ESPN Thematic Report on Access to social protection of people working as self-employed or on non-standard contracts

Transcription

1 ESPN Thematic Report on Access to social protection of people working as self-employed or on non-standard contracts 2017 Pedro Perista & Isabel Baptista January 2017

2 EUROPEAN COMMISSION Directorate-General for Employment, Social Affairs and Inclusion Directorate C Social Affairs Unit C.2 Modernisation of social protection systems Contact: Giulia Pagliani Giulia.PAGLIANI@ec.europa.eu European Commission B-1049 Brussels

3 EUROPEAN COMMISSION European Social Policy Network (ESPN) ESPN Thematic Report on Access to social protection of people working as self-employed or on non-standard contracts 2017 Pedro Perista Isabel Baptista 2017 Directorate-General for Employment, Social Affairs and Inclusion

4 The European Social Policy Network (ESPN) was established in July 2014 on the initiative of the European Commission to provide high-quality and timely independent information, advice, analysis and expertise on social policy issues in the European Union and neighbouring countries. The ESPN brings together into a single network the work that used to be carried out by the European Network of Independent Experts on Social Inclusion, the Network for the Analytical Support on the Socio-Economic Impact of Social Protection Reforms (ASISP) and the MISSOC (Mutual Information Systems on Social Protection) secretariat. The ESPN is managed by the Luxembourg Institute of Socio-Economic Research (LISER) and APPLICA, together with the European Social Observatory (OSE). For more information on the ESPN, see: 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 This document has been prepared for the European Commission, however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet ( European Union, 2017 Reproduction is authorised provided the source is acknowledged

5 Contents SUMMARY CONTEXT: SELF-EMPLOYMENT AND NON-STANDARD WORK RELATIONSHIPS IN THE NATIONAL ECONOMY AND LABOUR MARKET DESCRIPTION AND ASSESSMENT OF SOCIAL PROTECTION PROVISION FOR SELF- EMPLOYED AND PEOPLE EMPLOYED ON NON-STANDARD CONTRACTS Description of social protection provisions for self-employed and people employed on non-standard contracts Healthcare and sickness: cash benefits and benefits in kind Maternity/paternity cash benefits and benefits in kind Old-age and survivors pensions Unemployment benefits and social assistance benefits Long-term care benefits Invalidity, accidents at work and occupational injuries benefits Family benefits ASSESSMENT OF THE EXISTING SOCIAL PROVISIONS AND OF THE IMPACT OF POSSIBLE EXTENSION OF THEIR COVERAGE CONCLUSIONS AND RECOMMENDATIONS REFERENCES ANNEX

6 Summary In Portuguese legislation, self-employment is not defined per se but rather described as the inobservance of principles of an employment relationship. Furthermore, the fiscal law draws a distinction between income from dependent work and independent work and different social security contributory schemes are in place. In addition, there are different conditions for cases when a contracting entity benefits from at least 80% of the total value of the self-employed worker s yearly activity. In this case, the worker is considered to be economically dependent. In, the number of people working as self-employed decreased significantly over the crisis years representing, in 2015, around 18% of total employment. Self-employment is considerably higher amongst males than females. As for non-standard workers, data shows slight variations in with regards to temporary employment (amounting to 22.6% of workers and traditionally much higher than in the EU28) and part-time employment (9.4% and traditionally much lower than in the EU28). Altogether, in 2015 these two situations accounted for almost one third of employment. There is no sufficient data allowing for a good estimation of the extent to which selfemployment takes the form of bogus self-employment and the extent of irregular temporary contracts. However, available data indicates a decrease in the number of situations reported to the Working Conditions Authority. There is also no data/studies allowing for the analysis of the extent to which self-employed and non-standard workers are at greater or lesser social risk. Overall, existing measures seem to foster self-employment rather than controlling it. Control seems to derive most of all from tax obligations as the self-employed must comply with the tax and, possibly value added tax rates to which social security contributions should be added. Social protection also facilitates transitions from unemployment to selfemployment and the combination with contractual employment. Over the years, the position of self-employed workers in relation to the social security system has approximated that of employees. The general system of social security for selfemployed persons provides for benefits in case of sickness, maternity, occupational diseases, invalidity, old-age and death. The delivery of family benefits is guaranteed under the subsystem of family protection, which covers the whole population. Access to unemployment benefits is limited to self-employed workers who are economically dependent or who earn their income through a registered business of their own or possess an individual commercial establishment. This convergent trajectory needs to be consolidated by the accomplishment of the government s legislative initiative for 2017 which may represent a decisive move forwards in addressing existing deficiencies in social protection entitlement rights, in eliminating gender biases arising from entitlement exclusion of specific benefits, and in raising accountability among public stakeholders regarding bogus self-employment practices. Finally, it should be noted that current proposals from the government include the extension of social protection to the self-employed, acknowledged as too limited. However, data and/or studies allowing for estimations of the financial implications of such an extension and of its conceivable consequences on the labour market are lacking. Moreover, any concrete outcomes are still uncertain and dependent upon the use that will be made of the legislative authorisation for introducing changes in the contributory scheme of self-employed workers included in the State Budget for 2017, and upon the government s assumed objective that any changes should not contribute negatively to the sustainability of the social security system. However, the concern with the sustainability of the social security system should be considered within the framework of a strategic approach on labour as a development driver rather than as a mere cost. 4

