Definition and Recognition of Independent Professionals - EFIP Common Position Paper -
General Considerations The EU is experiencing a boom in independent working and the trend is growing. While there is still widespread disagreement about the causes of the boom, most commentators believe that high levels of self-employment are likely to be a permanent feature of the European economic landscape. The emergence of this new reality of work can be traced back to a series of developments that took place over the past 20 years: globalisation, faster lifestyles, the technological revolution, demographic changes, development of the service sector economy and new production patterns such as lean production or just-in-time systems. Despite their increasing importance and the fact that independent professions often provide highly skilled services in core areas of general interest, the significance of independent working is still not sufficiently taken into account by the European authorities when developing European legislation and policies.
Independent Working and Self-Employment in Europe The European Commission has acknowledged that micro businesses are the main drivers and the backbone of the EU economy: they account for over two-thirds of EU GDP and employment and have been the source of all net job-creation in recent years. Figures on self-employment by sex, age and nationality in the EU are updated by Eurostat (labour force survey) once every quarter of the year. The current figures (2Q 2014) puts the number of selfemployed workers in the EU28 at 30.612.000 (15-64 years old). Self-employed workers make up more than 14,32% of workers in the European Union. Although the majority work solely on their own account, almost a third of the self-employed create jobs for others (30%). Independent professionals (a highly skilled subset of self-employed workers) are the fastest growing segment of the labor market and a key social and economic factor in all Member States of the European Union. From 2004 to 2013, the EU27 independent professionals’ population grew from 6.2 million to nearly 9 million, a 45% increase, whereas from 2000 to 2011 (as showed in the picture below) the growth was even higher: 82.1%. In Q3 2014, the current number of independent 1
professionals in the EU was 11,7 Million .
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This number has been extrapolated from the total number of self-employed workers in the EU (Labour Force Survey of Eurostat) with regard to specific professional categories (using NACE codes). 1|P a g e
Independent professionals are not only a source of sustainability, productivity, growth, job creation and innovation. Being one’s own boss is also associated with greater job’s satisfaction, well-being and improved work-life balance. According to the Flash Eurobarometer FL354 "Entrepreneurship in the EU and beyond", in 2012, 37% of Europeans surveyed expressed a preference for self-employment over being an employee, and there is a lot of supporting evidence to suggest that job satisfaction is very high among the selfemployed. Those who preferred self-employment cited greater freedoms, such as personal independence, self-fulfilment and the chance to do something of personal interest, as well as the ability to choose their own place and time of work. However, only 14% of Europeans actually are selfemployed. Such a gap between aspiration and reality exists because of 79% of respondents see lack of financial support as a barrier to start on their own; 72% see complex administrative process and 51% see a lack of information as barriers.
European Definition of Self-Employed The European Commission does not define “independent professionals” in any legislative text. However, the European Commission defines a self-employed person as someone: “pursuing a gainful activity for their own account, under the conditions laid down by national law”. In the exercise of such an activity, the personal element is of special importance and such exercise always involves a large measure of independence in the accomplishment of the professional activities. This definition comes from Directive (2010/41/EU) on the application of the principle of equal treatment between men and women engaged in an activity in a self-employed capacity. This is in contrast to an employee, who is subordinate to and dependent on an employer. In addition, Article 53 of the Treaty on the Functioning of the European Union (TFEU) provides for the free movement of those taking up and pursuing activities as self-employed people. It stipulates: “In 2|P a g e
order to make it easier for persons to take up and pursue activities as self-employed persons, the Council shall… issue Directives for the mutual recognition of diplomas, certificates and other evidence of formal qualifications”. The self-employment form of work does not group homogenous workers. As indicated by the European Commission in 2010, there are “different understandings and definitions of the term selfemployment across the countries, with a number of different subcategories defined: for instance, according to the legal status of the enterprise, whether the business has employees or not (employers versus own-account workers) and/or the sector in which the business operates. Some countries also make the distinction between self-employed status and the status of ‘dependent self-employed’ (e.g. Spain, Italy), where the self-employed person works for only one client. Others distinguish selfemployment which is carried out in addition to paid employment (e.g. Belgium)”. Self-employment is mostly regulated at national level only. The provisions related to self-employment vary therefore widely between the countries. As indicated by Eurofound in 2014, the diversity of the self-employed has attracted diverse forms of regulation, mainly decided at national level: “EU employment law addresses the self-employed mainly in narrowly specific areas such as free movement and equal treatment”.
