Policy Responses to New Forms of Work

Chapter 8. Strengthening social protection

Social protection systems have often been designed with full-time, permanent, dependent employees in mind, leaving other workers at a potential disadvantage.

As detailed in the OECD Employment Outlook 2019 (2019[1]), in many countries, self-employed workers are not entitled to the same suite of benefits as employees. For instance, in many countries, self-employed workers are not entitled to unemployment insurance as the potential loss of income is seen as entrepreneurial risk, to be borne by the individual and not by society (although a basic level of social assistance may be available). Even where they have access, self-employed workers may face difficulties in meeting eligibility criteria or contribution thresholds of the schemes that they can access. They will typically also face a higher administrative burden than employees to report their income, pay social protection contributions and access benefits.

In most countries, worker classification determines access to social protection. In the Dutch response to the questionnaire, they stated their intention to enhance social protection for those in new forms of work by first tackling issues surrounding worker classification.

In cases where employees are misclassified as independent contractors, this will generally have the effect of reducing their access to social protection. Workers who sit in the “grey zone” between dependent employment and self-employment are at risk of being similarly disadvantaged, even though their working arrangements may have some of the characteristics of a typical employment relationship. Some countries will see this as rationale for enhancing social protection for workers in the “grey zone”.

Generally, part-time and fixed-term employees will have the same access to social protection as employees on full-time, open-ended contracts. However, they may have lower (or no) entitlement to benefits depending on their pay or hours worked. In other words, they may have “statutory” access to certain benefits, but have lower “effective” access to the same benefits compared to standard employees.

The following policy responses are discussed in this chapter:

• Extending benefits to workers in the “grey zone” between dependent employment and self-employment;

• Extending benefits (including unemployment insurance) to the self-employed more broadly;

• Simplifying administrative procedures for the self-employed;

• Improving effective access to benefits for fixed-term and part-time employees;

• Increasing the role of tax-financed benefits, including means-tested benefits and universal benefits; and

• Reviewing social protection systems in the context of new forms of work.

8.1. Extending benefits to workers in the “grey zone”

Some countries have identified certain groups of workers in the “grey zone” between dependent employment and self-employment to whom they think social protection rights should be extended. Some countries have implemented special measures for “dependent” or “employee-like” self-employed workers while others have targeted specific sectors or occupations.

8.1.1. Special measures for dependent or “employee-like” self-employed workers

Chapter 3 discussed how in some countries (including Italy, Portugal and Spain), groups of “dependent” or “employee-like” self-employed workers have been granted enhanced social protection coverage. Some recent changes are discussed here.

Italy’s “collaboratori” category was created with the purpose of improving access to social protection for those in between independent contractor and employee status. Unemployment benefit for collaboratori was established in 2017, along with new protections (for both collaboratori and freelance professionals) in case of maternity, illness or accident, including the possibility to postpone/suspend or find a suitable replacement for an activity for a client, subject to agreement with them.

In Portugal, changes in 2012 extended unemployment protection to economically dependent self-employed, in cases whether there is termination of professional activity. In 2018, the eligibility criteria for economic dependency were relaxed with the effect of extending unemployment protection to more self-employed workers. In 2019, the requirements regarding qualifying periods for access to benefits in case of cessation of activity were reduced from 720 days of contributions in the previous 48 months to 360 days of contributions in the previous 24 months.

The Korean response to the questionnaire reported that the government plans to improve the employment insurance system, allowing workers who fall into the grey area between the employed and the self-employed to enroll in employment insurance, specifically those directed and supervised by and strongly dependent on their employers. It also mentioned that the government has been considering the adoption of employment insurance for “artists”, as one of these dependent worker groups.

The Japanese response mentioned social protection as one of the topics included in one of their studies on Work Style Similar to Employment, previously mentioned in Section 3.3. At the time of writing, the discussion was said to be continuing in the study group (since October 2018).

Box 8.1 notes some steps taken to provide occupational accident insurance for platform workers (some, but not all, of whom may be in the “grey zone”) and for dependent self-employed workers.

Box 8.1. Expanding access to occupational accident insurance

Self-employed individuals will generally be expected to insure themselves against occupational accidents. However, some countries have taken measures to improve protection in this regard for platform workers and for dependent self-employed workers.

Occupational accident insurance for platform workers1

Specific characteristics of platform work may increase the risk of injury, including potentially high levels of competition (encouraging long hours and risk-taking), the type of tasks performed (e.g. delivery and passenger transport) and the informal and multilateral nature of working arrangements.

In France, the legislator has granted certain rights to platform workers through the August 2016 El Khomri law (or loi Travail), including special provisions for accident insurance. If workers earning more than EUR 5 100 per year from platform work voluntarily insure themselves against the risk of occupational accident or illness, the platform must provide reimbursement.

