Regulatory changes drive freelancer risk concerns among UK businesses
Recent changes to National Insurance Contributions (NICs) and minimum wage rates are weighing heavily on the minds of UK business leaders, according to a new survey by Coople. Some businesses might consider working around this by hiring freelancers. However, this strategy is risky and might lead to an increase in misclassifications and legal cases over time.
Coople surveyed 500 senior decision-makers at UK small and medium-sized enterprises (SMEs) to understand how these regulatory shifts and freelancer-related concerns are affecting them. The results reveal a clear picture of rising costs and growing uncertainty, with business leaders searching for ways to cut through the complexity.
While working with freelancers offers businesses flexibility and access to specific skills, our findings show that many decision makers are increasingly concerned about the risks involved - particularly the legal and financial consequences of misclassification. The recent regulatory changes around minimum wage and National Insurance Contributions have intensified ongoing concerns as they increase the potential back-payment liabilities if freelancers are deemed to be workers or employees.
There are no comprehensive official UK government statistics on the number of misclassified freelancers. However, various sources indicate that the issue is highly relevant.
A recent survey referenced by the HRReview found that 36% of UK businesses have misclassified freelancers at some point. In addition, employment tribunals saw an 18% increase in open cases in the second quarter of 2024, indicating a rise in legal disputes concerning employment relationships. According to the Financial Times, since the IR35 reforms were introduced in April 2021, between 150,000 and 200,000 contractors have been moved onto company payrolls to mitigate the risk of misclassification.
Two thirds of companies work with freelancers
66% of business leaders said they work with freelancers at least some of the time – 47% of survey respondents said they do “occasionally”. 18% do so on a regular basis.
14% of senior decision makers do not currently work with freelancers but are considering it, but a slightly higher percentage said they would not consider it, at 16%. As we will go on to explore, some businesses are unsure about working with freelancers due to legal uncertainty around their status and logistical issues that might come with employing these workers.
Flexibility and specific skills are top reasons for working with freelancers
The two most popular reasons for choosing to work with freelancers were flexibility, and gaining access to specific skills, both at 62%. 51% of business leaders said cost savings were a factor, too. For over a quarter of survey respondents, a lack of budget for permanent employees was a reason behind working with freelancers, at 28%.
Nearly one in ten business leaders unaware of potential legal and financial risks
Businesses that misclassify workers and fail to provide them with the rights they are legally entitled to can face serious consequences – including employment tribunals, financial penalties, and reputational damage.
For example, in 2021, the UK Supreme Court ruled that Uber drivers must be classified as workers, entitling them to minimum wage and paid holidays. In 2023, courier company Stuart Delivery lost a tribunal case related to worker misclassification, resulting in fines and backdated payments. These cases highlight the risks companies face when hiring freelancers without proper legal frameworks.
In our survey, we asked how aware business leaders are of these risks – including misclassification, unpaid tax liabilities, and non-compliance with employment laws.
Overall, 74% were aware, with the majority describing themselves as “somewhat aware” at 46%, and 28% saying they were “very aware”. 17% put themselves in the middle at “neither aware nor unaware”. Nearly one in ten business leaders said they were unaware of these risks, with 5% “somewhat unaware” and 4% “very unaware”.
We also asked how concerned they would be if they had to manage these risks themselves. 71% said they would be concerned, with 41% “fairly concerned” and 30% “very concerned”. 19% were neutral, and 10% expressed low or no concern.
79% of businesses said they will at least “somewhat” be affected by rising costs
Survey results showed that 53% of SMEs expect costs to “somewhat” increase, 26% foresee a “significant” increase, 16% expect a “small” rise, and only 4% believe their costs will not rise at all.
Nearly a third now unsure whether to continue working with freelancers
23% of SMEs said the regulatory changes would not affect their use of freelancers. However, 31% are now unsure whether to continue hiring them, and 17% said they will stop altogether due to legal concerns.
Only 19% of business leaders said they prefer to work with staffing agencies to minimise risk – but these partners can offer a clear compliance advantage. Staffing platforms like Coople shield businesses from legal uncertainty by acting as the legal employer and managing payroll, onboarding, offboarding, and compliance – while still enabling access to flexible, skilled workers.
Financial and legal compliance is time-consuming and costly
Our survey asked decision makers at SMEs to tell us how much time and resources it costs their business to ensure compliance with employment law. 54% said it costs them “a fair amount”, but for 35%, more than a third, it costs “a great deal”. Only 10% said it does not cost them very much, and only 2% said it costs nothing at all.
We also asked businesses to tell us how complex they found it to calculate and correctly process taxes, social security contributions, and insurance obligations for freelancers. For 19%, it’s very complex. The highest percentage, 43%, said they found this financial administrative work “somewhat complex”, and for 23% it is a little complex. Only one in 10 business leaders, at 10%, said they do not find it complex at all.
How agency staff, and Coople, can help
It’s clear to see that many businesses are already affected by the time and resources cost of maintaining compliance with employment law. On top of this, changes to regulations will increase those costs for many SMEs – and raise the stakes for businesses engaging freelancers without proper protections.
With Coople, businesses get the same flexibility freelancers offer – without the legal and administrative burden. We act as the legal employer of all flexible workers on our platform, ensuring full compliance with current employment law and treating all workers fairly. Coople manages payroll, NICs, insurance, onboarding and offboarding – removing this burden from clients entirely.
To help businesses assess their options with confidence, we’ve outlined the key differences between hiring freelancers directly and working with Coople:
Our easy-to-use platform allows businesses to quickly source pre-vetted, flexible staff with the right skills and training to join their permanent team whenever they need. And using the Coople Favourite Pools feature, businesses can build a list of top performing staff, making it easy to invite trusted workers back again.
Another factor to consider is that NICs for agency workers will be paid by their agency, not the businesses they provide flexible support to. This means that agency workers’ NICs do not count towards the Employment Allowance, which provides eligible businesses with a discount on the National Insurance they must pay – so if your organisation is eligible, the whole Employment Allowance can go towards reducing the cost of staffing your permanent team.
For businesses unable to absorb increased wages and NIC costs, flexible staffing with Coople offers a sustainable alternative. Companies can scale their workforce during peak periods without committing to permanent hires – avoiding both understaffing and overstaffing.
Note on our methodology
OnePoll, an accredited and trustworthy survey company, conducted this survey on behalf of Coople. 500 senior decision makers aged 18 and over in the UK answered the survey between 18 and 25 February 2025. Anyone without a significant level of responsibility at their place of employment was filtered out, ensuring that only senior leaders provided answers to the survey questions.