7 1 Context: self-employment and non-standard work relationships in the national economy and labour market According to Eurostat, in 2015 there were 625,200 self-employed aged 15 to 64 in (62.3% males and 37.7% females), compared to 908,100 (57.6% males and 42.4% females) in 2008 (-282,900, i.e %). In the EU28, the decrease over the same period was significantly less, at approximately 2%. This sharp decrease is coherent with the decrease in the employment rate of people aged 15 to 64 from 68% in 2008 to 63.9% in 2015, corresponding to a decrease of 477,000 people. It also shows the high vulnerability of a significant part of the Portuguese selfemployed to the economic and financial crisis as they represented nearly 60% of the loss in terms of employment. According to OECD data, 1 in 2015 self-employment represented 18.5% of total employment in (23% of male employment compared to 13.9% of female employment), compared to 24.4% in The latest data issued by Statistics (INE), presents a fairly similar picture. According to this data, in 2015 the self-employed represented 17.9% of total employment % self-employed without employees (61% males and 39% females) and 4.8% with employees (71.3% males and 38.7% females). As for non-standard work, according to Eurostat, the percentage of temporary workers decreased slightly in (from 22.8% in 2008 to 22% in 2015) compared to the steady but rather lower rate registered for the EU28 in the same timeframe (14.1% in both years). The analysis of the figures regarding by sex reveals a reversing trend. In 2008, the percentage of females in temporary employment was 2.6p.p higher than that of males (24.1% compared to 21.5%). Eight years later the percentage of males was 0.9p.p. higher (22.4% compared to 21.5%). Table 1 - Percentage of self-employment, temporary employment and part-time employment in in 2008 and in 2015 by sex Total Males Females Self-employment Temporary employment Part-time employment Source: Eurostat Part-time employment in in the aforementioned timeframe increased slightly from 8.8% to 9.8% compared with the sharper increase in the EU28 from 17.5% to 19.6%. Part-time in has half the preponderance it has in the EU. Similarly to temporary employment, considerable differentiation by sex is evident in part-time employment. Traditionally much higher amongst females, part-time employment evolved differently for men and women between 2008 and the 2015; for males from 4.1% to 7.1% while for females from 14.1% to 12.5%. In the EU28 part-time employment among females increased over this timeframe. National data from the Quadros de Pessoal, under the responsibility of the Strategy and Planning Office of the Ministry of Labour and Social Security (GEP/MTSS), which does not 1 OECD (2016), Self-employment rate (indicator). doi: /fb58715e-en, available at: (Accessed on 9 December 2016). 5