Occupational accident insurance for other self-employed workers

Dependent contractors in Korea and Spain are entitled to occupational accident insurance. The Australian Government reported that it was closely monitoring the issue of occupational accident insurance in relation to new forms of work. Estonia mentioned on-going discussions on occupational accident insurance for the self-employed more broadly.

8.1.2. Special measures for certain sectors/occupations

Some countries also have special entitlements for self-employed workers in artistic and cultural sectors. Such schemes exist in Germany for artists and writers. In Austria, there are special entitlements for “new self-employed”, i.e. holders of a ‘contract for work’ without a trade licence and freelance workers in some liberal professions (artists and writers, lecturers, psychologists and other professions).

In Turkey, taxi drivers and other public transport drivers, domestic workers, and some groups of artists specified by the Ministry of Culture and Tourism have the opportunity to pay for missing days, and social welfare entitlements and general health insurance similar to employees.

In France, since the 1960s, self-employed authors and artists (including writers, screenwriters, photographers, composers, choreographers, painters and sculptors) have benefitted from a social protection scheme adapted to specific characteristics of these professions. In 2018, the ministers of Culture and of Solidarity and Health together underlined the importance of this population continuing to benefit from quality social coverage and announced that they would examine the scope of application of the scheme. Other reforms introduced at the start of 2019 were expected to improve the speed and reliability of processes and give these authors and artists the ability to acquire rights in return.

8.2. Extending benefits to the self-employed more broadly

A number of countries reported movements in their social protection systems towards broader access to benefits among the self-employed more broadly. Some countries have introduced unemployment benefits for the self-employed for the first time while others have extended access to benefits such as healthcare and paternity benefits. While such measures are not targeted specifically towards workers in new forms of work, they may have the effect of increasing the level of social protection for workers in the “grey zone” between employment and self-employment.

8.2.1. Introducing unemployment insurance for the self-employed

In Spain, a reform adopted in December 2018 will extend social protection and social security contribution to almost all self-employed, aligning their social security scheme more closely to that of employees. It increases the social contributions for the self-employed. In return, they will get access to "a true right to unemployment" (in the form of improved access, flexible conditions and longer duration), as well as coverage for occupational risks (benefits relating to accidents at work or occupational diseases), enhanced benefits for temporary disability due to sickness, improved work-life balance and maternity protection (reduction in social security contributions for self-employed women returning to work after maternity, and a right to lifelong learning. Previously, the self-employed had had access to voluntary unemployment insurance (since 2010).

Ireland reported its intentions to extend contributory unemployment benefits to the self-employed by the end of 2019. This follows a trend of extending the benefits available to the self-employed, who had access to 80% of all benefits at the time of writing, including access to means-tested unemployment benefits.

In Lithuania, changes since 2017 have provided additional social protection to the self-employed, extending unemployment insurance, maternity benefit and sickness insurance to owners of sole proprietorships and members of business partnerships.

A number of countries mentioned that they had introduced voluntary unemployment insurance for the self-employed: Austria in 2009 and Romania in 2002 (for those earning between the minimum wage and five times the gross average wage). One potential limitation of this approach is that voluntary insurance schemes risk adverse selection of members, so that it is those with the highest risk that have the biggest incentive to join. The OECD’s 2018 report on the Future of Social Protection (OECD, 2018[19]) notes that if the scheme is entirely self-funded, a “vicious circle” of contribution increases and loss of low-risk members could result.

Israel reported that a few years ago there had been discussions about providing unemployment insurance to self-employed, but no new such policy had materialised.

8.2.2. Extending other benefits to the self-employed

Portugal and Slovenia mentioned that recent changes had brought benefits for self-employed workers closer to the benefits of employed workers, in terms of sickness, unemployment and childcare insurance in Portugal (in 2018); and healthcare and pension insurance in Slovenia (since 2013).

A recent United States regulation, which took effect in August 2018, enables qualifying workers in non-standard forms of employment (referred to as working owners, including qualifying sole proprietors and other self-employed individuals) to participate in Association Health Plans (AHPs). In effect, the new rule clarifies the definition of “employer” allowing small entities and working owners without other “employees” to join together and participate in these health plans. A proposal under consideration now includes similar reforms for retirement savings plans, referred to as Association Retirement Plans (ARPs).

Chile reported that the lower house of congress had approved a bill that would provide mandatory health and pension coverage for contract workers and the self-employed earning more than roughly twice the average national wage. Prior to the law, these workers contributed to the system only through voluntary contributions. Contributions are expected increase gradually until 2027, at which point they will equal the rate currently applied to "regular" employees (17% of the gross salary).

Germany mentioned the introduction of a pension obligation for self-employed in this legislative period.

