The lack of social security coverage for the self-employed has recently attracted significant attention in Europe. Changes in the world of work, including the rising prevalence of platform work, have led to an increasing number of self-employed workers with lower incomes. These trends, together with the COVID-19 pandemic, have shed light on the historically insufficient protection for the self-employed across the region.
Given that the rules that govern access to social security have historically catered for those in traditional employment relationships, people working in non-standard forms of employment, including self-employment, are often left without adequate coverage (European Commission, 2023). As shown in figure 1, legal access to benefits (both mandatory and voluntary) in Europe remains unequal: while employees typically enjoy access to a comprehensive set of benefits, the self‑employed are much less likely to have protection during key lifecycle and labour market contingencies, with significant gaps in coverage for unemployment, work injury and paid sick leave.
Figure 1. Number of countries in Europe providing legal coverage for self‑employed workers, by social security branch (2020)
Source: ISSA country profiles – Europe (forthcoming). Information is valid as of January 2020. The graph includes coverage under tax-financed and (mandatory and voluntary) contributory schemes.
In the European Union (EU), the Council Recommendation on access to social protection for workers and the self‑employed calls for extending formal coverage that is effective and adequate, facilitating the transfer of benefits across schemes, and increasing the transparency of systems (ibid.). Moreover, the Recommendation calls for closing these legal coverage gaps “at least on a voluntary basis and where appropriate on a mandatory basis” (Council of the European Union, 2019). This distinction is in recognition that, while a growing number of countries in Europe cover the self‑employed under mandatory regimes for certain risks, their participation remains voluntary in many cases. This is despite evidence of low take-up, adverse selection and related consequences for ensuring sustainable financing and adequate benefit levels, as recognized in the recently issued Council Conclusions on Social Protection for the self‑employed (Council of the European Union, 2023).
Beyond legal coverage gaps, affordability of social security remains a persistent and growing challenge for many self‑employed workers. Notably, the share of self‑employed workers who are vulnerable and at risk of poverty, notably the so-called “solo self‑employed” and the economically‑dependent self‑employed, are significant and increasing, especially in some countries (Schoukens, 2022). In addition, contribution rates for the self‑employed are typically much higher than the rates for employees. As shown in figure 2, owing to their need to account for both the employer and employee share, many self‑employed workers in Europe face contribution rates that are more than double those of the traditionally employed.
Figure 2. Total reported contribution rates of self‑employed and employees for all social security branches.
Source: ISSA country profiles – Europe (forthcoming). Information is valid as of January 2020. Contribution rates reflect a percentage of earnings (employees) or declared earnings (self‑employed). The graph excludes systems with flat-rate contributions.
Closing legal gaps in coverage and addressing affordability will only offer partial solutions. Reaching the self‑employed effectively also requires a deep understanding of their specific needs and the challenges they face, including difficulties with contribution calculation and reporting, maintaining adequate contribution density, and a lack of awareness of the overall social security system or the implications of opting for “other” employment status, among others (ISSA, 2012). Practical administrative tools are crucial to overcoming these barriers and facilitating the full incorporation of self‑employed workers into the social security system.
This article outlines recent developments in social security for the self‑employed in Europe. It complements previous articles on social security for platform workers in Europe and beyond (ISSA, 2023a, 2023b and 2023c). The article explores approaches aimed at building and maintaining inclusive social security systems that ensure comprehensive coverage, regardless of employment status; reforms or initiatives that address the affordability, adequacy and long-term sustainability of systems; and the simplification of administrative procedures that facilitate participation of self‑employed workers in contributory schemes.
Providing more comprehensive coverage for self‑employed workers
Beyond a basic level of income security through tax-financed benefits, the adequacy and inclusiveness of a system hinges on legal coverage and effective access to benefits through earnings-related schemes, where it is suggested that more “inclusive systems” offer coverage on a mandatory basis for all branches (Spasova et al., 2019). For example, in Slovenia, the self‑employed are insured for all compulsory social insurance schemes with a single application (ZPIZ, 2023), with similar approaches taken in Croatia, Hungary, Iceland and Luxembourg. In contrast, in Denmark, Finland, and Sweden, higher-level access is “à la carte” where all risks are legally covered, but participation is voluntary for some contingencies.
