Peer Review on Reconciling Family Life and Entrepreneurship

Transcription

1 Peer Review on Reconciling Family Life and Entrepreneurship Belgium, June 2017 Protection of self-employed through social security or tax schemes? Peer Country Comments Paper The Netherlands DG Employment, Social Affairs and Inclusion Written by Marlies Vegter June, 2017

2 EUROPEAN COMMISSION Directorate-General for Employment, Social Affairs and Inclusion Unit C1 Contact: Dijana Ror Boone Website: European Commission B-1000 Brussels

3 EUROPEAN COMMISSION Peer Review on Reconciling Family Life and Entrepreneurship Belgium, June 2017 Directorate-General for Employment, Social Affairs and Inclusion Peer Review on Reconciling Family Life and Entrepreneurship Belgium, June 2017 June, 2017

4 Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE The information contained in this publication does not necessarily reflect the official position of the European Commission This document has received financial support from the European Union Programme for Employment and Social Innovation "EaSI" ( ). For further information please consult: European Union, 2017 Reproduction is authorised provided the source is acknowledged.

5 Table of Contents 1 Situation in the peer country relative to the host country Definition of a self-employed person in the Netherlands Data on self-employed persons in the Netherlands Legal framework self-employed in the Netherlands Assessment of the policy measure Dutch and Belgian system compared with respect to number of selfemployed, income and working hours Legal framework in the Netherlands and Belgium Reconciliation of work and private life in the Netherlands and Belgium in general Measures in the Netherlands and Belgium to improve the reconciliation of work and private life of self-employed women Assessment of the success factors and transferability Maternity benefits Maternity aid and exemption from social security contributions Care initiatives Questions to the host country in the Peer Review... 8 Annex 1 Data tables... 9

6 1 Situation in the peer country relative to the host country The situation in the Netherlands is comparable to the situation in Belgium as far as the number of self-employed and their increase in recent years are concerned. Also in the Netherlands the number of self-employed has risen sharply in recent years. As in Belgium, the Dutch government wishes to support self-employment. However, unlike in Belgium, self-employed in the Netherlands are not covered by social security funds, but are supported by tax deduction schemes. In addition they can apply for benefits that are open to all residents of the Netherlands, such as child benefits, old age pension and social assistance. 1.1 Definition of a self-employed person in the Netherlands In the Netherlands there is no clear definition of a self-employed person. According to employment law a self-employed person is someone who is not an employee, i.e. does not work personally for an employer with an employment contract under the authority of the employer. According to tax law there are several kinds of self-employed, varying from sole contractors who work for only one client and are very much comparable to employees, to self-employed who have a company of their own and sometimes employ other people as well. To try to keep things as clear as possible, I will focus in this paper on what we call in the Netherlands the zzp er, that is the self-employed person without personnel. The zzp er is defined in the Netherlands as a person who earns an income by exercising a business or occupation on his/her own and does not employ staff. The zzp er is clearly distinct from an employee: he/she does not work on the basis of an employment relationship. 1.2 Data on self-employed persons in the Netherlands The number of self-employed has risen considerably from approximately selfemployed in the year to more than one 1 million in Of this million a little more than 1/3 are women (38%) and a little less than 2/3 are men (62%). This appears to be comparable to the Belgian situation. 2 According to the CBS 3 there has been a strong increase in the number of women who start a business. In % of starting entrepreneurs was female and in 2014 it was 37%. Women relatively often start a webshop, a management or organisation advice agency, a business in hair- and/or bodycare services or in the health care sector. Male entrepreneurs are also found in business services, and, much more than women, in the construction sector. The average income of male self-employed is considerably higher than that of their female counterparts. Research from 2012 showed that female self-employed earned approximately 40% less than men. 4 In 2014 CBS data even mentioned a difference of 50%. 5 The first reason for this difference appears to be that self-employed women work fewer hours than men (approx. 60% works part-time) as they spend more time on household tasks and care for children than men, being quite comparable to female 1 accessed 2 June Annex 1 shows the increase in the number of self-employed persons without personnel between the first quarter of 2013 and the fourth quarter of accessed 2 June p. 14, accessed 2 June accessed 3 June 2017 June,

