Policy Responses to New Forms of Work

Chapter 13. Policy directions

In recent years, many countries have seen the emergence of, and growth in, particular contract types that diverge from the standard employment relationship (i.e. full-time dependent employment of indefinite duration). While the use of such employment arrangements may bring advantages in terms of flexibility for both workers and employers, concerns have been voiced around job quality and the potential negative impact of excessive and/or improper use of such contracts on equality, productivity and growth, fair competition among firms, and the sustainability of social protection systems.

These trends have prompted countries to reflect on whether existing systems of labour legislation, lifelong learning, social protection, taxation and collective bargaining are capable of addressing effectively the current (and future) challenges of a rapidly changing world of work. While in some cases they are, in others policies and institutions may need to be adapted to ensure protection for vulnerable workers and to prevent abuse, and to ensure that firms that comply with the regulations are not unduly disadvantaged. In all cases, the reflection should be encouraged and where countries are facing similar issues, peer learning can be helpful.

This final section presents a set of policy directions to guide policy makers in consolidating, reviewing and adapting policies and institutions in response to the emergence and growth in new forms of work. These policy directions will feed into a broader set of future of work policy directions, which will be set out in the OECD Employment Outlook 2019 (2019[1]).

The policy directions are illustrated by country examples reported in the OECD/EC survey on “Policy responses to new forms of work”. These country examples should not be read as recommendations as the specific circumstances and challenges of each country vary, and most of these country examples have not been formally evaluated.

13.1. First things first: Getting employment status right

Employment status acts as a gateway to various worker rights and protections. Ensuring the correct classification of workers (and tackling misclassification) is therefore essential to ensure that workers have access to labour and social protection, as well as to collective bargaining and lifelong learning. In recent years, countries have strengthened compliance with existing regulations by:

• Strengthening the capacity of labour inspectorates to monitor and detect breaches of labour regulations. For example, Spain is developing dedicated operative procedures and specialised training as part of inspection campaigns targeted at false self-employment and platform work.

• Making it easier/less costly for workers to challenge their employment status. To do this, some countries place the burden of proof on the firm (rather than the employee) in disputes about employment status. This is the case for certain sectors judged to be “at-risk” (including caretaking/security, construction, transport, cleaning, agriculture and horticulture) in Belgium.

• Strengthening penalties for firms that misclassify employees. The Canadian Labour Code is being amended to include new penalties such as public naming of violators and exclusion from the awarding of federal contracts in the case of repeat or serious offences.

13.2. Reducing incentives for misclassification

Countries should aim to minimise incentives for firms and workers to misclassify employment relationships as self-employment just in order to avoid tax and social contribution liabilities. Large discrepancies in taxes and social contributions between employment and self-employment (particularly where these are not compensated by similar differences in benefit entitlements), create tax arbitrage opportunities for firms and workers in their selection of contractual arrangement, and can therefore encourage employment misclassification. Some countries have already taken steps to address this concern by:

• Assessing tax incentives and reducing large discrepancies in tax treatment where they exist. In the Netherlands, studies have shown significant discrepancies in tax treatment between employment forms, but attempts at reforming the system have proved politically complicated.

• Bringing work in the platform economy into the tax system. Estonia has introduced obligations for platforms to share financial transaction data with the tax authority so that drivers’ tax forms can be prefilled.

13.3. Extending rights and protections to workers in the grey zone between dependent employment and self-employment

Despite efforts to ensure correct classification, there might be still some ambiguity about employment status for some workers who share some characteristics of self-employed (e.g. autonomy over how they carry out their work) and some characteristics of dependent employees (e.g. economic dependence on a single client). Countries may want to consider extending rights and protections to these workers in the “grey zone” between dependent employment and self-employment. The following examples demonstrate different approaches countries have taken to extend coverage of labour law and social protection:

• Extending rights and protections to specific occupations. For example, in Germany and Austria, artists and writers have special social protection entitlements.

• Extending rights and protections to the economically dependent self-employed. For example, in Portugal, self-employed workers who depend on a single client for 50% of their income are considered economically dependent and are entitled to enhanced social protection.

Regardless of the approach taken, the driving principle should be to extend rights and protections to vulnerable workers left in the “grey zone” between employee and self-employed status, while being careful not to create opportunities to take them away from workers who previously had them.