8 include public administration, also provides information regarding some categories. The latest annual publication issued, regarding year 2014 (GEP/MTSS, 2015), reports a total of 779 workers providing subordinate telework, 2,075 workers with a contract for intermittent work and 71,103 temporary agency workers (0.03%, 0.08% and 2.13% of all employees, respectively). Out of these temporary agency workers, only 3.9% had a permanent contract; 45.5% had a fixed-term contract and 50.6% had a temporary contract for an indefinite period. In 2008, temporary agency workers represented 2.6% of all employees. In its latest annual report about its inspection activities in 2015, the Working Conditions Authority (ACT) reports a total of 1,124 inspections which detected 478 irregular situations concealing of employment contract (ACT, 2016). These situations include bogus selfemployment, bogus remunerated internships and other unspecified situations. Following ACT s intervention, 291 situations were regularised. The same report indicates a total of 791 situations of abusive use of fixed-term contracts and 17 temporary contracts not complying with the law, compared to 846 and 30, respectively, in This represents a sharp decrease regarding the figures for 2011 where those irregular situations amounted to 6,152 and 316, respectively. Reports in the media from late indicate that, in 2013, the institute of social security referred a total of 25,361 cases (in 11,419 companies) to the ACT. These are situations of companies benefiting, during the same calendar year, from no less than 80% of the total value of the service provision activities of the self-employed person (see section 2 for more details). The ACT selects a number of companies to visit and determines if the situations correspond to dependent self-employment. The same media reports indicate that the number of cases decreased in 2012 both regarding the number of workers (-45%) and companies (-40%). A significant problem regards the significant gap of about two years between the actual date of the situation and the referral to the ACT. According to the ACT this time gap is enough for many companies to have ceased to exist. With regards to the extent to which the self-employed are at greater or lesser social risk, it should be mentioned that Statistics (INE) publishes a table on the poverty rate according to the individual s labour status. However, although the table includes the category self-employed no data is reported. Following a specific request for clarification, the INE confirmed that these data are not available due to statistic quality/significance hindrances. Data from Eurostat reports that, in 2015, 32.7% of employed persons except employees (36.4% of males and 27.7% of females) were at risk of poverty or social exclusion, compared to 12.3% of employees (11.6% of males and 13% of females). In the EU28, the percentage of employed persons except employees at risk of poverty or social exclusion amounted to 24.8% (25.6% of males and 23.3% of females). One of the few studies focusing on indebtedness (Frade et. al, 2008) - drawn on the results of the questionnaire to over-indebted people, conducted by the Observatory on Consumers Indebtedness and by the Portuguese Association for Consumers Protection (DECO) reported that 11% of the respondents were self-employed with or without employees (5.7% and 5.3%, respectively). Thus, the need for further research in this field allowing for a better understanding of the potential vulnerability of self-employed workers seems clear. As for measures fostering self-employment, the Support Programme for Entrepreneurship and for Own Job Creation (Programa de Apoio ao Empreendedorismo e à Criação do Próprio Emprego - PAECPE) has been in place since September It aims to promote entrepreneurship and self-employment and it includes a set of measures: i) support to the 2 E.g. «Segurança Social envia 25 mil suspeitas de falsos recibos verdes à inspecção do trabalho», in Público 1/11/2015, available at: 6

9 creation of small companies, through guaranteed credit and reduced interest rates; ii) access to the microcredit programme; iii) support for the creation of one s own job by unemployment benefit beneficiaries through the anticipated payment of the total amounts the person would be entitled to in lump sum; iv) technical support for the establishment and consolidation of projects. Measures may be used simultaneously, i.e. beneficiaries may receive a lump sum payment of the unemployment benefit and resort to a credit line. Young unemployed aged 18 to 29 may also apply for Investe Jovem, a new programme that offers financial and technical support to young people to become self-employed or create their own microenterprise. The credit made available by this programme is interest free and has a grace period of 6 or 12 months depending on the amount of the credit. It also provides a non-repayable subsidy of up to six times the indexing reference of social support (IAS, indexante dos apoios sociais) per job created. Most measures can only be used by unemployed people. The credit lines MICROINVEST and INVEST+ may also be used by young first job seekers and by self-employed workers whose monthly income in the previous year was lower than the minimum wage. Micro-credit is available to people with greater difficulties in accessing the labour market but showing entrepreneurial profile and also to micro-entities and cooperatives of up to 10 employees. According to the latest statistics issued by the Institute for Employment and Vocational Training (IEFP) regarding September 2016, 3 the number of processes under the PAECPE amounted to 933 (63.6% regarding males and 36.4% regarding female beneficiaries). 40% of beneficiaries were aged 35 to 44. The age groups 25-34, and 50+ represented around 20% each. Very few cases regarded beneficiaries aged 20 to % were unemployed looking for a new job. The State Budget for 2017, approved on 29 November 2016, includes a legislative authorisation for introducing changes in the contributory scheme for self-employed workers. These would regard: a) the revision of the framework rules and dates of effect of the regime for self-employed workers; b) the adoption of new rules governing exemptions and exceptions from the obligation to contribute; c) changing the way of determining the contributory base, the relevant income and the calculation of contributions; d) the determination that the contributions to pay regard the relevant income of the most recent months, according to periods to be defined; e) the determination of the annual amount of contributions as the result of the application of contribution rates to the annual relevant income; f) the revision of the regime of the contracting entities; g) the establishment of transitional rules for the new contributory scheme for self-employed workers. Furthermore, the legislative authorisation includes the establishment of a minimum monthly amount for contributions in order to ensure an effective social protection, without gaps or breaks in the contributory career and to prevent situations of absence of a warranty period in the attribution of social benefits, resulting from major invoicing oscillations (, 2016: 68). In parallel, there are declared intentions of extending the mechanisms already in place regarding bogus self-employment to other bogus situations such as bogus traineeships, and to include mechanisms for the protection of precarious workers against unemployment. Until 2012 the self-employed did not have access to unemployment benefits. Law 20/2012 of 14 May extended unemployment benefits to cover self-employed workers in a situation of economic dependence i.e. where at least 80% of their activity is conducted on behalf of a contracting entity (provision of services contract). In 2013 (Decree-Law 12/2013 of 25 January), unemployment benefits have been again extended to cover self-employed workers who earn their income through a registered business of their own or possess an 3 o+2016.pdf/82515cab-ecb7-4d53-a48c-23aa33b1b46c 7

