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Stuart Field explores how trust powers the Bread Funds model of mutual income protection for the self-employed.

If you ask self-employed people about their bugbears, late payments are likely to be high on the list.

Indeed, in the USA, 16% of invoices are not paid at all.  One web designer took a novel approach to non-payment: he put a banner across the web site, saying “These guys don’t pay”, only to discover that he had committed a criminal offence by doing so.

In the UK we are perhaps more fortunate: we have a range of tools to deal with late payers such as charging interest, sending letters before action and issuing statutory demands. However, these tools can be a double-edged sword, and if you use them you may get paid but lose a valuable customer.

Late payment issues are just one of the side effects of modern employment practices. When you move from working in an office to working from home as a freelancer, you are in control of your own work situation, but you no longer have colleagues sitting next to you who you can provide a reality check. Many freelancers are happy to pay for co-working spaces where they can help each other deal with issues and get up to speed with new developments, while avoiding loneliness. All this helps to build up trust within the freelance community.

Another feature of freelancing is the loss of safety nets such as sick pay that are provided as standard to employees. This is potentially much more serious than late payments, as if you are unable to work for an extended period, you could find yourself with no income.

While insurance companies are often happy to provide cover for illness and injury, only about 9% of self-employed people in the UK have income protection insurance. One of the reasons why so few people take out this cover is scepticism as to whether it will pay out. The lack of trust in income protection insurance may have something to do with the ongoing scandal involving the similarly-named payment protection insurance (PPI). If insurance firms cannot convince people that their products will pay out, as their own research has suggested, where can people turn?

Bread Funds are an example of people getting together to support each other to provide income protection. A Bread Fund is a group of 25 to 50 self-employed people who put aside money each month and if any of them are unable to work because of illness or injury for an extended period, they can receive money from the fund and practical help from other members.

This model was started in the Netherlands, where there are currently over 17,000 members spread amongst over 380 Broodfonds groups, and it is based on people in small groups trusting one another. Trust is taken to a higher level than in co-working spaces, as a group member who is unable to work is likely to be dependent on financial support from other group members. This high level of trust can in turn open up other opportunities for people in the group to help one another: dealing sensibly with new regulations such as GDPR and Making Tax Digital, bidding together for larger contracts etc.

Face-to-face meetings are vital in building trust to this level, if the Dutch experience is anything to go by. The Dutch Broodfonds groups are face-to face, but there are competitors who organise via online communities. To date, these online competitors have been much less successful, with only a tiny fraction of the membership of Broodfonds groups. And what is most remarkable is that at the time of writing, not a single one of the hundreds of Dutch Broodfonds groups has ever fallen apart.

We are now piloting Bread Funds in the UK and would like to invite any RSA Fellows who are self-employed to join a pilot group. We have the legal structure and the bank account ready and waiting so that once 25 people are willing to join this group, it can start operating.

If you are interested in joining a pilot group or in setting up your own pilot group with other self-employed people, please contact Stuart Field at info@breadfunds.uk.


 

Future Work Awards - nominations close this Friday 21 September!

With the support of Barclays, Social Capital Partners and AltNow, the RSA is launching the Future Work Awards to highlight inspiring examples of good work initiatives from around the world.

We are looking for programmes that have a proven track record in improving the well-being and economic security of workers using novel methods. Examples include collective sick-pay funds for the self-employed, modern lifelong learning programmes for adults, new forms of trade union for gig workers, and innovative HR practices that give workers maximum autonomy.

The purpose of the Future Work Awards is to reward and recognise the unsung social innovators who are bringing about a better world of work outside of government. By raising their profile, we want to encourage others to consider kick-starting similar schemes in their own communities and sectors.

Nominations are open until mid-September, after which a panel of global judges will review the entries and announce the winners in December

If you run a good work initiative or know of one that deserves attention: 

submit a nomination through a short online form 

or find out more from our Future Work Awards site

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