13.4. Improving working conditions in, and preventing abuse of, fixed-term, casual and platform working arrangements

Greater efforts are needed in some countries to ensure adequate working conditions in fixed-term, casual and platform work, and tackle the excessive and/or improper use of these forms of work. While some firms and workers will require additional flexibility beyond that offered within a standard employment relationship, growth in new forms of work should not be driven by firms’ attempts to cut costs by circumventing labour market regulations. Some recent measures taken to prevent abuse of, and improve working conditions in, new forms of work include:

• Regulating the use of fixed-term and casual contracts. For example, in Finland, new legislation means that employers can only propose variable working hours if they have a variable need for labour. It also includes provisions for eventualities such as the worker falling sick or the employment relationship being terminated.

• Promoting better working conditions in the platform economy, at the national and international level. In France, where a platform determines the characteristics of the service provided, it must also take responsibility for occupational liability and professional training.

13.5. Ensuring that more workers are adequately covered by social protection

Social protection systems should be examined and, where necessary, reformed to improve access to benefits for workers in new forms of work. Fixed-term, casual and self-employed workers may face difficulties in meeting contribution thresholds for social protection schemes. In addition, within many social protection systems, self-employed workers are simply not entitled to the same suite of benefits as employees. While countries may choose different approaches (given that social protection systems have different starting points and experiences with accommodating new forms of work), here are a few ways countries might attempt to fill these gaps:

• Reviewing entitlement criteria for social protection and identifying any gaps in provision for those in new forms of work. For example, the Swedish government is currently conducting inquiries into how to improve the unemployment insurance system for self-employed individuals. The Swiss government is undertaking a study on the potential effects of digitalisation of the labour market on social security and whether the system requires increased flexibility.

• Boosting the portability of entitlements and consolidating existing programmes to extend their reach to new forms of work. For example, Denmark has introduced a new unemployment benefit system which treats all income sources equivalently, with the aims of: (i) increasing access 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.

• Increasing the role of tax-financed social protection elements to help address gaps in existing provisions, i.e. use universal and means-tested benefits to complement benefits linked to employment status and/or the level of contributions. For example, the Korean government is considering the introduction of a means-tested unemployment benefit that would cover those that do not meet the contribution threshold.

13.6. Extending collective bargaining rights

Countries may want to consider adaptations to existing regulations to allow collective bargaining for: i) workers in the grey zone, where genuine ambiguity exists about their employment status; and/or ii) those with little/no bargaining power and few/no outside options. The right to organise and bargain collectively is usually restricted to employees. The self-employed tend to be excluded because of potential conflicts with competition law. Yet some self-employed workers share characteristics (and thus vulnerabilities) with employees, and there is an argument for extending collective bargaining rights to these workers. Moreover, some self-employed workers have little or no bargaining power (so that rates of pay are set unilaterally by their employers/clients) and they cannot easily switch to work for other employers/clients. Some approaches described in this report addressing these groups of workers include:

• Extending collective bargaining rights to dependent self-employed workers. For instance, federal legislation for labour relations in Canada uses a definition of “employee” which explicitly includes dependent contractors, ensuring that they cannot be excluded from collective bargaining.

• Extending collective bargaining rights to specific occupations or sectors. In some countries, creative workers have had collective bargaining rights for years, enabled by specific exemptions and special statuses. For instance, freelance journalists in Austria have long had the ability to bargain collectively.

13.7. Supporting those in new forms of work to develop professionally

Governments may need to adapt existing strategies for Public Employment Services and public skills programmes to improve access and participation amongst those in new forms of work. Some countries are attempting to enable all workers to harness the benefits of a changing world of work, by:

• Ensuring broad-based access to public employment services. In light of new challenges in the labour market, Germany's Federal Employment Agency has enhanced the range of counselling services available for adults looking for reorientation in working life, regardless of employment status.

• Training jobseekers for opportunities in platform work. For instance, the Israeli Ministry of Labour and Social Affairs operates a few small pilot programmes offering training in the digital skills necessary to take advantage of opportunities in the platform economy.

• Ensuring broad-based participation in adult learning. For example, the French Individualised Learning Account allows any active person to acquire training rights that can be mobilised throughout their entire professional life, through employment, self-employment and non-employment.

13.8. Enhancing data collection and coordination

Policymaking should be based on evidence rather than anecdotes and where countries are facing similar issues, peer learning can contribute to better policies. Some approaches described in this report include:

• Using data collection to build better evidence on new forms of work. For instance, Statistics Finland found that qualitative interviews among workers in different employment situations were particularly informative for finding the correct measurement approach for new, not yet well-defined phenomena in the labour market, such as zero hours contracts and platform work).

• Addressing challenges through a comprehensive approach: Given the complexity around new forms of work, policy responses should be based on a comprehensive approach with the involvement of different stakeholders (various government agencies, social partners, other stakeholders). A case in point is the Danish effort to tackle challenges of future of work through the Disruption Council.

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