Despite freelancing becoming a more popular form of employment right now, there are massive risks posed to both freelance workers and the employers who hire them. Henry Nicholls/Reuters

Many of Britain's workers are freelance employees with 4.39 million people going down that route as of March 2023 due to the flexible nature of working it brings. When it comes to working hours and earnings, freelancers are able to have much more freedom in deciding when they work and how much they believe they can earn.

Despite this rise in the popularity of freelance working models, there are crucial rights and risks that must be acknowledged by British workers and employers when it comes to freelancing and reportedly these rulings are not understood by 70 per cent of organisations that hire freelance staff.

A new piece from Coople has shone a light on what British freelance employees and freelance-hiring companies must be aware of when it comes to this specific type of employment. Freelance workers must be aware of certain rights which apply to their scenarios whilst companies must be fully aware of the risks which could hamper them.

Group Chief Commercial Officer at Coople, Yves Schneuwly, has provided insight into the worries that freelance employees may have to deal with despite the perks they have with working hours and pay variety. He stated: "Being self-employed comes with a significant amount of admin and can also lead to exploitation or the risk of penalty fines. Freelance workers are not entitled to the same employee rights and benefits that regular employees receive – including minimum wage."

On freelancers, Schneuwly added: "While many set their own pricing, not all are in a position to do so – which can leave them vulnerable to exploitation from companies using their services. Undervalued work can be a big problem for those working for themselves, and a lack of protection from employee laws means that there is very little that can be done if their client sets a low price during contract negotiations."

The Group Chief Commercial Officer goes on to state the responsibilities which freelancers bare in comparison to full-time company staff. He clarified: "Freelancers are financially responsible for their own tax and NI contributions. Failure to pay the correct amount can result in severe fines. Though freelancing can offer desirable lifestyle benefits, there are always risks associated that ordinary employees do not have to worry about."

Freelancing as a worker means you get the categorisation of a self-employed individual and that is crucial when it comes to legal dealings and taxation. Annually, freelance workers are in charge of declaring their income in addition to paying their own taxes and National Insurance fees.

This makes it vital for them to be aware of how much tax they owe to HMRC as not paying the right tax figures could end up leading to dire consequences such as very significant and costly fines. Due to being classed as self-employed, freelance staff do not possess entitlement to the perks which company employees would receive such as maternity leave, minimum wage, statutory sick pay as well as pension contributions.

Ultimately, freelancers face a massive risk of their employers exploiting their services as the work they produce may not be recognised in what they deem a fair manner as they are not on a fixed salary and do not have the authority to dictate what their pay is.

In regard to the organisations which hire freelancers, the risks posed to them include the potential to be held responsible for not paying taxes due to them incorrectly labelling some employees as freelancers. Coople's piece clarifies that it is up to the government to decide who is self-employed due to the possibility of taxes not being paid.

HMRC brought about the off-payroll working rules, or IR35, a new assessment process to avoid any mishandling when it came to paying taxes as it decides whether or not a freelance worker is actually self-employed or is a company employee. In the past, it was up to the freelancers to decide if they were self-employed but as of April 6th, 2021, private-sector organisations and public-sector authorities are mostly in charge of handling IR35.

Organisations that incorrectly categorise their employee staff as freelance workers will receive fines for doing so and be also held liable for any unpaid taxes. Alongside financially disrupting a company, not paying employees what they are entitled to will put a large dent in the reputation of a company.

According to Coople, not scouting freelancers and instead discovering new employees through a digital agency will limit these risks posed to companies. This allows companies to not be drawn into legal misdoings and allows for flexibility for them and their employees.

For employees, being associated with a digital agency has benefits for them as well because there is no need for them to be put through the IR35 assessment and they do not have to pay their own tax or National Insurance contributions. This is because the digital agency usually handles this for them through Pay As You Earn (PAYE) – as it acts as the legal employer of the worker.

Crucially, Coople highlights that being hired through a digital agency means those workers are given the right to minimum wage and vacation allowances as well as other employee benefits to which self-employed workers would not be entitled to have.