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.
[SPOTLIGHT]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.