7 employees. The second reason is that they work in sectors where payments are relatively low, e.g. in health care. 1.3 Legal framework self-employed in the Netherlands Self-employed persons in the Netherlands do not contribute to and are not covered by the public social security system (except for social assistance, see below) nor are there any specific arrangement to support their work-life balance. Arrangements that apply to employees, such as the possibility to take care leave to provide care to relatives and other closely related persons, do not cover self-employed persons and the same applies to other work-life balance regulations. The self-employed are thus not obliged to be collectively insured against sickness, disability and unemployment. If they wish to insure themselves, they have to use private insurance schemes. The only social security system that covers the self-employed is a maternity benefit scheme. Dutch law has a specific arrangement in the Work and Care Act (art. 3:17 and 3:18). Self-employed pregnant women are entitled to a maternity benefit for 16 weeks, provided that they have worked for at least 1225 hours in the preceding year. The benefit is related to the woman s salary with a ceiling of 100% of the statutory minimum wage. The maternity allowance is granted on a voluntary basis, i.e. self-employed women can request the government agency UWV 6 to grant them maternity and pregnancy benefits. The maternity benefits are paid through a government contribution to the Disability Fund (no specific contributions are levied). Instead of applying for a maternity cash benefit, pregnant self-employed women can also apply for an allowance to pay for a temporary substitute during maternity leave (art. 3:21 Work and Care Act). This is possible if the self-employed woman is replaced by someone else during the maternity leave and if the replacement person is made available by an employment agency. The replacement benefit is 100% of the income earned in the preceding year, increased with the premiums and the compulsory contribution every resident has to pay on the basis of the Healthcare Act. In the Dutch system self-employed persons are not covered by the social security system, but they are supported by several favourable fiscal schemes. The most important of these is the so-called self-employed deduction scheme. On the basis of this scheme the self-employed have the right to deduct an amount of from their fiscal income, provided that they have worked at least 1225 hours (approx. 25 hours per week) for their company in the preceding year. In addition, new entrepreneurs are entitled to a deduction for starters of if they have not been an entrepreneur in one or more years during the five preceding years. Thirdly the so-called SME exemption makes it possible for SMEs to deduct a percentage of their profit (14% in 2017) from their fiscal income. This deduction is applied to the profit that remains after deduction of the starters and the self-employed deductions. Thanks to all these deductions approximately 80% of the profits of a self-employed who earns are taxable. In addition, the self-employed are covered by the universal social assistance schemes that cover all Dutch citizens, such as the old age pension (AOW), child benefits ( kinderbijslag ) and social assistance ( bijstand ), and by tax regulations that are meant to support working parents, such as the fiscal deduction for working parents and the childcare allowance. Whether someone is self-employed or not is not relevant for participation in these schemes. In order to qualify for child benefits one has to live in the Netherlands 7 and to have children under the age of 18 years old. For the AOW one has to be a resident of the Netherlands and to have reached the pensionable age. Residents can apply for social assistance if they have no means to provide for their 6 The Employee Insurance Agency 7 There are some exceptions, but they are too detailed to mention here. June,

8 existence. This applies both to self-employed and to employees. The tax regulations for working parents apply to all working parents, both employees and self-employed. There is also a specific arrangement for entrepreneurs who are temporarily unable to provide for their existence. They can apply for temporary social assistance (up to a maximum of 12 months). Usually this assistance is granted in the form of an interestfree loan. Entrepreneurs who terminate their business because it is no longer viable can also apply for this form of assistance. In their case it is a benefit, not a loan. Finally there is a specific arrangement for self-employed aged 55 and over who want to end their business because of a lack of income. To conclude one can say that the Dutch system also offers protection to the selfemployed, but, unlike Belgium, mainly through the fiscal system and to social assistance rather than through social security. 2 Assessment of the policy measure 2.1 Dutch and Belgian system compared with respect to number of self-employed, income and working hours In view of the findings mentioned in 1, the following preliminary conclusions can be drawn. In the first place it is worth noting that the figures relating to (female) selfemployed in Belgium and the Netherlands are quite comparable. In both countries there has been a considerable increase in the number of self-employed in the recent past and especially in the number of female self-employed. Also in both countries male selfemployed earn considerably more than their female counterparts. However, the gap between the income of self-employed men and women appears to be much higher in the Netherlands than in Belgium. One of the main reasons for this is probably the low number of hours female self-employed work in the Netherlands. According to OECD statistics, in 2008 Dutch self-employed women worked approximately 24 hours per week (men nearly the double amount), the lowest working hours in the European Union. 8 Dutch women in dependent employment are also champion in working part-time and apparently this same phenomenon occurs among self-employed women in the Netherlands. 9 Remarkable in this respect is that according to a 2015 survey one third of the selfemployed wants to work more hours, and this is especially the case for those selfemployed who work relatively few hours, i.e. between 12 and 20 hours per week. This group consists mainly of women. Apparently, therefore, many self-employed women would like to work more hours. The main reason for not being able to work more hours was, according to the survey, that no work was available because of the economic crisis. Now that the crisis appears to be over, perhaps this group will increase its working hours. 10 Other causes that were mentioned to explain the income gap between male and female self-employed in the Netherlands are: that women usually have less management 8 The numbers are derived from A. Annink and L. den Dunk, De positie van vrouwelijke zzp ers in Nederland, Atria, 2014, p. 18. See accessed 3 June It is worth noting in this respect that the net labour participation of women is somewhat higher in the Netherlands than in Belgium (68% vs 58% in 2014). However in the Netherlands women work more often part-time (approx 75% of all working women) compared to Belgium and other countries. For more information see inter alia eeftijd_en_opleidingsniveau, accessed 12 June accessed 5 June June,

