Social security measures for the self-employed during the COVID-19 crisis

Social security measures for the self-employed during the COVID-19 crisis

The self-employed are a key pillar of economic activity in many countries. While often belonging to lower income groups, their social security protection is usually significantly less comprehensive than the one provided to employees. Due to the coronavirus crisis, many governments have taken unprecedented steps to expand social security coverage for the self-employed.

Affected by health problems, self-quarantine obligations, care responsibilities or lost income due to economic restrictions in the context of the coronavirus crisis, many self-employed persons are in distress as they are usually not eligible to sickness pay, unemployment benefits or other income protection schemes. This situation is particularly difficult for the self-employed in the informal sector, freelancers and gig economy workers who often do not have sufficient savings to bridge even short periods without income.

Supporting the self-employed during the COVID‑19 crisis has therefore been a focus of many governments for both social and economic reasons. In addition to tax systems and interest-free loans, social security systems have been at the centre of these measures. This is leading to unprecedented social security coverage levels for the self-employed. In view of global objectives for social security protection, it is hoped that this increased coverage is sustained after the crisis.

The social security measures targeting the self-employed in the context of COVID‑19 can be classified into five main groups:

  • Extension of coverage of existing social security programmes to the self-employed, and in particular with regard to cash sickness and unemployment benefits. Some countries have specifically highlighted freelancers and gig economy workers as an important target group for this extension.
  • Increase in benefit levels: Where the self-employed already had access to social security benefits, increases in benefit levels, relaxed eligibility criteria or temporary flexibility measures have improved their economic situation. While such measures usually benefit all eligible groups irrespective of their employment status, some measures have also been tailored to the self-employed.
  • Temporary special income support measures: Targeted specifically at the self-employed, these measures aim to provide temporary income support in the context of the coronavirus crisis. Eligibility requirements usually include self-quarantine, care for family members, business closures or reductions in demand. Often based on a standardized average income or consisting of flat rate payments, most of these measures are restricted in time, usually for up to three or six months.
  • One-off cash transfers: One-off cash transfers to the self-employed and independent workers aim to provide rapid support to the livelihoods of these workers and their families. These payments are usually targeted at vulnerable groups, and are therefore subject to an income and/or asset test.
  • Temporary flexibility or exemptions from social security contributions: As outlined in more detail in a previous article, many governments implemented the possibility for companies and self-employed persons to be exempt from social security contributions or to delay their payment without penalties. These measures usually complement similar delays granted with regard to tax payments.

In Spain, self-employed workers are now eligible for a benefit similar to that of employees in receipt of unemployment benefits. In Iceland, a subsidy for the self-employed of up to 80 per cent of the average monthly income during 2019 is payable for three months. Australia has extended the Job Seeker Payments and the Youth Allowance to the self-employed and freelancers, and has temporarily waived the asset test. In Sweden, the self-employed can now also receive sickness pay during the first 14 days of sickness.

The United States have included the self-employed, freelancers and gig economy workers in the income protection package launched in response to the coronavirus crisis, providing them with access to unemployment benefits. Administrative difficulties to respond to a massive demand for benefits from previously excluded groups have however been a challenge to timely payments in practice.

Special income support measures for the self-employed have been introduced in Singapore where self-employed persons can receive a monthly cash benefit for up to nine months, based on a household income and asset test. In Portugal and Switzerland, a special benefit is paid to self-employed persons whose income is reduced due to self-quarantine or care responsibilities for a child up to 12 years old. The Netherlands have introduced a temporary income support allowance for the self-employed. Belgium provides a flat rate benefit to self-employed workers whose business needed to be closed, and New Zealand if income decreased by at least 30 per cent, due to the coronavirus crisis.

One-off cash transfers to support vulnerable self-employed workers and those in the informal sector have been introduced in El Salvador and in Argentina. Similarly, a cash transfer is paid to families of vulnerable self-employed workers in Peru. Finally, the possibility to delay the payment of social security contributions for a certain period without any penalties has been implemented in a number of countries, including France, Luxembourg, Australia, Portugal, Singapore and Spain.

Social security institutions are being challenged to rapidly implement these special measures for a typically difficult-to-cover population group. Administrative adjustments to standard procedures are often required, in particular in countries where the self-employed had hitherto not been registered in existing social security systems. This includes simplified registration and application processes, the calculation of benefits based on standardized rates, simplified income and asset testing, or the payment of flat-rate benefits. The current experience in extending social security benefits and in reaching out to the self-employed will be of high value for strategies to implement a longer-term coverage of this group in the future.