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Can We Overcome the Hurdles Stopping the Self-Employed Sector from Growing?

Recent statistics confirm that the labour market is shifting towards self-employment. Roughly 18% of the Australian workforce are self-employed, and more continue to join these 2 million enterprising individuals all over the country. The trend is even more apparent in other countries around the world.

What’s notable about this growth is that it’s happening despite the excruciating pace that the Government attempts to keep up with this workforce evolution. Lesislation should and can harness the opportunities from this self-employment revolution, rather than attempt to stifle it, as it opens even more opportunities for the greater population and promises substantial rewards to the economy.

A few key areas will need to be addressed to shape an environment that welcomes and thrives on the entrepreneurial spirit.

Attitudes

Perception on self-employment is divided. On one side are those who recognise it as a legitimate way of working, and who understand the incentive provided by the commercial opportunity and accept the commercial risks. Self-employment can provide more control over projects and a better work-life balance than traditional employment ever could.

On the other side are those who view self-employment as a mechanism for ill-intentioned company executives to exploit their engagements with the self-employed through underpayment or the avoidance of worker entitlements and protections.

Unions further exacerbate the latter view, since these work arrangements deny them new membership, causing an increased sensitivity at a time when their membership numbers are historically low and declining.

However, research showed that the primary reason the majority of individuals left traditional employment and became independent contractors or freelancers is that they’re looking to have more control over their work, and consequently their life outside of work.

Worker underpayments and exploitation is wrong. It also makes good click-bait. As a result, improving community attitudes towards self-employment is an uphill climb, though it’s one that’s certainly achievable through better education, strong compliance and advocacy, legislation and awareness. Perhaps some balance can be achieved by reporting the success stories?

Regulations

There are some who will always seek to save a dollar through unfair practices; unfortunately, the self-employed are not immune from these operators. The need for stronger commercial protections to dissuade and prevent this explotation is clear.

Ensuring that the terms of work contracts apply in practice is essential, and thankfully, the new unfair contract laws implemented last year will help in this regard. These laws allow self-employed individuals the ability to balance what could be a lopsided arrangement. Already, millions of contracts will need to be amended to comply with the new laws.

One particular challenge faced by the self-employed is securing sufficient levels of superannuation for more comfortable amounts of retirement income. The Association of Superannuation Funds of Australia reports that nearly 25% of self-employed individuals have no superannuation!

There are two reasons why this is happening. Firstly, some engagers of self-employed workers are not aware that they may be liable to make superannuation guarantee contributions on behalf of independent contractors.

However, more alarming is the choice that self-employed people often make to not contribute funds to superannuation where they are not required to by law. Our experience tells us that this is either from a historic distrust of the superannuation industry (fuelled by poor past experience) or from a desire to spend (short-term thinking) or invest this money elsewhere.

As such, new regulations can be introduced to incentivise the self-employed to better prepare for their retirement.

Business Skills

It’s no secret that a large percentage of new businesses fail only a few years after launch. According to the Australian Bureau of Statistics, more than 60 percent of small businesses cease operating within the first three years of starting.

More often than not, these business failures occur due to insufficient knowledge in running a business. The services being provided are great – the business part is the problem. Despite their expertise and passion for their craft or industry, many self-employed struggle with business management itself.

Improving and extending support for budding businesses is therefore imperative. Resources such as www.business.gov.au are crucial in educating the self-employed and providing them helpful references. In addition, specialist advice, such as legal and accounting guidance, should be made more available and in fact recommended so they can seek assistance in areas they’re not skilled in.

Success in business can ultimately depend on knowing your strengths and finding the right people to help you address your weaknesses. Entrusting aspects of your business, such as taxation and accounting, to specialists, such as CeTaX™ for example, will allow you to focus your time and energy where you excel.

Reflections

Supporting business enterprises

Self-employed numbers look to continue an upward trend. We are faced with the challenge of providing the same level playing field to both those working under traditional employment and those who’ve chosen to strike their own path, whilst respecting and recognising the core differences of each model. Our labour market needs to be more open to the contribution made by these enterprising individuals, and stifling regulations need to be relaxed and even lifted for them to flourish.

Supporting this modern, decentralised workforce only seems logical in order to adapt to its increasingly flexible nature. The self-employed, who by their initial choice of going into business for themselves are innately motivated and full of verve, must be allowed to blossom and deliver on their potentially immense contributions to the greater economy.

At Certica®, helping the self-employed succeed is what gets us out of bed each morning.

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