Dependent Self-Employment: Trends, Challenges and Policy Responses in the EU
ILO Employment Working Paper no. 228, International Labour Office, Geneva
64 Pages Posted: 9 Dec 2017
Date Written: December 4, 2017
Across the EU28, there is not only a significant ‘jobs gap’ with only 70.1 per cent of the working age population in jobs but also concerns over the quality of jobs. One particular concern is that employees are being falsely classified as self-employed by employers in order to circumvent collective agreements, labour laws (e.g., minimum wages, working time legislation), employment tax and other employer liabilities implied in the standard contract of employment, and that the emergent ‘gig’ or ‘platform’ economy is accelerating this trend.
This report evaluates this emergent employment relationship, here termed ‘dependent’ self-employment, which covers those classified as self-employed who do not meet one or more of the following criteria: (1) they have more than one client; (2) they have the authority to hire staff, and/or (3) they have the authority to make important strategic decisions about how to run the business.
Analysing the 2015 European Working Conditions Survey, the finding is that 4.3 per cent of total employment in the EU28 is dependent self-employment (1.4 per cent comply with fewer than two of the three criteria, and 2.9 per cent with only two of the three criteria), declining from 5.3 per cent in 2010. Just 53 per cent (compared with 49 per cent in 2010) of the self-employed without employees are thus ‘genuine’ independent self-employed (fulfilling all three criteria), while 47 per cent (51 per cent in 2010) were dependent self-employed, with 15 per cent (12 per cent in 2010) meeting less than two and 32 per cent (39 per cent in 2010) only two of the three criteria.
The prevalence of dependent self-employment ranges from 9per cent of total employment in Portugal, and 8per cent in Italy, Greece and Romania, to one per cent in Denmark and Sweden, and two per cent in Belgium, Estonia, France and Germany. Although it is not significantly associated with specific demographic and socio-economic groups (e.g., genders, age groups, educational levels), it is significantly associated with various organisations, occupations and sectors:
• Workers in the public sector are significantly less likely to be dependent self-employed than workers in the private sector.
• Professionals, and skilled agricultural, forestry and fishing workers are significantly more likely than managers to be dependent self-employed, and clerical support workers significantly less likely.
• It is significantly over-represented in the agricultural, forestry and fishing sector (i.e., 22 per cent of all dependent self-employment is in this sector), suggesting that dependent self-employment is not notably related to the digital economy.
Decent work deficits, however, are not significantly worse among the dependent self employed than for others in employment in relation to the physical environment, work intensity, working time quality, skills and discretion, and job and career prospects. Only the social environment in their workplace is significantly poorer.
Tackling dependent self-employment purely by developing effective mechanisms to detect and reclassify this work as standard employment, without at the same time tackling the decent work deficits attached to other employment relationships, might for instance simply lead to greater sub-contracting and outsourcing to genuine self-employment. Hence, the issue is not so much about making this work standard but more about making all work decent. Although the misclassification of dependent self employment needs to be urgently addressed, either by reclassifying it as dependent employment or recognising a new hybrid category and attaching rights and protection to such work, at the same time, decent work deficits across all employment relationships need to be tackled. This requires firstly, collective responses, including the strengthening collective bargaining, and secondly, adapting social protection to better reflect the demise of the standard employment relationship of permanent full time dependent employment, and a world in which the quantity of jobs mean that 30 per cent of the working age population will not be in employment.
Keywords: informal sector, informal economy, labor economics, entrepreneurship, industrial relations, tax evasion, informal labor markets, tax law, illegal behaviour, formal and informal sectors
JEL Classification: H26, J48, J46, K34, K42, O17, P37
Suggested Citation: Suggested Citation