Several countries in the region, such as Ireland, Portugal and France, have extended coverage by improving the comprehensiveness of benefits available to self‑employed workers under compulsory systems. For example, Ireland has taken a staggered approach to compulsory coverage, where social insurance has been mandatory for the self‑employed since 1988. Initially covering only old age and widow’s pensions, coverage was extended to include maternity in 1997 (Department of Social Protection, 2023), invalidity benefits in 2017 (INOU, 2024), with the final addition of unemployment insurance coverage in 2019 under the Jobseeker’s Benefit (Self‑employed) (Citizens Information, 2024; Reddan, 2019). In 2012, Portugal extended mandatory coverage (with exemptions under certain conditions) for unemployment insurance to self‑employed workers who were either independent entrepreneurs, holders of single-member limited liability companies, or classified as economically dependent. In addition, the country improved sickness benefits and care allowances for all self‑employed (ISS, 2022). Similarly, in 2021, self‑employed workers in France working in liberal professions (such as those providing intellectual, technical or care services) gained access to daily cash sickness allowances for up to 90 days, calculated on the average contribution income of the three preceding years (Ameli, 2024).
Notably, the degree of inclusiveness of national social protection systems for the self‑employed has important implications for the ability of the system to cope with new and emerging forms of work, such as platform work, that challenge traditional classifications. Emerging evidence suggests that the existing structure of social benefits – and specifically the extent of accessibility of social protection for the self‑employed – may help determine the nature of a country’s policy, political and regulatory response to platform work (Sieker, 2022). Those systems that are more inclusive toward the self‑employed, such as those in the Nordic countries and Austria, have been able to take a more integrative response to platform work, where it represents a minor policy change and is subject to lesser confrontation (ibid.).
Addressing the affordability, adequacy and sustainability of schemes
Even when legal coverage is inclusive, ensuring social security benefits that are both adequate and affordable for self‑employed workers, without compromising the financial sustainability of schemes, remains a key challenge. Ensuring sufficient contributions over an extended period to accrue rights is a particularly important objective. To address these challenges, countries have sought new arrangements to share the responsibility for contributions, adjusted the contribution base, and provided subsidies and flexibility to encourage enrolment. Due to the potential trade-off between affordability and adequacy, there are ongoing reforms across the region aimed at securing the long-term sustainability of systems.
Portugal’s economically dependent self‑employed and flexible income base
Several countries in Europe, such as Italy, Portugal and Spain, recognize economically dependent self‑employed workers as a specific sub-category, often with broader access to benefits than independent workers. Portugal’s recent reforms extends social security coverage to the self‑employed through the recognition of an economic dependence status for some workers, requiring the contractor to make contributions, and allowing flexibility in income declarations.
In Portugal, the Social Security Institute (Instituto da Segurança Social) determines the status of “contractors” based on worker’s total annual income declarations. Contractors that account for 50 to 80 per cent of the total value of the independent worker’s activity within a calendar year are required to contribute annually to workers’ social security at a rate of 7 per cent (10 per cent if the contractor provides more than 80 per cent) (ISS, 2023). These entities receive a notification for each affected worker and can consult their status and make the annual contribution directly through the social security portal. While only affecting a small percentage of the self‑employed, the involvement of a third party – also in place for subgroups in other countries (see box 1) – offers more equitable coverage.
In addition, self‑employed workers in Portugal have significant flexibility to determine their contribution base, which is tied to quarterly income declarations. Contributions are based on 70 per cent of the declared quarterly income, on which the standard rate of 21.4 per cent is applied to the monthly average. Its key characteristic is that it allows workers to set their relevant income each quarter as higher or lower than the previous quarter, doing so in intervals of 5 per cent and up to 25 per cent. This allows workers to account for earnings fluctuations and gives them the autonomy to manage their social security contributions. As an additional incentive and a buffer during transition periods, a low, flat-rate contribution applies to self‑employed workers for the first registered quarter as well as for any quarter for which they report little or no income (ISS, 2023).
Box 1. Tailored schemes for specific types of self‑employed workers
Germany’s Artists’ Social Security Fund (Künstlersozialkasse – KSK) is recognised as a successful case of addressing conditions of employment for specific types of workers.
Under the KSK, independent artists and writers that meet compulsory insurance requirements benefit from a three-party model – paying only half of the contributions, while the remaining portion is covered through a federal government subsidy (20 per cent) and social contributions from the companies employing artistic and publishing services (30 per cent). The users’ and state’s contributions are used to compensate for the contribution that employers would pay if the artist were working on a long-term contract (OECD, 2018). The workers’ monthly contributions still rely on income from work, and, once “topped up” by the KSK, are passed on to pension, health, and nursing care insurance (KSK, 2023).
