Could the flexibility of the gig economy provide more security for debtors?
As personal debt levels in the UK reach dangerously high levels, could the UK’s gig economy provide more consumers with increased security and help them manage their over indebtedness?
Since the last credit crunch, much has changed in the UK economy, some of it for the worse, but some for the better. For many, the worse has meant less certainty in the job market and resulted in increased financial instability and uncertainty; whilst for others it has meant increased opportunities and the ability to create additional sources of income.
At Creditfix, these changes have not been lost on us. We increasingly see clients with incomes that vary wildly from month to month, whilst others come to us with additional sources of income, over and above their regular wages.
This latter development is something we welcome at Creditfix, as part of the debt advice process we always assist our clients to identify whether there are additional sources of income they could access. The reason being if our clients can increase their income, then possibly they may be able to avoid using a formal debt solution such as a protected trust deed or individual voluntary arrangement.
However, in the past, this has not always been possible and the opportunities open to people have been restricted because of the inflexibility of the job market, which has not always been family friendly, or too often, when it involves a second job, meaning working unsociable hours.
However, the gig economy, has changed that for many.
What is the gig economy?
A gig economy is characterised as labour market that has a prevalence of short-term contracts and freelance work.
The actual gig economy itself, is not a new concept and has always existed.
In the past, however, it has played a significantly less important part in the UK economy, and has probably been more associated with what is known as the black economy. That is tradesmen doing “homers”, people working “on the side”, but could also mean dance teachers running classes in community centres, or people making a bit of extra money delivering takeaways for the local Chinese restaurant.
Nowadays, however, when we speak about the gig economy, we think of Uber and Deliveroo drivers, or home workers doing freelance work online, or even people letting their homes out through online platforms such as Airbnb, whilst on holiday.
However, as in the past, what characterises the gig economy, is it has primarily been an additional source of income for people, not their sole or main income. It has also been work people have chosen to take on when it suits them, doing as much or as little as they want.
This is different from another aspect of the UK economy that has grown in the last ten years, and now means over one million workers are employed on zero-hour contracts.
The key difference between this part of the economy and the gig economy, is whereas this casualisation has arisen out of the economic circumstances and uncertainty many employers now find themselves, the growth in the gig economy has largely been driven by the online and social media revolution.
Anyone can now become an online retailer, open a clothing boutique, or run a cupcake business. People have found new opportunities to sell their existing skills, but also to monetarise those they only practised in the past as hobbies.
Another key difference, is whereas the casualisation of over a million workers has led to increased financial uncertainty and instability for many, the gig economy has opened new opportunities with the flexibility meaning many are now able to find additional sources of income and security.
So, what do you need to do to become a gig economy worker?
Probably the most important thing you need is to find something that you are already knowledgeable in or have a passion for. Remember if the work is going to involve working additional hours, over and above those you already do in your normal job, you probably want to find something that you are going to enjoy and feel enthusiastic about.
You also need to find something that people are willing to pay you for. However, with increasingly more businesses now setting up online, to avoid the costs and overheads of traditional businesses, there are very few services that can be provided for a cost, that can now not be provided online to customers or through an online provider, for a cost.
As to how to you go about setting up a business, what form it takes is up to you, but it is worth researching. Setting up a business, however, does not always mean you need to start a limited company. Often doing so has no benefit and you may be better off just trading as a sole trader.
As you start out, sometimes simple is best, but later you may wish to make your business more formal. If you are setting up the business to help generate much needed income, you may want to avoid incurring any further debt to get you started, so try using a lean start up model.
As to how to set up a business, there are no exhaustive guidelines, as much will depend on what it is you are proposing to do. If you are providing catering services, you may find that local health and safety regulations apply; or if you are delivering classes you might find you need to be a member of a professional body or group; or you may even find you need to take out some form of professional insurance.
There are, however, plenty of online resources that can help you to explore setting up a business, including the legal and financial implications, and it is advisable you explore these fully. One of the most reliable and a good starting point, is those provided by the UK Gov. Website.
A key point, however, is you must notify HMRC that you are trading as a business, as otherwise you may incur further tax liabilities that you are not aware of, including penalties and charges.
Another key point is you need to be careful what you are doing is not in conflict with what your main employer offers as a service, otherwise, you may find you are in breach of your contract of employment and that could put your existing employment in jeopardy.
However, the gig economy offers a great opportunity for many to generate additional income, which as the UK economy becomes increasingly uncertain, may just make the difference between managing to keep your head above water and sinking.
If you need more information about the options available to you in dealing with your debt, you can always speak confidentially with one of our friendly advisors on 0808 2085 198.