Self-employed workers are often, but not always, entrepreneurs in a legal sense. This means that they have a formal status (legal persona), which also creates obligations to pay value-added tax and other taxes that are explicitly for entrepreneurs as opposed to wage-earners.
In practice, it is not always easy to discern the “real” self-employed worker from the “bogus” self-employed. The latter are formally entrepreneurs, but their work happens in a construction where a de facto employer-employee relation exists. The distinction between real and bogus self-employed is crucial for understanding the position of self-employed workers in the context of labour market relations.
The key case on this issue is the Dutch FNV/KIEM -case. The court decision which has been adopted also into EU jurisprudence, states that collective agreements can be extended to self-employed workers, provided that they de facto are indistinguishable from normal employees. In other words, they are formally self-employed but in other ways do exactly the same as employees.
This court case is important, because it shows one dimension in which the traditional activity of labour unions is restricted by law. For a thorough overview of the legal dimensions of “worker” and “undertaking”, and the FNV/KIEM – court case, see Daskalova (2018). In short, in normal cases a labour union could not engage in, for example, collective bargaining for minimum hourly fees (with a resulting collective agreement), since this would be price fixing and subject to anti-cartel legislation. EU legislation only provides an exemption to this restriction regarding workers, not businesses.
Self-employed construction workers in the Netherlands
One of the most common professions among self-employed workers in the Netherlands is construction work. This obviously includes a wide variety of professions within the sector. According to a Dutch report on the construction sector, about 155.000 people work as self-employed construction workers. This is also a group of professionals that has grown significantly since 2003. Although the number does not signify much without context about taxation and social security issues, their average yearly pre-tax income is roughly 32.100 euros.
Self-employed construction workers have the unenviable honour of being the group with relatively little insurance against occupational disability. According to a recent report 46% of self-employed construction workers have insurance in case of an occupational disability and only 30% has some kind of pension insurance. The main reason for this situation is that for construction workers, the insurance fees are prohibitively high, therefore they can’t or won’t pay for them.
Older construction workers often even cannot get insurance, because the insurance company refuses to insure them. This issue has been recently the topic of intense political debates: whether there should be an obligatory collective insurance to cover occupational disability. Other issues in the political arena relate to legally mandated minimum hourly fees and instruments to prevent bogus self-employment.
Representation of self-employed construction workers
If the position of self-employed workers in the system of labour market relations is somewhat unclear, what does this mean for the representation of these people in the labour market, or in the pollical arena?
Traditionally, employees in a sector can be organized by labour unions. They are employees (i.e. there is a power asymmetry in the employer-employee relation), they work in similar firms and legislation allows labour unions to represent them in the firm, at the sectoral level and through lobbying also at the national level (or: depending on the national institutions, there may be a dedicated role for labour unions and employer federation in labour market policy-making). The distinguishing feature of self-employed workers is that they do not work in a firm but are their own boss.
Although they may have a weak labour market position (e.g. in contract negotiations with other, bigger organizations), they do not occupy the same legal space as employees. This means that various labour market regulations are simply not applicable to self-employed workers. For example, whereas employees have rights to sick-leave or annual holidays, self-employed workers do not have such rights, because they are legally speaking entrepreneurs.
As a result, labour market representation of all self-employed workers is a political question: should their representative body be a labour union, or a professional organization of that sector? The Dutch construction sector is interesting, because there are two options for self-employed construction workers. The first, FNV Zelfstandigen, is a real labour union, connected to the biggest Dutch labour union federation FNV. In that context it also takes part in the federation’s boards and membership organs. The second is Zelfstandigen Bouw, which presents itself as an organization for entrepreneurs. Contrary to FNV Zelfstandigen, it mentions their number of members, around 10.000.