Recognition and Definition of Independent Professionals Research has shown that independent professionals allow businesses to promote innovation, maximise performance in times of demand, and create jobs by increasing levels of efficiency and profitability. There is a need to identify the defining and unique features that distinguish independent professionals as unique economic agents in their own right. The lack of an up-to-date definition limits the optimisation of their use and as a result, hampers economic growth. Although independent professionals make a distinctive contribution to the economy, there is a common lack of recognition of that contribution, and a suspicion that the rise of independent working is an undesirable development. Indeed, independent professionals are sometimes portrayed either as people who have been coerced into self-employment, or as people hiding behind a freelancing shell to avoid paying higher and additional taxes, as well as national insurance. This is despite the latest results from the latest Global Entrepreneurship Monitor that indicates the level of “opportunity” entrepreneurship – where people start up for positive reasons (e.g. to make the most of a good idea) is close to five times higher than the level of “necessity” entrepreneurship – where people start up for negative reasons such as bogus self-employment. This lack of understanding has real consequences, since those who choose to become independent can encounter unnecessary risks, (particularly in relation to fiscal matters), as well as barriers to trade, as a result of their requirements not being defined, recognized and addressed. No definition applicable throughout the European Union currently makes a clear-cut distinction between the genuinely self-employed who work independently and the bogus self-employed. Each national authority and individual body applies its own legal and regulatory framework provisions, which may vary depending on their remit or policy area (tax law, social security, business law, employment market, insurance). This lack of clarity, matched with the lack of a comprehensive
understanding of what constitutes a flexible labour market, creates major problems in independent professional working at cross-border level in the EU internal market. As a first step, it is recommended that the EU, employers’, employees’ and self-employment representatives adopt a Europe-wide joint recognition of positive (not sham) self-employment and a 3|P a g e
definition of independent professionals, including a shared terminology for the various sectors. Notwithstanding the EU definition of a self-employed person, EFIP defines independent professionals (IPros) as: “a highly-skilled subset of self-employed workers, without employers nor employees, offering specialised services of an intellectual and knowledge-based nature”. Independent professionals work on a flexible basis in a range of creative, managerial, scientific and technical occupations; they are not a homogeneous group and as such, they cannot be considered or investigated as a whole. They are generally characterised by a large portion of autonomy, a high labour productivity, knowledge intensive performance, social commitment and a large dose of entrepreneurship and specialisation. According to KIZO, self-employed workers can be divided into different categories (see picture below). Except for the first couple of boxes, Independent Professionals (highly skilled knowledge workers working with their “Head” rather than “Hand”) fit into all these categories.
Own Free Will or Forced (Is the decision to become independent a personal or coerced choice?). Specialist or Entrepreneur (Is the Independent Professional a skilled worker or someone willing to launch a start-up and employ personnel?). Sole or Together (Is the Independent Professional working alone or in collaboration with other Independent Professionals?). 100% or Hybrid (Is the Independent Professional full time self-employed or also retains a part-time salaried job?).
Since the term independent professionals and self-employed is understood differently in the Member States, a common European definition of this term is crucial. EFIP recommends the EU institutions to use EFIP’s own definition for any legislation addressing this group.
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Independent Professionals and the European SME Definition With the recommendation concerning the definition of micro, small and medium size enterprises, the European Commission clarified that: “An enterprise is considered to be any entity engaged in an economic activity, irrespective of its legal form. This includes, in particular, self-employed persons and family businesses engaged in craft or other activities, and partnerships or associations regularly engaged in an economic activity.” According to this definition, it is the economic activity that is the determining factor, not the legal form. Independent professionals and the self-employed are therefore included in the European SME definition as micro-enterprise (<10 staff, < 2 million EURO balance sheet, <2 Million Euro Turnover). However and in practical terms, support measures for all kind of SMEs - for instance in terms of access to finance, markets, public procurement, training and the SME Test - remain unbalanced in many EU countries as they often fail to take into account the characteristics of the smallest business of one, a very diverse group in a continuously evolving environment. Independent professionals and the self-employed are a unique subset of micro SMEs. Their business model rests on supplying their expertise to clients without necessarily seeking to grow and take on permanent staff, which is typical of SMEs. In doing so and serving their clients, self-employed workers often join forces with other selfemployed and contribute to the creation of “work” rather than “jobs”. The European independent professionals and self-employed community therefore believes that “selfemployed workers” should be better recognised as a stand-alone group outside the micro-enterprise category, as the European Parliament has also called for in its Motion for a Resolution on Atypical Contracts, but at the same time included in the official European SME definition, as to benefit from the same support measures given to SMEs.
Policy Recommendations
Independent Professionals’ contribution to economy and society should be recognised and their characteristics and needs should be specifically taken into account in policy development.
Discussion around new forms of work should be included in policy areas other than labour and social protection, such as regional development policies, sectoral and business development policies and innovation or digital policies.
Independent Professionals need to be properly researched and identified in national and EU data as a distinct group: they are neither SMEs nor entrepreneurs and are not ‘sham’ selfemployed either. In addition, Eurostat and the official statistics in the Member States should include the one business companies and part-time self-employed who are often widely excluded and miscounted.
Independent Professionals have the right to a clear status for both tax and employment purposes. The EU, employers’, employees’ and self-employment representatives should adopt a Europe-wide joint recognition of positive (not sham) self-employment and a definition of independent professionals, including a shared terminology for the various sectors.
Recognise that independent working is a legitimate form of economic activity and realistic career option, and encourage this way of working by funding those transitioning from traditional forms of employment into independent professional working.
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Independent Professionals should be encouraged to organise themselves and to acquire representation. Facilitate Independent Professionals in gaining a voice to express views and concerns, and ensure they have adequate representation at EU level through committee and consultative body membership, and seats on advisory boards so they can be consulted when change is proposed.
About the European Forum of Independent Professionals (EFIP) EFIP is a European not-for-profit collaboration of national associations which represents over 11 million of independent professionals at EU level through targeted research and advocacy. Independent professionals (often referred to as freelancers or contractors) are highly-skilled selfemployed workers without employers nor employees. They offer specialised services of an intellectual and knowledge-based nature and work on a flexible basis in a range of creative, managerial, scientific and technical occupations. With a 45% increase since 2004, they are the fastest growing segment of the EU labour market. EFIP mission is to strive for European policy, business and social environment to become more conducive to the independent and self-employed way of working, in both the private and public sectors. More information about EFIP is available on our Website, our Manifesto and our Campaign.
Contact Marco Torregrossa Secretary General European Forum of Independent Professionals Avenue de lâ&#x20AC;&#x2122;Opale 124 box 6 B-1030 Brussels (Belgium) +32.486.71.30.26 marco.torregrossa@efip.org www.efip.org EU Transparency Register N.: 823591710024-95
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