10 individual commercial establishment, as well as their spouses if performing a professional activity together with them on a regular and permanent basis. During the discussion of the Draft State Budget for 2017, the Minister of Labour, Solidarity and Social Security acknowledged that the rules governing the social protection of selfemployed workers are quite detached from those governing the majority of workers. ( ) We are not pleased with the current protection in as it is too limited. However, it is important that there is political will to change things. 4 Additionally, he emphasised the need to ensure that true self-employed workers make an acceptable contributory effort. At the same time, however, he also stressed that the system should not contribute negatively to the sustainability of the Social Security system. The Minister also highlighted the need to ensure that future protection is solid and that the conciliation of all these factors represents the major difficulty of the reform. He criticised the option taken by the former centre-right government which allowed most of the selfemployed workers to make contributions according to the lowest contributory tier. Allowing 80% of the self-employed workers to make contributions according to the lowest contributory tier may seem interesting but exposes people dramatically. We would have again, in the future, a new generation with minimum pensions. 5 2 Description and assessment of social protection provision for self-employed and people employed on non-standard contracts 2.1 Description of social protection provisions for self-employed and people employed on non-standard contracts In most cases, social protection provisions for people employed on non-standard contracts such as temporary workers and part-time workers fall under the general regime of social protection (see table 4 in annex 1). As access to many benefits is conditional on the person having worked at least for six months before the request, some workers with temporary contracts may be excluded. Additionally, many benefits explicitly exclude workers with labour contracts of extremely short duration, i.e. contracts lasting up to 15 days and only admissible for purposes of seasonal agricultural activity or tourism event. Self-employment is not defined as such in national legislation. The Labour Code defines the principles of an employment relationship, and whenever some of these principles are not observed (ambiguous formulation in the Labour Code itself) the worker is considered to be self-employed. For self-employment to be in place, the beneficiary of the activity must not own nor determine the place of work, the equipment used, or the working schedule; a steady periodic amount similar to a salary must not be paid; and the worker must not perform a leadership function in the enterprise. Furthermore, the fiscal law draws a distinction between income from dependent work and independent work. The classification of a particular worker is expected to be consonant across these two legal sources. In none of them is there a distinction between self-employed worker with or without employees; this however is a distinction that is used in the collection of labour force official statistics. In addition to the existence of distinct social security contributory schemes for dependent and independent workers, Law 55-A/2010 of 31 December set different conditions for cases when a particular collective entity (company, cooperative, association, etc.) benefits from at least 80% of the total value of the self-employed worker s yearly activity. In this 4 «Falsos recibos verdes, estágios e bolsas passam a ter contrato», in TVI24 26/10/2016, available at: 5 «Recibos verdes: alterações não podem prejudicar contas da Segurança Social», in Negócios 26/10/2016, available at: 8

11 case, the worker is considered to be economically dependent on the collective entity, and the latter is thus required to pay a portion of the worker s contribution to the social security scheme. This contribution is currently set at 5% of the total amount paid to the worker, while the contribution to be paid by the worker stands at 29.6% (the contribution rates in case of subordinate employment are 23.75% for employers and 11% for employees) see table 2 in annex 1. For the purpose of this contributory duty, distinct companies belonging to the same commercial group are to be considered one collective entity. An adjustment was introduced in the meantime (Law 83-C/2013 of 31 December) establishing that, from 2014 onwards, this only applies in the case of self-employed workers who are required to contribute to a social security scheme and reach an annual income from independent work of at least six times the Social Support Index currently meaning at least 2, In contrast with the above notion, self-employed workers who do not perform 80% of their yearly activity to the same entity can be considered economically independent. There is no definition of bogus self-employment; a self-employment arrangement is considered to be bogus whenever the working conditions in place actually fulfil the principles for the presumption of an employment contract. Doubts on the application of this legal mechanism led to several attempts by the Supreme Court of Justice to clarify the distinction between employment contract and self-employment arrangement (e.g. rulings on 16 January 2008, 21 January 2009, 9 December 2010 and 12 September 2012). Law 63/2013 of 27 August set new mechanisms for tackling the fraudulent use of selfemployment contracts in subordinate employment relationships. The new law established a duty for labour authorities to open an enquiry procedure whenever they were informed of a case of self-employment with some features of subordinate employment. It also simplified the administrative and judicial procedures, especially through the definition of short periods for each step to be completed (ensuring a maximum duration of 55 days from the identification of the abuse until the solution of the problem, including the decision by labour courts if necessary) and the clarification of the roles and responsibilities of each party in the process (employer, employee, labour inspectorate, public ministry and labour courts). As expressed in the MISSOC tables 6, in, all self-employed persons (including, among others, helping spouses and farmers) are compulsorily covered by the social protection system (general system of social security for self-employed persons). However, membership is voluntary for persons whose annual reference income for selfemployed work is equal to or less than six times the indexing reference of social support (IAS, indexante dos apoios sociais). In addition, lawyers and solicitors are covered by a specific insurance fund. The general system of social security for self-employed persons provides for benefits in case of sickness, maternity, occupational diseases, invalidity, old-age, death and unemployment. The delivery of family benefits is guaranteed under the subsystem of family protection, which covers the whole population. Insurance against accidents at work is compulsory. Self-employed persons are obliged to take out insurance against this risk with an insurance company. The financing of the system for the self-employed is ensured by the self-employed workers themselves, including those engaged in commercial or industrial activities as well as members of the statutory bodies of legal persons, and by the contracting entities (i.e. natural or legal persons who, during the same calendar year, benefit from no less than 80% of the total value of the service provision activities of the self-employed person). The standard contribution rate of self-employed persons is 29.6%. A reduced rate of 28.3% applies to the self-employed (and their spouses) pursuing only agricultural activities. A 6 9

