A new social contract: who pays?
One of the strengths of direct, open-ended, full-time employment contracts is their legal clarity about who shoulders the various risks that social protections are designed to address. This sort of clarity is often lacking for other forms of work. With their share in the marketplace increasing, it’s crucial to decide how to strike that social bargain.
The demands of flexibility and social protection are currently discussed as if they were in opposition. “The big question that comes out of this is who bears responsibility for offering certain types of flexibility and for certain types of social protection?” says Professor Mark Stuart. “Who’s going to cover the costs?”
Bettina Schaller adds that any potential solution to these questions faces two further challenges: “Is the funding sustainable in a broader societal discussion, and is it going to actually stand the test of time?”
Without a solution, those not covered by social protection may have to fall back on the last resort of the state. Stijn Broecke points out that this will be funded by general taxation, so firms that use diverse forms of working arrangements to avoid providing social protection could end up paying for it anyway through higher taxation.
A kaleidoscope of national systems
Adding to the complexity are the substantial differences between social protection systems in different countries. “We don’t have one global labour market,” says Denis Pennel. “We have over 150 at the national level. Even within the EU, we still have 28 different labour markets.”
A few examples show just how diverse social protection systems currently are – and the challenge this presents.
“The term ‘self-employed’ is understood differently across and even within the 35 countries covered in this report,” says a European Commission report. “In fact, there is currently no single, unambiguous definition applicable in any of the countries (except for Slovenia) drawing a clear-cut distinction between ‘genuine’, ‘dependent’ and ‘bogus’ self-employed.”1
Different national legal arrangements bring their own distinct complications. France, for example, has tried to make life easier for platform workers – for example by creating the new legal status of auto-entrepreneur, which was later changed to micro-entreprise. Adding additional legal categories, however, can cause complications. France Stratégie’s Cécile Jolly says that ultimately the government will “have to harmonise the social protection of independent workers, because we have a lot of different protections for different kinds of occupations and independent workers.”
Romain Trébuil, CEO and co-founder of YOSS, a digital marketplace for freelancers and a global brand of the Adecco Group, has experienced the complexities of French social protection. In addition to providing the best match between freelancers and clients, YOSS is committed to taking care of both mandatory and optional socialprotection for the self-employed. YOSS does not handle regulated professions such as law and medicine, independent members of which have their own relevant regulations. YOSS serves freelancers in 13 separate legal categories – all with different social protection regulations – and advises freelancers on their optimum status according to income, specialities and protection expected.
Furthermore, YOSS is engaged to offer more services to freelancers and to bring them “a la carte” services as healthcare, training, co-working and insurance. Those services are adapted to their needs and can evolve in line with their career changes or evolution. It provides protection, flexibility and freedom - which is really what people look for as freelancers.
The UK has a simpler set of legal categories, but this causes its own problems, and the Taylor Report encourages the creation of at least one more: dependent self-employed status.
Within countries, a mixed picture
Specific protections also vary widely. In some countries, access to certain social protection depends on residency; in others, on employment history, or on individual contributions.
Self-employed workers in the UK, for example, have no access to unemployment insurance, while in Denmark they are able to contribute to and benefit from such a scheme. On the other hand, eligibility of a Danish freelancer’s spouse for benefits in the event of the worker’s death depends on the latter’s ability to join an occupational pension scheme, which varies by type of work. The UK, meanwhile, is more accessible, with this benefit part of the universal state pension scheme.
Self-employed workers in both the UK and Denmark, however, have access to publicly funded universal healthcare. Across the Atlantic in the US, healthcare is very different. A recent LinkedIn survey of US freelancers found that their biggest concern was finding health insurance, and the ability to make social protection portable between jobs came third.2
To complicate social protection further, in federal countries such as the US and Canada different elements of social protection may come under the remit of subnational states and provinces, the federal government, or sometimes both. Meanwhile in Japan, although a unitary state, local administrative units have a role in every element of social protection except pensions.
The nature of government involvement in social protection may also range from direct provision through to mandated self-funding. Singapore requires residents and their employers to contribute to several accounts under its Central Provident Fund. These savings then offset the pension, healthcare and disability insurance costs of individuals and their family members. However, Singapore has no unemployment insurance – based on the argument that the government’s active labour market policies are sufficient to keep people from being unemployed for long.3
Finally, the state is not the only provider. “A lot of social protection coverage also comes from private insurance and occupational schemes, including for those on diverse employment contracts,” says Rebekah Smith. “We need to discuss what they have to offer as well.”
- Access to social protection for people working on non-standard contracts and as self-employed in Europe: A study of national policies, European Commission, Directorate-General for Employment, Social Affairs and Inclusion, 2017
- These Are Freelancers’ Top Four Concerns For 2018, Fast Company, 15 December 2017
- PM: What we have is better than unemployment insurance, The Straits Times, 2 May 2016