8.3. Enhancing portability across different forms of employment

Significant reforms to the social protection system in Denmark and France should boost portability of entitlements for individuals moving between (or even combining) employee status and self-employment.

In 2018, Denmark brought in a new unemployment benefit system which treats all income sources equivalently, with the aims of: (i) increasing access to unemployment insurance for self-employed, non-standard workers and on-demand employees; (ii) making it easier to combine self-employment and employment income; and (iii) making it simpler for self-employed individuals to prove discontinuation of operations. Before the reform, self-employed applicants had to produce documentation not only on earnings, but also on revenue and tax declarations, proof of orders etc. Under the new rules, eligibility will be based on reaching the minimum income threshold. It also aims to simplify the administrative process of proving that a company has in fact closed down, removing the requirement for proof of sale of all of the company's assets. An evaluation of the new system is expected by 2021.

In France, a major reform to social protection is being implemented between 2018 and 2020. It brings coverage of the self-employed under the general social protection scheme, limiting the administrative changes required if a person moves between employment and self-employment. One of the main aims is to ensure continued social security coverage throughout peoples’ careers, which the questionnaire stated were less linear today than before. Other efforts to simplify payment and filing procedures were also announced, such as unifying social and tax declarations for the self-employed from 2020.

8.4. Simplifying administrative procedures for the self-employed

Many countries mentioned efforts to simplify administrative procedures within the social protection system for workers and/or firms through increased use of online tools, the development of centralised systems, or enhanced data sharing between various ministries and agencies. Some policies aimed at simplifying administrative procedures for the self-employed in particular are described here. While these policies are not targeted specifically towards workers in new forms of work, they are likely to increase effective access to social protection for workers in the “grey zone” between employment and self-employment.

8.4.1. Providing consolidated accounts

To reduce the administrative burden faced by self-employed individuals, Estonia has developed the entrepreneurial income account. This is an account to which a person can transfer their entrepreneurial income, to be taxed with a lower tax rate (20% if annual earnings do not exceed EUR 25 000 and 40% above this). The payment is then divided between social tax (pension and health insurance) and income tax. This removes the obligations to submit tax declarations, register as an entrepreneur and keep records of expenses.

8.4.2. Simplifying access to benefits

In Belgium, since 2017, certain benefits for self-employed workers can be granted without the worker having to make an application. For example, after the birth of a child, the social insurance fund will contact the mother regarding maternity benefit and exemption from contributions while the mother is away from work. They also mentioned that the 2014 "Only Once" regulation, which prohibits federal public services from asking citizens of businesses for information that they already have or that they have access to by other means, also simplifies procedures in the social security system.

8.4.3. Changing the way contributions are calculated

In France, testing was done in 2018 on a new system that would give the self-employed more opportunity to adjust the amount of social contributions in response to the level of income actually received, thereby avoiding big shortfalls in low-activity periods. In the new system, the self-employed will be able to adjust the level of their contribution instalments every month or quarter (rather than once a year). If successful, the system will be rolled out more widely in 2019. Another related change introduced in 2017 allowed the self-employed to give advance warning that they would need a staggered payment of contributions in case of difficulty (previously this could only be done on the due date).

In Portugal, changes to the calculation of contributions for self-employed workers came into force in January 2019, basing them on more recent income information and changing the period over which they are calculated.

In the Slovak Republic, as of 2015, the responsibility rests with the Social Security Agency to notify self-employed individuals about their contributory obligations. According to the questionnaire response, this has radically simplified the administrative burden on the self-employed.

In Sweden, the government is currently conducting inquiries into how to base entitlements for self-employed individuals to unemployment insurance on income rather than working hours; how to ensure that a larger number of people can be covered; and how to improve social security for people who move in and out of entrepreneurship.

8.5. Improving effective access to benefits for fixed-term and part-time employees

Generally, part-time and fixed-term employees will have equal access to social protection as employees on full-time, open-ended contracts. However, they may struggle to meet minimum requirements based on contributions or contribution periods, and may simply have lower entitlements than standard employees due to working fewer hours. Some countries reported action to improve these employees’ effective access to benefits.

8.5.1. Improving effective access for fixed-term workers

In Italy, the eligibility conditions for the new universal unemployment benefit scheme introduced with Decree Law 22/2015, lowering the contributions thresholds, thereby increasing (statutory and effective) access for fixed-term and temporary workers.

In the Slovak Republic, since 1 January 2018 the durations of unemployment benefits for permanent and temporary employees have been aligned to six months (originally temporary employees had only the right to four months). In addition, the eligibility criteria have been slightly unified and relaxed to two years of contributions from the last four years (originally the condition for permanent employees was two years of contributions from the last three years).