12 rate of 34.75% is applied to the self-employed engaged exclusively in commercial or industrial activities and proprietors of individual limited liability establishments (and their spouses) whereas that of the contracting entities equals 5% - applied to the total value of the services they received (see table 2 in annex 1). For self-employed persons, the amount of the contributions is calculated by applying the relevant rate to a flat-rate remuneration based on the actual total income (gross earnings) resulting from the self-employed activity and fixed according to one of the 11 levels indexed to the indexing reference of social support (IAS, indexante dos apoios sociais), the first equal to this reference and the last to 12 times this reference. If the annual reference income for the self-employed work is equal to or less than 12 times the IAS, the contribution base can be decreased for a maximum period of 36 months from the start of the activity, the limit being 50% of the said indexing reference. Workers who are not compelled to register in a social protection regime may register in the Voluntary Insurance Scheme. This includes e.g. mariners and watchmen working in foreign vessels, high performance sportspeople, research fellows, volunteer fire-fighters and trainees. A determined number of months with registered contributions are needed in order to ensure access to social protection in the cases of invalidity (see specific cases ahead). 2.2 Healthcare and sickness: cash benefits and benefits in kind Benefits in kind (e.g. medical appointments) are granted by the National Health Service, under the responsibility of the Ministry of Health. Cash benefits are granted according to the regulations of the general system for the employed. However, there are some exceptions. The period of absence for granting sickness benefits to the self-employed is 30 days, while for employees it is 3 days. Similarly, the maximum period they can receive this allowance is 365 days, while for employees it is 1,095 days. However, there is no maximum period in case of tuberculosis, both for employees and the self-employed. In case of hospitalisation, ambulatory surgery, sickness starting during the granted period of maternity benefits and lasting beyond that period and in case of tuberculosis, compensation is paid during the entire period of incapacity (these rights concerns both categories of workers). For those self-employed receiving benefits for clinical risk during pregnancy (subsídio por risco clínico durante a gravidez), benefits for interruption of a pregnancy (subsídio por interrupção da gravidez) and benefits for specific risks (Subsídio por riscos específicos) there is no entitlement to Christmas and vacation allowances, contrary to the situation applicable to employees. In the case of the benefit for specific risks, the self-employed and the beneficiaries of the Voluntary Insurance Scheme will have to present supporting evidence issued by an occupational physician or by the National Health System that they perform night work or are exposed to risks. In order to be entitled to these benefits the worker must have worked and have a correspondent record of social security contributions for the six months previous to the request. This applies to all workers. However, only employees have to comply, simultaneously, with the obligation to have had 12 days of paid work in the four months immediately preceding the incapacity. The access rules for the benefits specifically mention the entitlement of some beneficiaries of the Voluntary Insurance Scheme mariners and watchmen working in vessels of foreign companies and research fellows, as well as at-home workers. Conversely, they explicitly exclude workers with labour contracts of extremely short duration, i.e. contracts lasting up to 15 days and only admissible for purposes of seasonal agricultural activity or tourism events. 10

