Equifinance, the specialist second charge mortgage lender, says that we must ensure the ‘gig economy’ highlighted in the Taylor Review doesn’t result in financial exclusion due to insecure employment, often on an enforced self-employment basis.
The Review, published last July, proposed the creation of a new status of employee ‘Dependent Contractors’ – who should have employee rights. The Government published a response to the Review in February, but with consultations not due to finish until June, it may be a while before recommendations are implemented and enshrined in law.
This is important to specialist lending because, once a loan is taken out, if the piece meal work dries up or the customer gets sick with no statutory rights to sick pay, the customer is in greater danger of defaulting on the loan and being financially excluded in the future.
Workers rights are crucial in lending decisions – after all many full-time employees would take for granted a certain level or sick pay, paid holidays, a pension scheme and are usually paid for jobs that may only be partially completed or a full quota not reached. However, these aren’t currently offered to those working in the gig economy.
"Those working in the gig economy are still in limbo with regards to the security of their finances."
Zero hour contracts, cash in hand, paid on a quota basis, all of these need taking into account when underwriting a loan and clarity needed on how these can be accounted for, and of course, what happens when the income slows down?
After all, there are still some 1.4m workers on ‘zero hour contracts making lending decisions difficult and financial inclusion for the customer more unlikely, unless the status of employment for these people can be improved.
Tony Marshall, Managing Director of Equifinance commented: “Those working in the gig economy are still in limbo with regards to the security of their finances. Until we see enforceable regulation for sick pay, paid holiday leave and other employee benefits, the real risk is that more people will be trapped into enforced self-employment and, ultimately, financially excluded.
“However, with bad credit such as CCJs still on the rise, this is not going to be an easy task, but one in which the specialist finance sector must try to address.”
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