More than 1.7m workers will miss out on next month’s increase in the UK minimum wage because it does not apply to the self-employed, according to new research by the Social Market Foundation.This disparity could undermine the government’s drive to tackle low pay, the think-tank warns, because it creates an incentive for firms to engage contractors rather than taking on new employees. Next month’s introduction of the national living wage will raise minimum pay for employees over 25 from £6.70 an hour to £7.20. This is to rise to more than £9 an hour by 2020, giving Britain one of the highest minimum wages in the OECD. However, the SMF warns that this risks “sharpening the divide between employee and self-employed”. It is already cheaper for companies to use self-employed workers, since they are not entitled to paid holiday or sick leave. Nicola Broughton, the SMF’s chief economist, said policymakers should instead “adapt to a world that is moving away from the traditional employer-employee model of working”.
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