13 2.3 Maternity/paternity cash benefits and benefits in kind In order to be entitled to these benefits the worker must have worked and have a correspondent record of social security contributions for the six months previous to the request. This applies to all workers. The access rules for the Initial parental benefit (Subsídio parental inicial) and for the Adoption benefit (Subsídio por adoção) specifically mention the entitlement of some beneficiaries of the Voluntary Insurance Scheme mariners and watchmen working in vessels of foreign companies and research fellows, as well as at-home workers and professional sportspeople. Conversely, they explicitly exclude workers with labour contracts of extremely short duration, i.e. lasting up to 15 days. 2.4 Old-age and survivors pensions Generally speaking, old-age and survivors pensions are granted according to the regulations of the general system for the employed. Entitlement to the latter depends on the deceased having a contributions record of at least 36 months. For beneficiaries of the voluntary insurance scheme the contribution record should be at least 144 months for oldage and 72 months for the survivor s pension. 2.5 Unemployment benefits and social assistance benefits In most cases, employees must have worked for at least 360 days in the 24 months prior to unemployment. Different rules apply to substitute teachers in primary and secondary education who need to have worked at least 540 days in the 36 months prior to unemployment. The scheme provides for entitlement to professional activity cessation allowance (Subsídio por cessação de atividade profissional) and to partial professional activity cessation allowance (Subsídio parcial por cessação de atividade profissional) when the self-employed workers concerned, among other conditions, have completed 720 days of activity as selfemployed, business manager or director, for which contributions have effectively been paid, in the course of the 48 months immediately preceding the date of involuntary cessation of the professional activity or service contract. The amount equals 65% of the reference earnings. These correspond to the daily average earnings defined as E/360, whereby E represents the total earnings registered during the 12 calendar months preceding the second month prior to the date of cessation of the professional activity. Unemployment benefit is also available to those self-employed who are in a situation of economic dependence, i.e. who provide at least 80% of their activities on behalf of a contracting entity (contract for the provision of services). The amount is calculated as follows: (L x 0.65) / 30 x P L = Level of the beneficiary s contribution basis at the time of contract cessation. P = Percentage corresponding to the degree that the beneficiary is economically dependent from the contracting entity. For employees, the self-employed who are 80% dependent, or business owners the amount is increased by 10% in situations where both members of the couple or the partners are recipients of the severance pay and have dependent children, or a single-parent family does not receive the maintenance allowance. The access rules to the unemployment benefit explicitly exclude at-home workers and beneficiaries of the Voluntary Insurance Scheme. As access to the benefit is conditional on having worked at least for 360 days in the 24 months previous to unemployment, some workers with temporary contracts may be excluded. 11

14 2.6 Long-term care benefits Generally speaking, benefits in cash are granted according to the regulations of the general system for the employed. Benefits in kind are delivered according to the regulations established for all dependants in long-term care (MISSOC). However, the self-employed are not entitled to the Benefit for the care of disabled or chronically ill children (Subsídio para assistência a filho com deficiência ou doença crónica). The access rules to the benefit specifically mention the entitlement of some beneficiaries of the Voluntary Insurance Scheme mariners and watchmen working in vessels of foreign companies and research fellows, as well as at-home workers. Conversely, they explicitly exclude workers with labour contracts of extremely short duration, i.e. lasting up to 15 days. Additionally, as the access to the benefit is conditional on having worked at least six months (consecutive or interpolated) before the request, some workers with temporary contracts may be excluded. If interpolated, the interruption may not have been equal to or longer than six months. 2.7 Invalidity, accidents at work and occupational injuries benefits Overall, invalidity benefits are granted according to the regulations of the general system for the employed (MISSOC). Beneficiaries of the Voluntary Insurance Scheme can access the Total Disability Invalidity Pension (Pensão de Invalidez Absoluta) but not the Relative Disability Invalidity Pension (Pensão de Invalidez Relativa). The former regards situations where the applicant has permanent incapacity for performing any work or professional activity and it is not anticipated that the situation will change till they reach the age of 65. The latter regards situations where the applicant has permanent incapacity for performing their last professional activity and, due to it, is not able to earn more than one third of the salary they would normally earn. Additionally, the applicant is not expected to gain the capacity to earn more than half of the salary they would normally earn within the following three years. In order to be entitled, the non-standard workers who are beneficiaries of the Voluntary Insurance Scheme must have a minimum contribution record of 72 months, compared to 36 months for employees and for the self-employed. When an employee exhausts their sickness benefit of 1,095 days their incapacity for work should be assessed by a Commission for the Verification of Permanent Incapacity. Until this occurs, a provisional invalidity pension is attributed, including for those who have already requested an invalidity pension. As the sickness benefit for the self-employed is limited to 365 days, these workers are not entitled to any provisional invalidity pension. In any case, access to the invalidity pension depends on the decision of the Commission for Verification. No data could be found regarding possible long waiting periods. However, the latest report of the Portuguese Ombudsman to the Parliament highlights the expressive delay in the assignment of solidarity benefits as one of its most important interventions related to social security issues (Portuguese Ombudsman, 2016: 38). Beneficiaries of the Voluntary Insurance Scheme can only be entitled to the Subsidy in case of temporary incapacity due to an occupational disease if they pay an extra contribution of 0.5% specifically to this end. For accidents at work, rules are applied as established for the employees except for adaptations related to the nature of the self-employed activity, notably with regards to the annual income taken into account for calculating bonuses and cash benefits. This corresponds to at least 14 times the indexing reference of social support (IAS, indexante dos apoios sociais). With regards to occupational diseases, benefits are granted according to the regulations of the general system for the employed (MISSOC). 12