Some countries also have special, more generous schemes for artists and other creatives who often are employed on a short-term basis, have unstable employment patterns and, and may thus struggle to meet requirements based on contribution periods. Such schemes exist in France and Luxembourg for artists and technicians, though these are not recent developments in response to new forms of work. In Luxembourg, a change to this scheme in 2014 made it possible in particular to make up for an income below the minimum wage or an interruption of activity.

8.5.2. Improving effective access for part-time workers

The Korean response reported that the government was revising the law to ease the requirements for unemployment benefits for “short-time” workers who work less than 15 hours a week. The employment period requirement will be changed from 180 working days over an 18-month period to 180 working days over a 24-month period before the termination of employment.

8.6. Increasing the role of tax-financed benefits

Some countries mentioned changes to the social protection system that would increase the role of tax-financed benefits, complementing (or potentially replacing) benefits linked to employment status and/or the level of contributions (conditions which may limit access for non-standard workers as discussed previously). Such measures may not necessarily be targeted towards workers in new forms of work, but may increase the effective coverage of the social safety net for self-employed, part-time and fixed-term workers, by providing multiple layers (contributory, means-tested and universal) of social protection.

8.6.1. Increasing the role of tax-financed, means-tested benefits

Tax-financed, means-tested benefits could enhance access for non-standard workers since they are not linked to employment status and/or the level of contributions. Italy and Korea reported attempts to increase the role of tax-financed, means-tested benefits, implementing a minimum level of assistance or boosting the existing level.

• The Korean questionnaire response reported that the Korean government was considering the introduction of “Korean-style unemployment assistance”, a means-tested (based on income and asset levels) unemployment benefit that would cover those that do not meet the contribution threshold.

• In Italy, in October 2017, an inclusion income (Reddito di Inclusione) was introduced to tackle poverty, combining means-tested income support with activation measures and reinforced services. The Italian Government has also proposed a minimum income support (Reddito di Cittadinanza) aimed towards poor and at-risk-of-poverty households.

8.6.2. Increasing the role of universal benefits

France and Estonia mentioned efforts to provide healthcare (already universal in a number of OECD countries) on a universal basis, rather than linking it to employment status and/or contributions.

The French questionnaire response reported a general trend in France since the 1980s towards more universal cover (and a movement since the 1990s away from using labour contributions to finance this). As one example, in 2016, universal healthcare (covering sickness and maternity coverage) replaced a previous scheme conditional on hours worked and contributions paid.

While social protection in Estonia is generally contributions-based (with the exception of family and invalidity benefits), the Ministry of Social Affairs and Ministry of Finance were said to be (at the time of writing) analysing together the possibility of establishing universal health insurance.

8.6.3. Basic income trials

As an experiment, Finland started paying randomly selected long-term unemployment benefit recipients a basic income in January 2017. Payments were not conditional on work and participants are not required to seek employment. The pilot ended in 2018, and first results of the experiment will be published in late 2019 to early 2020. The Finnish government has recently rejected the proposal to expand the experiment to a sample of employees (2018[20]). Drawing on this experiment, an ongoing inter-administrative project (TOIMI-hanke) aims to scope options for reforming the basic social security system with the aim of increasing employment and activity and decreasing inequality in the long run (while addressing new forms of work also).

8.7. Reviewing social protection systems in the context of new forms of work

The Spanish government said that it had prioritised analysis on how to address the challenges and opportunities offered by new forms of work, mainly linked to digitalisation and platform economy. Within the Parliamentary Committee on Social Security, a round-table was established to develop consensus on social security and digitalised economy at the national level and to identify possible innovative mechanisms for financing social security (i.e. beyond "traditional" social contributions). The round-table also seeks to address issues of worker classification, and reverse potential negative effects of new forms of atypical work (and in particular, the platform economy) on contribution levels and overall social protection of the workers.

The Swiss government has commissioned a study (due by the end of 2019) by the Department for Home Affairs to assess the potential effects of digitalisation in the labour market on social security; and whether these effects can be addressed by increased flexibility within the social protection system, and how to reduce the administrative burden.

The EU Member States reached a "political agreement" on the proposal for a Council Recommendation on Access to social protection for workers and the self-employed, adhering to the objectives of improving formal coverage, effective coverage, adequacy and transparency of social protection systems. The EC has also published a booklet highlighting best practice examples from Member States (European Commission, 2018[21]).

Note

← 1.  Apart from policies in relation to accident insurance, there was little discussion in the questionnaire responses of social protection policies specific to this group. This is likely because the treatment of platform workers in the social protection system will typically depend on whether these workers are classified as employees or self-employed. Further, the social protection needs of self-employed individuals who offer services via platforms may not be obviously different from those of self-employed operating in traditional markets.