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Future Working: The Rise of Europe’s Independent Professionals

by Patricia Leighton

 [For: Professional Contractors Group, April 2014]

The Professional Contractors Group focuses on the self-employed people who work in ‘professional’ areas such as information technology, engineering and so on. They refer to this group as ‘iPros’ (or freelancers) and have just released a major new report on the rise of the sector across Europe.

The Report—Future Working: The rise of Europe’s Independent Professionals—is here.

ICA has extracted key points (below) as a summary.


Extracts from Future Working: The rise of Europe’s Independent Professionals

Work is changing
“Traditional hierarchical organisations are struggling. People are increasingly rejecting traditional employment with its lack of personal control and repression of creativity. New ways of working are emerging, new forms of collaboration, new structures, new alliances and new opportunities. iPros are at the heart of this.”
Who are the iPros?
iPros are highly skilled self-employed individuals who work for themselves but do not employ others. They range from journalists and designers to ICT specialists and consultants. iPros represent a significant segment of professional working generally, making up
  • 25 per cent of all those working in professional, scientific and technical work and
  • 22 per cent of all those in arts and entertainment.
Big growth
The growth in iPros in the EU since 2004 has been remarkable. Numbers have increased by 45 per cent from just under 6.2 million to 8.9 million in 2013, making them the fastest growing group in the EU labour market.

In the Netherlands, Poland and France iPro growth has been especially marked. The EU still faces unprecedented levels of unemployment and without this growth in iPro working, the picture would be much gloomier.

Their rise represents a major shift in the nature of work and ways of working. No longer can work be defined simply in terms of working for a big corporation, public sector employer or an SME.

Growth iPros 2004–13 (%)
  EU     45
 Netherlands     93  Poland     88  France     85
 United Kingdom     63  Finland     56  Belgium     53
 Spain     51  Germany     43  Italy     12

The research confirmed there is a major change in the way work is performed. A new and exciting radical agenda based on collaboration rather than competition has emerged as a response to perceived failures in existing business and management strategies.

Barriers
However, there are also many barriers to being an iPro and working in this way is complex. iPros  
  • face constant accusations of ‘sham’ self-employment, where employees are forced or voluntarily become self-employed to minimize tax and other liabilities.
  • feel they are treated with suspicion and hostility by fiscal authorities, ignored by politicians developing initiatives to support new enterprises, and marginalised by the wider business community.
Benefits
  • iPros find this way of working fulfilling.
  • Many choosing to work in this way have rejected standard employment, which they feel requires conformity and represses creativity.
  • The rise of iPro working marks a distinctive shift to a more collaborative way of working.
  • iPros value autonomy and freedom, yet to be effective they need the appropriate support.
Policy makers tend to focus on job creation rather than work creation, an area where iPros actively contribute.

A new breed
“Where some decades ago working aspirations may have been driven by job security and ‘climbing the corporate ladder’, now well over a third of the European workforce would prefer self-employed independence over employment.”
“iPros represent neither hidden unemployment nor failed small businesses. iPros are defined by their work in high-value, high knowledge professional sectors.”

Percentage of iPros by sector (%)

 IT     12
 Financial Insurance     6
 Real Estate     16  Prof, Scientific Technical     25
 Admin Support     9  Education     4
 Human health     6  Arts & Entertainment     22

Some Profiling

iPros
  • are more likely to be men, and are less common in female-intensive professions.
  • are typically over 25, with some countries showing a bias to those aged over 50.
  • report choosing working in this way consciously, owing to a sense of natural aptitude, emphasis on certain lifestyle values, and the preference for not being an employee.
  • prefer to define themselves as ‘freelancers’ or ‘independent’ and not as entrepreneurs—even though they all consider entrepreneurship essential to their success.
Regulations
Far more varied and sometimes seemingly onerous are social security contributions. Contributions in most member states again reflect the more general employee/employer system. The difference, with some variations dependent on differences in insurance and benefit eligibility, is that the full contribution is paid by the self-employed person, rather than being split between employee and employer.

Some states have more recently developed laws to specifically provide for the self-employed, such as LETA, Spain’s autonomous workers law and the Social Akkord, 2013 in the Netherlands.

Definitions
All states have legal tests to differentiate the employee from the self-employed. And, as stated above, most rely on notions of subordination but pose slightly different questions. Subordination assumes the ability of an employer to ‘control’ an employee.

‘Protections’
A complicating factor is that many employment rights derived from EU legislation extend protections to workers. That is a wider category than employees and covers many iPros who work closely with organisations. Member states have implemented these laws differently, so it depends on which state you work in whether, as an iPro, you can access rights.  The rights are important ones, e.g. under health and safety laws, including working time, equality, maternity protections and freedom of movement.

Tax
iPros are often in the ‘gap’ between individuals and businesses for tax treatment; although rates and allowances are typically similar, one key issue is that iPros have to sometimes meet compliance requirements designed with larger businesses in mind.

Preference for self-employment
[2012 survey figures first; 2009 figures in brackets second]

Across the EU, 58 per cent (49 per cent) prefer employee status and 37 per cent (45 per cent) prefer self-employment. Attitudes differ markedly by nation:
  • 30 per cent (26 per cent) of Belgians prefer self-employment;
  • 45 per cent (64 per cent) of Cypriot;
  • Finland only 24 per cent (34 per cent) preferred self-employment;
  • 29 per cent (36 per cent) in Germany.
According to the 2009 data, the reasons for self-employment:
  • independence and fulfilment (68 per cent);
  • flexibility over work (35 per cent);
  • income prospects (20 per cent);
  • business opportunities (9 per cent.
Emphasis on fulfilment and flexibility applies across demographic segments.

The evidence on self-employment highlights some interesting tensions. Independent working is an attractive, preferred option for around four in ten people in the EU. For nearly three of those four people, working independently isn’t just preferable: it’s feasible, too. And yet, when it comes down to it, only one or two of them are going on to do it.

Poland case study
Under the Freedom of Business Activity Act 2004 (as amended), self-employment is defined as a ‘for profit production, construction, commercial and service activity… pursued on an organised and continuous basis.’

Polish law assumes that the self-employed aren’t managed by their clients and that they bear the risk of the economic activity. Polish law appears relatively clear in aiming to differentiate the genuine self-employed from others and it is to be anticipated that iPros would not face major problems as a result of the Labour Code—their activities are clearly covered by the commercial law.

The following are the key stages in getting started:
  • Entry onto the Register of Business Activities. This register is held locally and it cost around €25 to register. Key documents have to be provided for authenticity. This process takes around two weeks.
  • Obtain a REGON number, filed with the national statistics office; this gets the individual on to a national data base—apparently a relatively quick process.
  • Obtain a company seal, which is needed for banking and financial purposes. All previously approved documents have to be provided.
  • Set up a bank account.
  • Register with the tax office.
  • Register with the social security institution.
  • Notify the office in the city or commune where your business operates from.

Although this list of requirements looks extensive, none of the tasks are considered especially time consuming, although Polish law seems to assume that the registration will be done in person.

 



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