9 experience than men when they start their enterprise; that they often work in low income sectors; that they take less risks than men; and that they are more than men, involved in household tasks and child care. 11 It can be assumed that the situation in Belgium is not substantially different from the Dutch situation in these respects. 2.2 Legal framework in the Netherlands and Belgium The legal framework for self-employment in the Netherlands differs considerably from the Belgian system. Whereas the Belgian system offers protection to self-employed through compulsory and collective social security, in the Netherlands the tax system is very important for the income position of the self-employed. It is difficult to say whether one system works better than the other. As pointed out in the preceding paragraph, the number of (female) self-employed in the Netherlands is comparable to that in Belgium, so perhaps one might conclude that the obstacles and opportunities for becoming a selfemployed worker do not differ considerably in both countries. The income of Dutch selfemployed women is lower than that of their colleagues in Belgium, but there are no indicators that this is caused by the legal system. The number of hours worked appears to be a more important factor. 2.3 Reconciliation of work and private life in the Netherlands and Belgium in general The central question of this peer review is to what extent entrepreneurship and family life are compatible. This is not easy to measure. In the Dutch Zelfstandigen Enquête Arbeid (Survey self-employment) 2012 and 2015 both men and women were asked if they missed or neglected family-activities because of their work and the other way around. In 2015 more than one third of the self-employed interviewed said they never missed or neglected family-activities because of their work (37.6% of the men and 39.4% of the women), whereas 10.9% of the men and 8.6% of the women said this happened regularly. 12 Approximately half of the respondents indicated that they never neglected or missed out on work because of their family and 3.7% of the men and 2.7% of the women reported this happened frequently. In 2012 one third of both men and women indicated that they never missed or neglected family-activities because of their work, so this is somewhat less than in % indicated this happened regularly, which is somewhat more than in Similarly to 2015, almost half of the respondents mentioned that they did not neglect or miss work because of family-activities. 13 Both surveys thus yielded more or less the same results. In other research, from 2013, 67% of the self-employed said to have enough time for private activities, but 21% experienced lack of time as a problem and felt they did not have enough time for their family, friends and other activities. 14 It is difficult to say whether these few surveys give an accurate view of the situation. European research shows that the extent to which Dutch and Belgian self-employed women are satisfied with their work-life balance is comparable: approximately 70% is satisfied and approximately one third or less experience conflicts in this area. The 11 A. Annink and L. den Dunk, De positie van vrouwelijke zzp ers in Nederland, Atria, 2014, p See accessed 4 June accessed 4 June A. Annink and L. den Dunk, De positie van vrouwelijke zzp ers in Nederland, Atria, 2014, p. 19. See accessed 4 June _tcm pdf, accessed 4 June June,