15 2.8 Family benefits Family benefits are granted according to the regulations of the general system of family benefits which covers all residents (MISSOC). The Child benefit is attributed to the child or youngster per se so it is not directly related to the parents labour status. This is only indirectly relevant as this is a means-tested benefit. There are also benefits associated with the need for family members to provide care for children in case of ill health or disability. Within this scope, the self-employed are not entitled to the Child care benefit (Subsídio para assistência a filho) and to the Benefit for the care of grandchildren (Subsídio para assistência a netos). The access rules to these benefits specifically mention the entitlement of some beneficiaries of the Voluntary Insurance Scheme mariners and watchmen working in vessels of foreign companies and research fellows, as well as professional sportspeople. Conversely, they explicitly exclude workers with labour contracts of extremely short duration. Additionally, as the access to the benefit is conditional on having worked for at least six months (consecutive or interpolated) before the request, some workers with temporary contracts may be excluded. If interpolated, the interruption cannot have been equal or longer than six months. 3 Assessment of the existing social provisions and of the impact of possible extension of their coverage Coverage and adequacy of social provisions for people working as self-employed still lag behind those of salaried workers. The same applies to some categories of non-standard workers. Over the years, the position of self-employed workers with relation to the social security system has approximated that of employees: both categories now have access to equal benefits in case of illness, parenthood, disability or old age, although contribution schemes are still very distinct to the disadvantage of self-employed workers who pay higher contributions (see table 2 in annex 1). Available literature strongly suggests that one of the incentives for companies to prefer self-employment arrangements is the transfer of social security costs to the worker. This adds, of course, to the higher flexibility attached to bogus self-employment in terms of dismissal, non-compensation obligations which act as strong incentives for employers and as disincentives for employees. Self-employed workers are in a less favourable position than employees with regards to social security: they must pay a higher proportion of their income and enjoy fewer benefits. In particular, they do not have access to unemployment benefits unless they are owners of a business or economically dependent from one sole contractor. The National Health System is organised on the basis of universal access, meaning that self-employed workers are not disfavoured in this respect. Access to unemployment benefits is limited to self-employed workers who are economically dependent or who earn their income through a registered business of their own or possess an individual commercial establishment. Thus the self-employed who do not perform 80% of their yearly activity for the same entity do not have access to the unemployment benefit. Those performing 80% of their yearly activity for the same entity or who earn their income through their registered business must have completed a record of contributions of 720 days in the previous 48 months compared to the record of 360 days in the previous 24 months applicable to most employees. Additionally, it should be borne in mind that only in 2012/13 did some self-employed become entitled to the unemployment benefit. Another significant focus of inequality lies in healthcare and sickness cash benefits. With the exception of a few specific cases (see above), the period of absence for granting sickness benefits to the self-employed is 30 days, while for employees it is 3 days. Similarly, the maximum period for receiving this allowance is 365 days, while for 13