Spain’s adjusted contribution base
Self‑employed workers in Spain are obliged to make social security contributions under a special scheme from the first day of the month in which they begin their activities. Starting in January 2023, a new contribution system applies based on net income. The new system is characterized by its flexibility and the incorporation of new benefits (increasing the amount and duration of some) and represents a step towards equal benefits and contributions for all workers.
Under the changes, self‑employed workers declare their expected annual income, and after deducting 7 per cent for normalised expenses, fall into one of 15 contribution brackets, each with minimum and maximum contribution amounts. Three of these brackets are part of the “reduced contributions” regime in place for workers earning less than the interprofessional minimum wage (IMW) and where the contributions for the lowest level are inferior to those in place in the previous scheme. This reduced scheme is expected to affect three out of four self‑employed workers. Additionally, the scheme allows workers to alter their contribution base up to six times a year according to the variation in their predicted net annual income. Both the registry and the declaration of activities can be carried out through the designated website IMPORTASS (see box 2).
Finally, new entrepreneurs can apply for a reduced, flat-rate contribution of 80 euros (EUR) per month for the first year, which can be extended for an additional year if the individual’s income falls below the interprofessional minimum wage. It can be extended for two years, or even three years for certain categories of workers (Seguridad Social, 2023). The communities of Andalucía, Madrid and Murcia have gone a step further and implemented a “zero fee” for new entrepreneurs registered in the state’s flat-rate scheme, providing a full subsidy, as have the communities of the Balearic Islands and La Rioja, albeit with additional requirements (Instituto BBVA de Pensiones, 2023).
Türkiye premium incentives
The self‑employed in Türkiye are incorporated into the general scheme, with similar benefits to employees and with a range of financial incentives to encourage participation. Formerly known as BAĞ-KUR the self‑employed system now takes the name of its regulating article, 4/b, of Social Security Institution Law 5502. The contributions for short-term (covering occupational risk and sickness and maternity), long-term (invalidity, old age, and survivors’ benefits), and health branches are taken from declared earnings and at a rate of 2, 20, and 12.5 per cent of declared income respectively.
As part of a wider project to increase registered employment, especially among women, youth, and people with disabilities, the country has laws in place providing insurance contribution incentives, supports and discounts with a total of 18 measures currently in place. While encompassing multiple groups, the policies have a direct impact on the self‑employed through the 5 percentage-point discount automatically applied for those under the 4/b scheme who are up to date with their contributions, meaning no debt to the Social Security Institution (Sosyal Güvenlik Kurumu – SGK). This discount, which effectively lowers the total contribution rate from 34.5 to 29.5 per cent, is funded by the Ministry of Treasury and Finance and applicable to the long-term insurance branch. This incentive aims at facilitating timely contribution payment, while easing financial pressures. Incentives are even higher for young entrepreneurs, as individuals between the ages of 18 and 29 registering to the 4/b system for the first time have their contributions covered by the Treasury for a year.
Finland’s confirmed income from self-employment
To address sustainability and adequacy, particularly related to underinsurance, a 2022 reform in Finland changed the income basis for calculating pension insurance contributions for the self‑employed. Previously, contributions of 25.6 or 24.1 per cent relied on self-declared annual income, often leading to workers choosing the lowest contribution category. Doing so negatively affected the value of their earnings-related pensions and other income transfers such as sickness and family leave benefits (Kangas, 2022).
From January 2023, the contribution rate is retained but now applies to the “confirmed income from self-employment” (YEL income), an amount that must correspond to the monetary value of the labour input – the wage that would be paid if the work of the self‑employed was carried out by another (wage earner) (Finnish Centre for Pensions, 2023). The YEL income estimate is made by pension providers, all using the same calculation service, and based on the median wage of the business field and turnover (ibid.). This approach still provides some leeway for workers as the calculator allows YEL income to fall within 30 per cent of the recommended value, and individuals can submit additional details on the value of their work input to justify deviating from the overall estimate. Finally, the reform sets provisions for regular monitoring as YEL income will be reviewed and adjusted accordingly every three years. Notably, in the first two reviews, the pension provider can raise confirmed annual income by up to EUR 4,000 at a time, meaning the monthly pension contribution can rise by no more than EUR 80 after each review.