10 difference between men and women is small. 15 Compared to the rest of the EU, Belgium and the Netherlands are in the middle. Women in Slovenia and Norway are most satisfied (80%) and women in Estonia least (50%). Interesting in this respect is that research shows that both in the Netherlands and in other European countries many women became self-employed to make it easier to combine work and the care for their family. And most of these women do indeed experience that working as a self-employed does improve their work-life balance. However, there are still quite a number of bottlenecks, such as lack of time, lack of insurance in case of illness, work stress, financial insecurity, etc Measures in the Netherlands and Belgium to improve the reconciliation of work and private life of self-employed women Both Belgium and the Netherlands have a maternity leave and benefit scheme for selfemployed women. In Belgium the maternity leave is max 12 weeks, shorter than in the Netherlands (16 weeks, provided that the self-employed women have worked for at least 1225 hours in the preceding year). The maternity leave in the Netherlands is not compulsory and cannot be taken partially: it is either taken completely or not at all. In Belgium 3 weeks of the maternity leave are compulsory. It is not entirely clear how this is enforced in practice. The leave can be extended in the case of hospitalization of the child after birth. In the Netherlands this is also possible, but with a shorter duration than in Belgium (max 10 weeks compared to max 24 weeks). In both countries the leave can be transferred to the father (or other partner of the mother) in the case of death of the mother. In the Netherlands the leave is extended when giving birth to twins or multiples. The Belgium maternity allowance is higher than in the Netherlands: 458,31 per week compared to a ceiling equivalent to 100% of the minimum wage ( 1.565,40 per month as of 1 July 2017). Since the Dutch leave is longer, the entire allowance is a little bit more in the Netherlands ( 5842,- in the Netherlands versus 5.496,- in Belgium). In Belgium self-employed women are also entitled to adoption leave. In the Netherlands this is not the case. All in all it is hard to say whether the Belgian or the Dutch arrangement is more favorable to self-employed women. They appear to be comparable. The Belgium approach appears to be more generous though in other respects. The Dutch system does not work with vouchers nor is there an exemption from social security contributions. However, Dutch self-employed women do not have to pay social security contributions at all, because they are not covered by social security schemes. The Netherlands do not have a system of care initiatives for the self-employed, as in Belgium. There are no (monthly) benefits for self-employed caregivers. Regulations that are meant to facilitate the caring for (sick or disabled) relatives in the Netherlands apply only to employees, not to self-employed. As said before, the Netherlands do have benefits in the fiscal area which aim to support working parents (both employees and self-employed), such as the fiscal deduction for working parents and the childcare allowance. It is not clear whether Belgium has comparable regulations. 15 A. Annink and L. den Dunk, De positie van vrouwelijke zzp ers in Nederland, Atria, 2014, p See accessed 4 June See for more information the dissertation by S.M. (Anne) Annink, Busyness around the Business: a cross-national comparative research of the work-life balance of selfemployed workers, Rotterdam, March 2017) June,

11 3 Assessment of the success factors and transferability 3.1 Maternity benefits The Belgian regulation for maternity leave and benefits appears to be successful. In the Netherlands self-employed women received a maternity allowance in 2015 and in In the Netherlands there is no possibility for taking part-time leave. In view of the positive evaluation of the Belgium regulation in this respect, it might be worth considering the introduction of this possibility in the Netherlands as well. In theory it is already possible for Dutch women to use their maternity leave in this way. They may apply for the maternity benefit for a maximum of 16 weeks and spread the leave and the allowance over a longer period. However, it is not entirely clear whether it could be considered a fraud to apply for the maternity benefit and continue to work. Therefore it would be better if the law would explicitly provide for this possibility. Dutch law also offers the possibility to engage a substitute and apply for a benefit to pay this substitute. This benefit can be paid directly to the agency that arranges the substitute. In that case it is not possible to spread the benefit over more than 16 weeks. The Netherlands do not have a regulation for adoption leave for self-employed women. This is due to the fact that the main reason for the maternity benefit for self-employed women in the Netherlands is the protection of their health. However, in a gender equality perspective introducing adoption leave for self-employed women might be a good idea, as it would enable them to combine their work with their adopted child/children. 3.2 Maternity aid and exemption from social security contributions As already pointed out, the Dutch system does not offer vouchers for household chores or other tasks, following maternity leave. In Belgium apparently this is a familiar system. In the Netherlands the system of vouchers is used at present only in the care for elderly and people with disabilities. Municipalities can apply for a supplement from the national government in order to offer a voucher to their residents who need help. With the voucher the residents can buy domestic help at a lower cost. 18 This system might be helpful, but it is not clear whether it is more practical than a system in which other kinds of subsidies are provided. To me the voucher system for self-employed women appears to be quite attractive, especially if women can choose themselves what they use the vouchers for. Support with household chores can be really helpful, both directly after maternity leave and for the care for older children. I doubt whether there would be political support at present for introducing this type of vouchers. It was not included in the programmes of the political parties in the period preceding the elections in March of this year. As the vouchers would cost money, the question is whether political parties and/or the future government 19 would be interested in putting this topic on the agenda. This also depends on the question to what extent the combination of work and family life for self-employed women is deemed to be a problem. According to surveys between 20% and 30% of self-employed women and men reported that they felt they lacked time for private activities because of their work. 20 In my view this should be an indication that improvement is necessary, but so far this topic has not been high on the agenda. 17 See the annual reports by the UWV (the employee insurance agency) 18 accessed 5 June At present negotiations are going on about the formation of the new administration accessed 4 June 2017, A. Annink and L. den Dunk, De positie van vrouwelijke zzp ers in Nederland, Atria, June,

