Plans to raise the minimum wage will mean a brutal benefit cut for the lowest earning self-employed workers due to complex changes to in-work benefits.
When Universal Credit is fully introduced (stop laughing) then anybody who is self-employed will be subject to the ‘Minimum Income Floor’. What this means is that when calculating in-work benefits, such as Tax Credits and Housing Benefit, the DWP will assume a level of income regardless of how much the self-employed worker is actually earning. For most people this means that the rate of benefits they receive will be based on them earning the equivalent of the minimum wage for 35 hours a week. This will apply even if they earnt nothing at all that month, potentially plunging people hundreds of pounds into rent arrears just because they’ve had a bit of a slow period.
So, as George Osborne is well aware, any rise in the Minimum Wage will prove devastating for the self-employed if they are not able to constantly improve their earning to keep up. Instead of it being an employer’s duty to pay the Minimum Wage, for the self-employed at least, it will be the worker’s duty to earn it. Failure to do so will mean an effective cut to vital housing benefits as well as the replacement for Tax Cedits.
For five years the Tories have been happily encouraging low paid, precarious self-employment, not least because it helps bring the unemployment figures down. Companies running the Work Programme have been handed pay-outs worth thousands of pounds in some cases everytime they encourage someone on the dole to become self-employed. And now, having used a bogus fall in unemployment to help them win an election, the Tory Party are setting out to destroy this socially engineered entrepreneurship.
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