Freelancers are lowering their day rates and working more, new research by the Association of Independent Professionals and the Self-Employed (IPSE) has found.
The research, from IPSE’s quarterly Confidence Index, showed that in the last quarter of 2020, freelancers worked almost one extra week more than the previous quarter, but at the same time cut their day rates by an average of £16. The result was roughly stable earnings that were driven by more work for less pay.
The highest cuts in rates were among associate professional and technical freelancers such as designers and technicians, who dropped their average day rate by £22 from £254 to £232, and also managerial freelancers, who dropped their average rate by £29 from £555 to £526.
Across the sector, the average number of weeks without work dropped from 5 to 4.3. This was driven by professional freelancers, who had almost one less week without work (3.8 down from 4.5), while associate professional and technical freelancers had 3.9 weeks without work, down from 5.3. Managerial freelancers, on the other hand, had more time without work in the last quarter of 2020: 5.7 weeks in the quarter, up from 5.3, cutting their day rates while also working less.
The Confidence Index also showed that while confidence in freelancers’ businesses and the wider economy was rising at the end of 2020, concern about taxation policy and the coming changes to IR35 self-employed taxes was rising. For the first time since the beginning of the pandemic, managerial freelancers and professional freelancers have cited the government’s tax policy as having a worse negative impact on their business than the pandemic.
Chloé Jepps, head of research at IPSE, said: “The last Confidence Index of 2020 shows several concerning trends for freelancers. First and foremost, the average freelancer was working more for less. This is because, when they were more able to work before entering this renewed lockdown, they were cutting their rates to competitively scoop up as much work as possible. It is a worry that this could translate to a longer-term downward trend in freelancer day rates.
“Concerning, too, is that unlike the rest of the sector, managerial freelancers did not see an increase in work even before this lockdown. While others cut their day rates to get as much work as possible while the going was good, for managerial freelancers, the going never got good.
“On top of this, managerial freelancers – along with professional freelancers – are one of the groups that will be most affected by the changes to IR35 due in April. It is indicative of the damage these changes will do that, for the first time since the beginning of the pandemic, managerial and professional freelancers said that government tax policy – not coronavirus – is having the most significant negative impact on their businesses.
“Altogether, these worrying trends are a sign that now more than ever, freelancers need better government support and protection – not the threat of tax rises and damaging structural tax changes.”
Xenios Thrasyvoulou, founder and CEO of PeoplePerHour, a freelancing community, added: “While it’s concerning that many freelancers had to cut their rates during the last quarter of 2020, it’s perhaps unsurprising given that the second lockdown came into effect halfway through the quarter.
“Although freelancers are facing increased competition for their services, according to the reports’ findings they seem to have kept their confidence in the economy, which is at its highest level since 2017. This is likely due to the increase in demand for remote online freelance services by medium to large businesses, which is unlikely to wane in the coming months.
“There is however a legitimate concern by many self-employed consultants and freelancers regarding the government’s lack of clarity and protection with the fast approaching IR35 regulations.”