How can freelancers, sole traders and contractors get a cut of tech elite’s AI productivity gains?

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AI-centric companies are getting richer with fewer people, so what is owed to the contractors who help make that happen? We dig into the thorny reality of flat organisations, profit-sharing and the uncomfortable truth about what independent workers contribute and are rarely given back

If AI makes companies dramatically more productive and profitable with fewer people, should those gains just flow to shareholders and senior executives?

Profit-sharing mechanisms, such as employee ownership trusts, profit-sharing schemes, and share options, are designed with employees in mind. Yet that very category is being quietly eroded by the rise of flat organisational structures.

The combination of AI-centric enterprises, smaller headcounts and more people going into self-employment to do the specialist work is no longer simply a workplace trend; it is becoming a matter for serious public debate.

"Flat is the new up"

As The Freelance Informer noted in its article Would a future Chancellor of the Exchequer ever scrap Employer's NI?, former Prime Minister Rishi Sunak has been told by chief executives that "flat is the new up."

Sunak has since proposed rebalancing the tax system by abolishing National Insurance "over time" and replacing it with taxes on corporate profits. AI-led productivity improvements will drive gains, he argues.

Such a policy, however, would have significant consequences for the solo self-employed: freelancers and contractors who operate through a limited company. They could find themselves caught in a fiscal blind spot, neither benefiting from employee-facing schemes nor adequately recognised within a reformed corporate tax framework for small companies.

Here is an example of this CEO mindset from Coinbase CEO Brian Armstrong, who justified why he has decided to make 14% of his staff redundant:

Today I’ve made the difficult decision to reduce the size of Coinbase by ~14%. I want to walk you through why we're doing this now, what it means for those affected, and how this positions us for the future...

We are flattening our org structure to 5 layers max below CEO/COO. Layers slow things down and create coordination tax. The future is small, high context teams that can move quickly. Leaders will own much more, with as many as 15+ direct reports. Fewer layers also means a leaner cost structure that is built to perform through all market cycles.

No pure managers: Every leader at Coinbase must also be a strong and active individual contributor. Managers should be like player-coaches, getting their hands dirty alongside their teams.

AI-native pods: We’ll be concentrating around AI-native talent who can manage fleets of agents to drive outsized impact. We’ll also be experimenting with reduced pod sizes, including “one person teams” with engineers, designers, and product managers all in one role.

In short: AI is bringing a profound shift in how companies operate, and we’re reshaping Coinbase to lead in this new era. This is a new way of working, and we need to leverage AI across every facet of our jobs.

All the pain and no gain?

This raises an urgent question. If artificial intelligence makes companies dramatically more productive with fewer people, who should benefit from those gains and how? Many contractors are already contributing meaningfully to AI-driven productivity through their specialist knowledge and expertise, yet no clear reward mechanism exists for them.

The self-employed cannot simply be shoehorned into frameworks built for traditional employees. The challenge, then, is whether corporate and government policy can develop separate, fit-for-purpose mechanisms that recognise this contribution without inadvertently pushing contractors inside IR35 or into disguised employment territory.

Here are some proposals that need to be considered and tested by freelancers, advocates, hiring companies and tax experts:

Benchmarked sector-wide rates for AI-adjacent work

One avenue to explore could be sector-wide collective bargaining for contractors who belong to unions or rate floors. Trade bodies and professional associations could negotiate minimum rates for AI-adjacent work, so when companies become more profitable through AI, the contractors who help maintain and operate those systems aren't simultaneously squeezed on day rates. This already happens informally in some creative industries; making it more formal and widespread would distribute gains without triggering employment status questions.

That said, self-employed workers should be negotiating their own rates. However, if they are fixed-term contractors, the hiring company will often set the rates with little wiggle room for negotiation; hence, a healthy baseline rate for certain responsibilities could be negotiated and set with contractor input.

Sole traders and limited company director benefits fund

For sole traders and limited company contractors, the mechanism is more obvious. A dedicated tax or hypothecated levy on large companies' AI-driven productivity gains, essentially an automation contribution, could be channelled into a portable benefits fund.

For example, freelancers and the self-employed would accumulate entitlements based on their self-assessment earnings: a sick pay credit activated after a waiting period, a training allowance refreshed annually, and a pension top-up matched against voluntary contributions.

The gain is shared at a national level, with the state as intermediary, so there is no direct financial relationship between any specific contractor and any specific client that could trigger IR35 scrutiny. The business-to-business relationship remains clean.

❗However, a well-designed freelancer dividend or support fund through the tax system needs to wrap its head around all groups of contractors differently: sole traders, limited company freelancers, agency and umbrella contractors.

Baseline of security for umbrella and agency workers

For umbrella company and agency workers, the situation is more complicated because they technically already have access to statutory sick pay, holiday pay, and pension auto-enrolment. The problem is not that these entitlements don't exist on paper; it's the economics of umbrellas and how they have historically worked, which means the worker funds them implicitly through a reduced net rate, and the enforcement record is patchy.

The more useful policy intervention here is not another benefit layer, but better enforcement of the rights already owed:

• Mandatory transparent payslips showing the full deduction
• Statutory requirement to pay out accrued holiday on leaving, regardless of umbrella circumstances
• A portable pension pot that follows the worker between umbrella companies rather than resetting each time they change provider

The current system makes it administratively convenient for companies to use flexible labour through agencies, umbrellas, and limited company contractors, without bearing the full cost or responsibility of employment.

At the same time, the workers in that flexible labour market face income risk comparable to the self-employed, without always enjoying the self-employed person's tax efficiency, and employment status comparable to employees, without always receiving the employee's protections in practice.

Therefore, a system of portable, universal entitlements that travel with the worker regardless of which legal category they happen to fall into this month should be put in place. Just a baseline of security that follows the umbrella worker in an AI-driven economy.

Reformed capital gains for winding up a freelance business

The self-employed have genuinely lost ground on Business Asset Disposal Relief, the lower rate of capital gains tax available when closing a limited company. This is one of the few mechanisms by which a freelancer who has built something over the years can be rewarded for the risk they took.

Changes to capital gains tax rates have particularly affected contractors looking to wind up their companies or sell business assets, increasing the tax payable on gains realised. Restoring and strengthening this relief would mean that self-employed people who thrive in a flat-org world can eventually keep the rewards of their work, not just collect a day rate until they can't work anymore.

Flat org economy policies need a work-through

If government policies look at the future of work as a genuinely flat-org economy, the self-employed would no longer be a niche group which can be considered at the margins of policy. They are the workforce. Any serious attempt to distribute AI productivity gains must be built with them in mind, because traditional employment is quietly disappearing.

Going back to Sunak’s point, AI is posing an unemployment problem. Unemployment in the UK has risen to 5.1%, a four-year high, disproportionately hitting younger workers, with AI replacing entry-level roles. His BBC Newsnight interview deserves credit for bringing the topic into the public domain, rather than behind the closed-door boardrooms of the tech elite. There are near-term costs to household livelihoods and funds for public services.

However, Sunak's proposal arguably contains a contradiction that needs a work-through. Replacing employer NI revenue with higher corporate taxes, at the very moment more people are being forced into self-employment through their own limited companies, doesn't solve the problem. It creates a new one.