Dawn Robertson: The all-important 'flexible' workforce needs a better safety net

In November last year the major construction firm Rok went into administration, making 1,066 of its employees redundant in one week and 1,800 the following week. And the new year was not even a week old when the Buchan-based Les Taylor Group - consisting of Les Taylor Contractors and JG Fowlie - made more than 150 employees redundant after the business went into receivership. Since then the jobs fallout from the Buchan situation appears to have been alleviated by about half of the Taylor/Fowlie former employees finding work with other contractors in the North-east. But in general many newly unemployed construction workers are not so lucky.

Construction staff are entitled to the same minimum severance payments as all other employees - ie half a week's pay for each year of service for those under the age of 22; one week's pay for each year of service between the ages of 22 and 40; and one and a half week's pay for each year of service after the age of 41. In each case the maximum weekly pay is limited to 380, with the cap due to rise to 400. Companies planning to make 100 or more employees redundant are also supposed to give threatened employees a 90-day consultation process on redundancies, or, when planning to make between 20 and 99 employees redundant, a 30-day consultation period, although a third of those that go under fail to do so.

Even when a failed company is unable to meet these obligations - not uncommon in the construction industry, where receiverships often come out of nowhere - redundant employees can apply to the National Insurance Fund for unpaid employers' payments to secure redundancy pay and any other sums owed.

But self-employed people do not enjoy the security of such cover; they work for themselves, not somebody else, and therefore cannot draw on the fund because they are not entitled to a redundancy payment. Indeed, a self- employed person often ends up even worse off when invoices for normal work done have not been paid once a company goes into receivership. In theory these people become unpaid creditors. They could, of course, sue but will they rarely go through such hassle and expense.

Someone who sees things in black and white would say: "Self-employment comes with rewards as well as risks, which these people knew.If they were worried about a client going bust and not getting compensation, they should have covered themselves by taking out an income protection policy which is available from most insurance companies."

Well, of course, they could. But in most cases these are practitioners and tradespeople first and business-owners second, no matter what official status self-employment confers, and in the real world financial protection products may not be among their top priorities.

The time may have come, therefore, for the government to consider extending mandatory redundancy payments already available to employees to the self-employed, especially those that have been contracted to the one company for a long period. This could be paid for by increasing mandatory National Insurance contributions by the self-employed themselves. Currently self-employed people only have to pay a basic level of NI contributions, although they can elect to pay an increased level. To keep the cost to the taxpayer down, the number of payouts could be limited to, say, one every three years.

The government has said the economic recovery needs a flexible workforce - which implies a lot more tradesmen, technicians and, indeed, white collar professionals taking the self-employment route. A national insurance safety net - paid for by its potential beneficiaries - would surely go some way to encouraging that.

• Dawn Robertson is head of employment law at Murray Beith Murray.