JHL: Social security for self-employed must be improved

JHL/Trunf - Helsinki (06.05.2011 - Heikki Jokinen, Juhani Artto) A fairly new item on the agenda of the Trade Union for the Public and Welfare Sectors JHL is safeguarding the interests of those who are self-employed.

But before delving deeper into this, we should note some basic facts concerning the situation of the self-employed in Finnish society today. Some 160,000 people earn their living as self-employed persons, which makes up seven per cent of the total labour force - far less than in many other EU member states. In the last two years the number of self-employed in Finland has grown by 20,000.

Only a few years ago not many trade unions paid much attention to the interests of the self-employed but more recently an increasing number of organisations have begun to elaborate their policy on safeguarding the interests of this heterogeneous group. The reasons for this are obvious enough, as those engaged in self-employment have managed to penetrate most industries in one way or another.

Clearly, the pattern of self-employment has changed. In the past, self-employed people used to be professionals and specialists, but in the last few years we have witnessed an increase in the number of self-employed operating in industries such as construction, catering and hairdressing. And this phenomenon or development has also reached into the public welfare sector, mainly due to the outsourcing policy of municipalities and the State.

In-between in the social legislature and low incomes

The major problem for self-employed is this: Finnish labour and social security legislation is built around a binary distinction between employees and entrepreneurs. Self-employed persons are defined as entrepreneurs, even in cases where they are completely dependent on only one contractor.

The legislation, as it stands, makes no real provision for the self-employed when they fall on hard times. The self-employed are responsible for their own pension contributions and other work related social security contributions. They are not entitled to receive benefits from the employees' unemployment funds, which puts the self-employed in a seriously disadvantaged position when they find themselves without work. The growing number of self-employed people means an increase in the amount of working people left outside the work-related social
security system.

Another major problem is the fact that the income level of the self-employed is often low. According to Statistics Finland, in 2009, 17 per cent of those registered as self-employed belonged to the low-income group. Among wage and salary earners the figure was only 3 per cent. The threshold value used for low income is 60 per cent of disposable median income per person.

Trade unions have claimed that in many cases self-employment is a consequence of employers' effort to minimise their expenses and risks. Often the former employer has remained the only customer of the new self-employed person and thus the new self-employed individual has remained completely dependent on just one contractor.

Employers may also be motivated by the differences in working hour regulations. Labour legislation and collective agreements do not restrict the working hours of entrepreneurs, whereas working hours for wage and salary earners are carefully regulated. Thus, self-employment may offer the employer a practical way to circumvent working hour regulations, and, in terms of a company’s own operations, get rid of unpleasant working hours.

Self-employment issues for the next government programme

Päivi Niemi-Laine, the director of research and social policy at the Trade Union for the Public and Welfare Sectors JHL, demands an end to the use of self-employment as a way to circumvent employer obligations.

The political development in the public sector encourages this kind of disguised employment. "The public service production is crumbling due to use of service vouchers. Citizens become customers when they can buy health and other services from private providers with these self-same vouchers", Niemi-Laine explains. The vouchers, are it should be remembered, issued by the municipalities.

In the future, public sector organisations may encourage their employees to become self-employed, even to the extent of promising future contracts. "In that case scenario they would do the same work as before and the work could take place at municipal premises. They would have tenure with the municipality but would not have the wage or salary and social benefit entitlements they had when being employed by the municipality."

However, there is no guarantee that contracts would be given to former employees. The competition legislation stipulates that public sector subcontracts must be tendered. "Destia - the state owned road maintenance company - encouraged its employees to become entrepreneurs and made them attractive promises. However, they did not win a single tender."

"We demand that the next government programme include a clear statement which will effectively improve this group's social situation. As far as social security rules go there is clearly a need for the self-employed to be separated and dealt with separately from entrepreneurs. This would create a new group of wage and salary earners." (Political parties have begun to prepare the next government programme and are due to finalise it in the coming weeks in May or June. The Parliamentary elections were held on April 17.)

"The self-employed should be allowed to join employees' unemployment funds and have the right to receive adjusted unemployment allowances in the same way as part-time unemployed employees do. The right to be involved in collective bargaining and to have collective agreements is also important for the self-employed. Right now they do not have this right. Trade unions should be allowed to take class action lawsuits, as the self-employed, depending on their contractors, may not dare to take disagreements with their contractors to court."

Cooperation with other union organisations

Trade unions have close mutual cooperation when developing their work to safeguard the interests of their self-employed rank and file members. For this purpose, JHL has formed a joint coordinating group with several other trade union organisations.

Until now, the participants in this group have been the Central Organisation of Finnish Trade Unions SAK, the Finnish Confederation of Professionals STTK, the Finnish Musicians' Union (a SAK affiliate), Akava Special Branches (a Akava affiliate) and the Union of Journalists in Finland (independent). The union confederation of highly educated people Akava and the Service Union United PAM (a SAK affiliate) have decided to join the group and are soon to participate in the work.

These organisations want the next government to make a comprehensive survey on the problems facing those who are self-employed. The survey should cover both labour market and social security issues. And the government should translate findings of the survey into positive action. The union organisations wish to spell out in no uncertain terms that entrepreneurship must always be a genuinely voluntary choice, not something which is forced on people.