UK businesses are turning to the self-employed in an effort to re
in in costs as they try to navigate Chancellor of the Exchequer Rachel Reeves’ £26 billion ($34.5 billion) payroll tax hike.
Advertised contract jobs have risen 22% since April, when the tax rise came into effect alongside a near 7% incr
ease in the minimum wage, according to Adzuna figures shared with Bloomberg. In contrast, vacancies for permanent jobs have declined 9%.
The findings show how firms are responding to Labour’s decisio
shifting away from full-time staff toward contractors, who carry out short-term assignments, rec
eive no employee benefits such as health care and, crucially, settle their own tax and national insurance affairs.
“Businesses are now thinking ‘these self-employed are a more attractive option, I don’t need to pay
NI, I can save money.’ We’ve been hearing from some that this is hel
ping them find workers,” said Joshua Toovey, senior research and policy officer at IPSE, a trade group for the self-employed.
Companies have shed more than 180,000 employee jobs since the hike was announced in October, according to official tax figures, with purchasing-manag
ement data pointing to a further slide last month. The slowdown in the labor market and stagnant economic growth are for
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ecast to persuade Bank of England policymakers to cut interest rates for a fifth time on Thursday.
According to Adzuna, a jobs search website, advertized contract roles are above year-earlier levels, whereas dem
and for permanent jobs has fallen. Labour Force Survey figures show self-
employment has risen by over 100,000 in the past 12 months, though doubts remain over the accuracy of the data due to a collapse in response rates.
The drop in payrolls has been concentrated in sectors that are highly exposed to higher employment costs
, like construction or hospitality. Most of these also rely on a high share of self-employed staff, suggesting they can easily switch away from payrolled workers to cut
costs without losing capacity, according to an analysis of tax data conducted by Pantheon Macroeconomics.
“If jobs are falling because firms are adjusting their workforces to higher costs, you don’t simply want to cut rates,” said Rob Wood, chief economist at Pantheon. “Firstly, we have tax hikes that will be pushing up inflation, but secondly, that’s more of a one-off adjustment. Once firms have adjusted their workforces for the higher costs, the job falls will stop.”