October 22, 2020

It is urgent to end the false self-employed



For years there has been talk about how difficult it is for young people to start their working life in Spain: high temporary employment, precarious work, low wages, and one of the highest youth unemployment rates in Europe, year after year. Now they are faced with a new barrier: the increasingly widespread practice of false self-employed workers.

What is a fake freelancer? They are workers registered in the Special Regime for Self-Employed Workers, despite the fact that they work for a single company and are subject to its remuneration policies, hours, guidelines and routines. They invoice that company for their work and pay their own social contributions as if they were self-employed. In most cases, The company requires that they register fraudulently as self-employed in order to save Social Security contributions. It is a new formula to reduce labor costs in Spain at the expense of the worker.

Although it has great economic advantages for the company, the increasingly widespread practice of imposing “autonomy” on new employees is very costly for the worker, who in many cases is a young person. The false self-employed person registers and pays a minimum monthly fee of 286.15 euros. (In the first year it is reduced to a flat rate of 60 euros.) These people They do not have the right to unemployment, sick leave, or vacation. Nor can they demand pre-notification or severance pay. Although the government assures that the number of false self-employed has been reduced, the Union of Self-Employed UATE estimates their number at 225,000 in Spain, and estimates that they cost Social Security about 592 million euros a year.

How can a person who is falsely self-employed defend himself? In theory, workers can report their situation, and the Government, which claims to want to end this fraudulent work formula, has carried out hundreds of inspections to detect cases and impose sanctions. However, there is often no real alternative, especially at the present time, and the young person has to choose between being falsely self-employed or losing his job.

The practice of false self-employed is not a product of the Covid crisis. Its use was extended in years of relative prosperity, as a way to reduce costs and help companies compete in the euro area and in a globalized world. But in reality, the high costs associated with hiring workers have simply been transferred to the weakest part and with the least capacity to bear them, the worker.

The fault, however, is not only with companies. The taxation that the Spanish State imposes on people, SMEs and the self-employed in Spain is high. For example, the quota for freelancers paid in Spain, whether false or real, is the highest of the surrounding countries. In Italy, France, Portugal and the United Kingdom, the self-employed are taxed according to their earnings, without a fixed fee; and in Germany the fee is lower (140 euros) and applies only if more than 1,700 euros are entered.

In a country where unemployment is chronically high, part of the solution should be to reduce tax burdens on labor. How could these burdens be reduced? It would take more efficient public spending, and a more rational tax system, which would tax more other activities and less work. This would help companies to hire at a lower cost, and perhaps reduce the pressure to seek formulas like the false freelancer. To help young people specifically, the State would have to subsidize their hiring to facilitate their entry into the labor market, so that they can start an economic life on which the entire country depends. The decrease in unemployment would probably offset the drop in income by increasing revenue due to increased activity.

Obviously, the country with the most unemployment in the EU cannot have the highest tax burdens on work in its environment. And it cannot allow companies to shift an increasing part of these burdens to the worker.

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