Given that neither organization can engage in collective bargaining for their members, what is it they offer them instead? Perhaps not surprisingly given the background and current political debates, but both organizations have a very strong service-oriented profile. FNV Zelfstandigen (FNV) and Zelfstandigen Bouw (ZB) offer legal advice, discounts for insurance and debt collection services for their members. The former is nonetheless more oriented on skill developments than the latter, which can be seen through the variety of courses offered by the organization. Based on their website, Zelfstandigen Bouw also offers advice and knowledge services regarding entrepreneurship, but (perhaps) differently that FNV Zelfstandigen. Both organizations offer occupational disability insurances – but ZB seems to have developed an “in-house” insurance, while FNV has arranged this insurance with a few different insurance firms.
Preferred policy solutions show the difference
The difference between these two organizations is clearest in their political standpoints. Both are active influencers in politics, but FNV is oriented towards a “just” labour market and “sufficient” fees in order to be able to pay insurances and save for pension accumulation.
This is evident from its occasional demands for minimum tariffs by sector. Their idea is that the minimum hourly fees for self-employed workers are congruent with the minimum hourly wages concluded in the collective agreements of a sector. FNV argues this is especially important for sectors in which there is a high risk for “squeezing” tariffs, such as package delivery and hairdressing. The occupational disability insurance is another issue, where FNV Zelfstandigen shows a more “collectivist” identiy, A slight majority of their members, and therefore the organization, is in favour of the newest policy measure regarding occupational disability. The plan, presented by the social partners (labour unions and employers federations negotiating in the Labour Foundation), envisages an obligatory insurance for self-employed, with an opt-out possibility for high earners. On the issue of pensions, FNV Zelfstandigen is enthusiast about the plans for an obligatory pension for self-employed workers, but ideally they would like to see the possibility of participation in sectoral pension funds. These are the backbone of the Dutch (income-dependent) pension system.
ZB on the other hand is oriented towards retaining tax benefits particular to self-employed workers and promoting deregulation. The tax benefit is important for many self-employed workers, since it provides a kind of buffer for investment or for hard times. The current Dutch government wants to reduce this tax benefit for two reasons. First, all Dutch citizens should get a tax reduction. The financing of the tax reduction has to come from somewhere, though, and this tax benefit seemed a good source, because of the second reason. In the Netherlands the government wants to increase the (market) tariffs of self-employed at the bottom of the range, because these do not necessarily suffice for living and costs like insurance. ZB also advocates lowering value-added tax in the construction sector and stricter policy towards non-payment of self-employed workers by bigger companies.
Regarding the plans for the obligatory occupational disability insurance, it is against these plans, because it does not include obligations for other entrepreneurs. In other words, the insurance plan weakens the position of self-employed workers against other entrepreneurs, because they can’t always include higher costs in their fees to contractors.
Low-earning self-employed workers cannot deduct these kinds of costs from their taxes in contrast to higher earners. The logic of ZB appears to be driven by a desire for a level-playing field for all entrepreneurs. This is also visible in an earlier plan (2018) regarding pensions. The core of the plan is that all employed (i.e. employed and self-employed workers) are given the ability to save for a higher legally-mandated pension (i.e. the pension that everyone receives upon turning 67). This way, the diverse groups in the labour market would be treated equally.
Self-employment in the Dutch construction sector shows that due to the ambiguity of this form of work, political representation can lean towards entrepreneurship issues or towards broader labour market fairness issues.
The former indicates self-employed workers should be seen as entrepreneurs and should operate in a level playing-field, the latter they should be seen as entrepreneurs with a weak labour market position. Therefore, the goals of the two organizations discussed here are different.
Broadly speaking one is aligned with entrepreneurship-oriented values (deregulation, lower taxes, keeping tax benefits) and the other is aligned with a more collectivist range of values (fair pay, policies towards equal treatment regarding pensions). Therefore, it may be a matter of personal preference – both offer many services specific to self-employed workers.
In that sense, it may be that these organizations represent a new kind of craft union, that represents a specific profession. But, they are also new organizations, since their orientation is strongly towards the political arena.