The UK can't pay it's debts now, and without the recent unprecedented interventions of near zero base rates and over £300 billion extra printed pounds, we'd already be in serious trouble. Please read up the consequences of too much government debt, like the Weimar Republic hyperinflation, the collapse of Argentina, Yugoslavia and the recent disaster of money printing gone mad in Zimbabwe ( to name but a few historical examples ) It's not a pretty picture, and if it gets that bad in the UK, the least of everyone's worries will be a minor adjustment in the tax code. By the way hairydougals, there is no National Insurance pot. Zero.Zilch.It is PAYE by another name.
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First of all maternity pay is covered by National Insurance payments, not tax, and as it's title states, it's an insurance payment. When you are ill or suddenly become unemployed or pregnant, this insurance policy kicks in and gives you cover for the period you are unable to work. Following that line of logic I totally agree with you Felicity, that it is extremely unfair as to the differences in the policy payments to women. Another aspect that might effect my future decisions, is the difference in policy payments to those women who have biological children and those that chose to adopt. I feel women unable to physically have children, are penalised for this, if they chose to then adopt instead as the payment structure can be different both by the state and also a lot of companies maternity policies. That's one of my big bug bears, as my employer pays less to women who can't have their own children. Children are expensive and a huge responsibility and some people take the choice to have them too lightly. I don't think we should impose an only child policy as in China, but I don't think people should receive the same level of state support for a child once a family grows past a certain number of children. There is also a skew statistically of family sizes in that poorer families have more children and those that could afford to support more children tend to have smaller families. This can cause all sorts of problems by skewing the population dynamics. Of course there is also the aspect of more broken families in this country adding to the dynamics, when is a step child a first child etc. There would have to be a very tight definition of family size and would probably have to be linked to how many children one woman has physically given birth to maybe... But that's a whole other debate!
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@felicity thanks for the reply. Sorry. ... I was being a little facetious in response to your point about paying taxes. Unless you're doing incredibly well there is no way your taxes match up to the wide range of costs involved with being pregnant, giving birth and then everything that follows after you've had the child. It's not the right argument to make. Money is handed out left right and centre to the rich and poor, the caring and responsible as well as those like the scum who burnt the children to death because they actually wanted to keep the child benefit money coming in. The whole system needs reform, not just the part you happen not to like. I'm actually OK with taxes being used to support families, but not the way taxes are being used to reward large families or those who feel like playing at a career then expect others to bail them out. Do you want your taxes used to fund women who'll take the cash and time off and then happily drop out at the earliest opportunity? Just because you're working hard - do you think everyone else should get more money too?
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24 November 2013