12 In this respect it is important to note that the debate about self-employed and employees in the Netherlands appears to focus on other topics rather than the combination of work and family life. The starting point in the Dutch system is that the self-employed, unlike employees, are considered to be entrepreneurs who have chosen to be independent and therefore cannot rely on various supportive systems. There is a strict separation between employees and self-employed. Sometimes this line is crossed, especially when the self-employed have much more in common with employees than with entrepreneurs. In these situations the self-employed person is legally considered as an employee for the regulation involved (e.g. tax law or employment law). There is debate going on about the desirability to offer more protection to self-employed workers, especially because it has become clear that many self-employed are not sufficiently insured against sickness and disability, due to their high costs. However, in this debate it is also mentioned that the self-employed receive considerable tax benefits in the form of the deduction for starters, the deduction for self-employed workers and the tax exemption for SMEs. The question then is whether these tax deductions must be abolished because they make it relatively cheap for employers to engage selfemployed rather than employees. Because of this larger debate there is not sufficient consensus to offer some social protection to self-employed. The idea is that self-employed are sufficiently supported with tax deductions, and in order to grant them other benefits, such as vouchers or other forms of social security, the tax benefits should be reduced. Self-employed themselves also have different opinions in this respect. Some are in favor of more protection, especially in the field of sickness and disability, but many value their independence and the tax support they receive and do not want the system to change. 21 The matter is thus rather complex, which means that adaptation is not easy. 22 Finally, the Netherlands do not grant the exemption from social security contributions following maternity leave to the self-employed as in Belgium, because the self-employed are not covered by social security. It is not likely that such a measure would be introduced as a stand-alone measure, especially because the Dutch debate on the position of self-employed at a larger scale is still going on. 3.3 Care initiatives The Netherlands do not have a system comparable to the Belgian system of care initiatives for self-employed, and at present it seems unlikely that such a system could be introduced. Before such a measure comes to light, the larger debate on the position of self-employed has to be crystallized. 2014, p. 19. See accessed 4 June 2017 and accessed 4 June See also accessed 5 June For more information about the Dutch debate on self-employed see inter alia the interdepartmental report on the position of self-employed from December 2015 ( accessed 5 June 2017), the report by the Central Bureau of Statistics (CBS) of October 2016 about the income of self-employed and the alternatives for social security used by them (CBS, Zelfstandigen en hun alternatieven voor sociale zekerheid, annex to CPB Policy Brief 2016/11, Zelfstandigen en arbeidsongeschiktheid, Den Haag, 2016) and the advice by the Social-Economic Council about the position of independent entrepreneurs (Advice no 2010/04, The Hague, 15 October 2010). June,

13 4 Questions to the host country in the Peer Review Does Belgium have tax facilities for self-employed? What is their fiscal position, compared to employees? How high are social security/social assistance benefits, compared to other countries? Three weeks of the Belgian maternity leave are compulsory. How is this enforced in practice? How exactly is the success of the Belgian system measured, especially with respect to maternity aid and care initiatives? Do statistics exist about the number of female self-employed, the sustainability of their companies and about their economic independence (also in the long term and pension)? What is the financial source of the maternity leave, maternity aid and care initiatives? Are they paid by social security contributions or from the general tax revenues? Do Belgian employees receive comparable aid (care leave, care vouchers)? June,

14 Annex 1 Data tables In the table below shows the number of self-employed persons without personnel in the Netherlands for each quarter of a year, starting from 2013 and ending at the end of Table 1. Increase in self-employed persons in the Netherlands from Q to Q4 2016, 000 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Total ,008 1,020 1,034 1,026 1,024 1,015 1,029 1,046 Men Women Source: Central Bureau for Statistics (CBS) June,

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