In the face of rising wage bills and National Insurance contribution changes, more and more businesses are considering turning to freelancers to address skill gaps – but a recent survey shows lingering fears around legal compliance, worker misclassification and potential penalties.
The survey, by flexible staffing platform Coople, found that although 66 percent of businesses currently work with freelancers, concerns over compliance remain a pervasive issue.
Misclassifying freelancers can result in financial penalties, legal disputes and reputational damage. These concerns have been reinforced by recent rulings against businesses such as Uber and Stuart Delivery, prompting companies to scrutinise their employment practices more closely.
Rufus Hood, General Manager UK at Coople, told HR review, “Our new survey shows that UK SME leaders expect the increases to minimum wage and National Insurance contributions to cause their costs to rise, with over a quarter expecting costs to rise ‘significantly’. They are also worried about working with freelancers because of the legal and financial risks they might incur if they were not compliant with employment regulations.”
Freelancer use tempered by compliance fears
While flexibility and access to specific skills remain the key motivations for working with freelancers – both cited by 62 percent of respondents – compliance-related concerns are holding many businesses back from expanding their use. Of those not currently working with freelancers, 14 percent said they would consider doing so. However attitudes remain mixed, with 31 percent undecided and 17 percent stating they would avoid hiring freelancers due to current regulatory challenges.
The fear of getting compliance wrong is widespread. Coople’s data shows that 71 percent of business leaders would be concerned about the risks involved in freelance hiring. Of these, 41 percent described themselves as “fairly concerned” and 30 percent as “very concerned”. Meanwhile, only 10 percent expressed minimal or no concern.
Knowledge gaps around legal responsibilities may be adding to this hesitancy. Almost half (46%) of respondents described themselves as “somewhat aware” of the legal risks, and 28 percent as “very aware”. However, 9 percent admitted to being unaware of the risks altogether, including 4 percent who were “very unaware”.
Compliance and administration create further challenges
The survey also examined how much time and resource compliance requires from businesses. More than half (54%) said it costs them “a fair amount” while 35 percent reported that it costs “a great deal”. Only 10 percent said compliance costs them very little and just 2 percent said there is no cost.
When asked about the complexity of managing taxes, social security contributions and insurance obligations for freelancers, 43 percent of businesses said the process was “somewhat complex”. Nineteen percent considered it “very complex” and 23 percent found it “a little complex”. Only 10 percent found these tasks straightforward. This administrative burden may act as a further barrier to wider freelance engagement.
While cost increases are a clear concern, the regulatory and legal demands around freelance hiring are pushing some businesses to consider alternative options. Nineteen percent of leaders said they prefer to work with staffing agencies instead, citing reduced risk and administrative responsibility. Agencies typically handle classification, NICs and compliance on behalf of clients, making them a safer option for risk-averse businesses.
As UK businesses continue to face mounting financial and regulatory pressure, how they choose to engage talent – freelancers or otherwise – will likely remain a central concern for HR leaders.