16 employees it is 1,095 days. Additionally, for those self-employed receiving the benefit for clinical risk during pregnancy, the benefit for interruption of a pregnancy and the benefit for specific risks there is no entitlement to Christmas and vacation allowances, contrary to the situation applying to employees. In the case of the benefit for specific risks, the selfemployed will have to present supporting evidence issued by an occupational physician or by the National Health System that they perform night work or are exposed to risks. In October 2016, the self-employed represented 2.4% of the total beneficiaries of the sickness benefit. 7 The self-employed also do not enjoy the same rights with regards to care and long-term care possibilities. They are not entitled to the child care benefit, to the benefit for the care of grandchildren and to the benefit for the care of disabled or chronically ill children. Provisions in case of maternity/paternity and the access to pensions are less prone to relatively disfavour the self-employed as is also the case in the provisions for invalidity, accidents at work and occupational injuries. As for non-standard workers, access to many benefits is conditional on the person having worked at least six months before the request which may exclude some workers with temporary contracts. Additionally, many benefits explicitly exclude workers with labour contracts of extremely short duration. The beneficiaries of the Voluntary Insurance Scheme wanting to access the benefit for specific risks also have to present supporting evidence issued by an occupational physician or by the National Health System that they perform night work or are exposed to risks. Amongst these beneficiaries, there is concrete differentiation according to their situation. Mariners and watchmen working in vessels of foreign companies and research fellows have the widest social provision coverage, including all aforementioned areas except for unemployment. The coverage for social volunteers and volunteer fire-fighters includes invalidity, old-age, death and occupational injuries. In other situations, including cooperation agents and professional sportspeople, coverage is limited to invalidity, old-age and death. Different periods of record of contributions apply to the beneficiaries of the Voluntary Insurance Scheme compared to employees in general. In a few cases, social protection facilitates transitions into self-employment. A beneficiary of the unemployment benefit may request the anticipated payment of the total amounts they would be entitled to as a lump sum in order to support to the creation of one s own job. Additionally, payment of contributions to social security is due only from the 13 th month of self-employed activity, i.e. the person will be exempted for a one-off period of one year. The combination between contractual employment and self-employment is also favoured. In case of simultaneous pursuit of an employed activity covered by a compulsory social protection system and a self-employed activity, the law provides, as long as certain cumulative conditions are monitored (for example, the employed and self-employed activity cannot be carried out for the same company), for the exemption of payment of contributions based on the latter activity. The exemption of contributions is also stipulated for those drawing invalidity or old-age pensions who practice a self-employed activity. This right is also guaranteed to persons holding an occupational disease pension and suffering from incapacity to work of 70% or more. 7 Available at: (Accessed 5/12/2016) 14

17 Desk research did not provide any results allowing for estimations of the financial implications of an extension of the coverage and of its conceivable consequences on the labour market. 8 As for individual social security accounts, it is worth mentioning the capitalised old-age public scheme. This scheme, in place since 2008, is based on voluntary individual affiliation and is complementary to Social Security, allowing for the establishment of savings to be used as a complement to a retirement pension (old-age or absolute and permanent invalidity). It consists of additional contributions to be made to an individual social security account integrated into an investment fund. The contributions are calculated on the basis of the person s gross income and may be, depending on individual choice, of 2%, 4% or 6% of the monthly remuneration. The latter case may only be chosen by those aged 50 or more. No plans regarding this issue could be identified either from desk research or from specific contacts. 4 Conclusions and recommendations The self-employment phenomenon in comprises a wide array of situations which arise both from the existing legal provisions but also from self-employment practices. Although there is a lack of specific research regarding the phenomenon at the national level, it is important to highlight the overall framework structuring recent discussions around transitions between different forms of employment and the potential for extending (or restricting) social protection for non-contractual forms of employment. Discussing the potential of self-employment for addressing the on-going economic and labour market structural transformations and the challenges arising from differential social protection treatment of people working under these forms of contracts raises the crucial issue of how employment should be envisaged and managed. During the crisis years, the issues around the need to reduce the cost of labour gained even more relevance in the national context. Thus, the dominant approach has been a focus on labour as a cost which should be managed in the most efficient way, i.e. labour costs should be reduced as much as possible. This approach has been basically informed by a narrow and short term perspective of the role of labour which is not compatible with a strategic approach to labour as a development driver which should, in our opinion, also be an important factor in the design and implementation of employment public policies. However, Portuguese public services have themselves long and recurrently engaged in self-employment practices, leading to precarious forms of concealed regular employment relationships under new forms of self-employment. Such practices are particularly harmful both for their consequences on social protection entitlement and coverage, but also by presenting a negative role model within the overall labour market functioning. As an example of this particular aspect of the State s performance it is important to recall that only in the late 1990 s did teachers under temporary contracts (employed by the State) gain access to unemployment benefit, even though they complied with entitlement criteria. Thus, one major issue to be addressed in the national context is the need to make the necessary efforts to distinguish within the diversity of self-employment situations those that actually correspond to real and voluntary self-employed situations and forms of dependent and bogus self-employment. On the one hand, there is an urgent need to overcome the lack of official data on self-employment which continues to be a major hindrance in this respect. On the other hand, limitations on the authority and scope of the 8 Additionally, several contacts were made in order to try and secure data and/or studies. This included NGOs such as the Association for the Fight against Precariousness, one of the main promoters of the public initiative that led to the approval of Law 63/2013, as well as government officials. We contacted the Office for Strategy and Planning of the Ministry of Labour, Solidarity and Social Security, where it would be likely that such data and/or studies could be found. However, the Office informed us that no efforts on this matter are being conducted within its scope. 15