Thousands of workers across the country are missing out on employee benefits because they are 'bogusly self-employed’.

That's according to new research from Citizens Advice, which found that some unscrupulous bosses are pushing staff to identify as self-employed when they’re really employees.

This means they avoid paying employee benefits like employers’ National Insurance contributions, sick pay, holiday pay and pension contributions.

Self-employed or employee?

Citizens Advice has reported a growth in people asking advisers to determine whether they’re self-employed or not.

Though the current definition of self-employed is rather unclear, there are distinct differences between the two.

Self-employed people can choose their own working pattern, when to take time off and they can work for multiple clients.

Employees don’t have these freedoms, but have a right to parental leave and pay, minimum wage, sick and holiday pay. They’ll also be auto-enrolled on to a pension scheme and can take their employer to an employment tribunal if they feel they’re being treated unfairly.

Research by Citizens Advice revealed that legal tests on some of the ‘self-employed’ would define them as employees. Having work hours set by an employer, using the business’ equipment  and having tax deducted from their pay by their employer indicate that someone should be an employee rather than self-employed.

The charity founds that one in ten of the 'self-employed' people it spoke to could be wrongly classified. Based on this figure, the Government is missing out on a whopping £314 million a year in lost tax and employer National Insurance contributions. The loss of employer National Insurance contributions costs the Government over £300 per person per year.

Workers who are bogusly self-employed pay an extra £61 a year in National Insurance that they wouldn’t if they were classified as employed.

In addition, responsible employers could be undermined by employers who don’t pay their staff properly as they have more money to undercut competitors’ prices.

[Related story: Northern areas top best places to live in Britain list]

Real life cases

Citizens Advice revealed some examples of people who had been in contact about their bogus self-employment issues.

Meg

Meg worked as a Childminder’s Assistant but was concerned about her employment status. She worked regular hours every day, didn’t provide her own equipment and didn’t have the option to send someone else to work if she was unable to.

The childminder gave Meg a ‘contract of self-employment’ on her first day. Not knowing any better, she signed it.

In the first seven months of her employment, she had one sick day and one holiday; she was not paid for either. 

Though Meg was clearly an employee, she would have to go to employment tribunal to confirm it.

Builder’s employee from the south east

The next case worked for a builder for 15 years and was told he was self-employed, even though he was treated as an employee. His employer paid tax for him, but not National Insurance.

Last year, he took three days off due to back pain and has not been offered any work since. Again, he would have to have gone to tribunal and pay in excess of £1,000 to confirm if he was self-employed or not and claim compensation.

Farah

Farah was a Carer’s Assistant for a single company who, like Meg, was given a self-employment contract from day one.

After two years of working there, she fell pregnant her first child and was told that unless she returned to work as soon as possible after the birth, she’d lose her position. She thought that her partner could take the paternity leave but under the terms of her self-employment, she didn’t have the right to shared parental leave.

[Related story: How to make money by renting out your things]

Tackling the issue

Citizens Advice wants the  Government to clarify what self- employment is as a priority, as the current lack of clarity makes it easier to exploit employees. Employment law and tax law take different approaches making it even harder to define.

It also recommends extending the rights which are reserved for employed people to self-employed people too, reviewing tax and National Insurance to ensure that self-employed people are treated fairly.

Taking matters to tribunal is not always an option for workers, so making the process cheaper and easier would be greatly beneficial too.

See if you can cut your car insurance costs