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What is the impact of COVID-19 on freelancers and contractors?

Posted on 8th October 2020 by Marketing Executive - Katherine Ducie

What is the impact of COVID-19 on freelancers and contractors? - Freelancer working on laptop

Whether you’re an engineering contractor, management consultant or a self-employed health and wellbeing professional, contractors and freelancers across all industries have been significantly impacted by COVID-19, since Lockdown1 began in March 2020.

For many professional’s, even after lockdown has eased, coronavirus still continues to have a huge effect on the way they work and critically, their income.

In this blog, we will explore how income, the way we work and the number of self-employed people in the UK has been affected by COVID-19.

Coronavirus effect on income

In the second quarter of 2020, April to June, it was recorded that freelancers on average saw their income drop by 25% during lockdown.

This statistic was revealed in the most recent freelance Confidence Index by IPSE (the Association of Independent Professionals and the Self-Employed) and PeoplePerHour, which surveyed 748 self-employed workers.

The report surmised that the steep drop in income was caused by a significant decrease in the hours worked and a decrease in average day rates of 3%.

Between March and June, the average freelancer is estimated to have gone 5.5 weeks, out of 13, without work. This compares with freelancers not working an average of 3.3 weeks, out of 13, in the months before coronavirus.

While downtime is normal for freelancers who often find themselves in between jobs, the typical amount of time spent not working increased by 66% during this period.

The report also found that freelancers are expecting an average decrease of 11% in their day rates over the coming year. This is more positive than in the previous quarter, when freelancers expected a 20% fall in day rates.

A change in the way people work

The self-employed and employees alike are adjusting to the ‘new normal’ of working.

For many freelancers, like copywriters, graphic designers and other creative professionals, working autonomously from home is what they’ve always done. This bunch were one step ahead and already had an effective workstation set up at home.

For IT contractors and project managers who are used to spending their time on site with clients, working from home will feel like a big change. The upside of this for contractors is that it may allow them more control in their workday and more independence, working in their own space and using their own equipment.

If you are no longer assigned to the typical 9am-5pm working hours, you could even work on multiple contracts. Where IR35 is concerned, an increase in control could be a positive thing.

For business and management consultants who are used to catching up with clients, this has meant maintaining relationships virtually. With new clients, having those initial conversations where you’re getting to know a business via video conferencing, rather than in person, can be hard.

Even if your clients are now allowing business meetings with external parties, lengthy trips using public transport might not be something you want to risk.

For health and wellbeing professionals like psychotherapists, hypnotherapists and personal trainers, their entire working model shifted during lockdown.

With psychotherapists and counsellors providing therapy through Skype and some personal trainers still working with clients online, a personal connection, and results, can be hindered.

For some professionals, the remote way of working has opened up new opportunities and allowed them to break into new markets, working with clients outside of their local area.

Drop in self-employment

In a recent survey by The Office of National Statistics, it was revealed that the number of self-employed people in the UK, 4.76 million in total, has sharply decreased by 238,000 in the three months up to August (1).

It’s thought that this drop is likely down to the lack of government support some self-employed people have received during the pandemic.

While some freelancers and contractors were supported by the government’s Self-Employment Income Support Scheme (SEISS) during lockdown, there were many self-employed individuals, roughly 1.5 million, who fell through the gaps and ultimately suffered.

Those who were new to self-employment, or self-employed on a part-time basis, or those earning above £50,000, and limited company directors were not eligible for any government support and left to struggle their way through the lockdown.

If work was scarce for these individuals during lockdown, their income would have been little to none, leaving them to rely on savings or the help of friends and family.

While loan packages have been available, freelancers may have avoided this option, for fear of the financial difficulty is could cause later down the line.

For those who have left self-employment, suspending work or closing their business permanently may have felt safer than taking on the risk of a loan.

During economic recessions, there is often an increased demand for freelancers. While the cost and responsibility of hiring staff for businesses can be high, freelancers provide a flexible and more affordable way of meeting business needs.

Fortunately, this could be a surge in opportunities for freelancers and contractors over the year ahead.

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Related articles:

What are the changes to self-employed tax and how will they affect you?

Why freelancers need professional indemnity insurance

How a claim for R&D tax relief can help your business right now


Sources

 

  1. https://www.ipse.co.uk/ipse-news/news-listing/ipse-warns-alarming-avoidable-drop-self-employment.html

https://www.ipse.co.uk/ipse-news/news-listing/freelancers-devastating-25-drop-income-lockdown.html

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/august2020

https://www.forbes.com/sites/forbesfinancecouncil/2020/05/06/freelancing-in-a-recession-why-its-a-good-thing/#402e94871b5a

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