Enhancing accessibility, facilitating coverage and adapting to new types of self-employment
Beyond legal coverage and measures to address affordability, adequacy and sustainability, the expansion of social security for the self‑employed has been hindered by a mismatch between administrative requirements and the nature of self-employment and entrepreneurship (ISSA, 2012), as well as a lack of awareness of social security coverage among the self‑employed. According to the ISSA Guidelines on Administrative Solutions for Coverage Extension, it is important that administrative tools and mechanisms are tailored to the specific needs of the target population (ISSA, 2022). Specific solutions must also address new types of self-employment including, for instance, workers registered on and receiving income through a number of platforms, or platform workers providing online work for contractors abroad. To address these challenges, countries have simplified registration and contribution payment, unified processes with other organizations, promoted social security systems and easy access, and worked towards taxation systems that support new forms of self-employment.
France’s auto-entrepreneur status
In January 2020, to simplify the management and monitoring of social security, the social security scheme for the self‑employed (Régime social des indépendants – RSI) was incorporated into the general social security scheme. Apart from unemployment benefits, from which they are excluded, and from reduced provisions in case of work accident and disability, the protection offered to independent workers is comparable to that of employees. Mandatory enrolment is required for regular independent workers and for “auto-entrepreneurs”, a status available for everyone to register a main or complementary economic activity. The auto-entrepreneur classification eases the procedures for creating and managing individual business while allowing workers to benefit from a simplified contribution scheme.
As auto-entrepreneurs, workers benefit from VAT exemption, along with social security contributions based on reported turnover on a monthly or quarterly basis. Contribution rates range from 6 to 21.2 per cent, according to the activity performed (craftsman, trader, or liberal profession such as those providing intellectual, technical or care services). Having contributions rely on reported turnover eases financial pressure as workers are only required to contribute when they have income, while also addressing administrative challenges by reducing the necessary record keeping to receipts and purchases that specify method of payment. In line with other digital innovations in the country (see box 2), both declarations and contribution payment are made electronically through a dedicated site or a mobile application. Workers also have the option to unify their social security contributions with the payment of income tax. Significant efforts have been made to promote this website and its use.
The simplified process and revenue responsive contributions facilitate participation in the social security system, though this may have repercussions on benefits in the long run. Given that the old-age pension system relies on accrued quarters, the no-turnover-no-contribution model can affect workers ability to meet the qualifying conditions. While the self‑employed have the option to make base-level contributions into each scheme, doing so takes them out of the auto-entrepreneur system and into the classic system as independent workers, losing then the ease of unified contribution payment.
Box 2. Digital innovations enhancing awareness and access
Beyond easing registry and contribution collection, digital innovations help address the barrier of low awareness and knowledge of social security. Websites providing information on benefits and procedures in lay language, and tools simulating contributions, are bridging the information gap and helping independent workers meet their social security obligations.
The country’s social security and family allowance contribution collection network, URSSAF National Fund, offers online businesses start-up guidance, with a decision-making tool consisting of simple and dynamic questions as well features to assist with anything from choosing a legal status to simulating social security contributions.
The Importass platform was designed to provide information and facilitate procedures from any device via a public and a customized space (personal area), where insured persons can access their personal information, details on their work history, and social security position in real time. Self‑employed workers have access to a specific section within the portal that groups all procedures they might need. The personal area for these workers is still under development.
Estonia’s entrepreneur account
Since January 2019, self‑employed persons in Estonia with an income below EUR 40,000 per calendar year can open an Entrepreneur Account (EA). Designed as a mechanism to enable an individual who is paid for providing goods or services to a legal or private person to declare their income, the EA simplifies administrative procedures and enables individuals to conduct their economic activity without the need to register as a sole proprietor, keep accounting records, or issue invoices. Facilitating tax and social security transactions for new types of self-employment, the account supports multiple sources of income via the coordination and interconnection of the Estonian Tax & Customs Board (ETCB) and a bank holding the Entrepreneur Account. The individual account allows for the automatic payment of contributions, as 20 per cent of income up to EUR 25,000 is withheld for tax and social security, and 40 per cent of income above EUR 25,000 (figure 3). Of the total amount withheld, 60 per cent is directed to social tax, 36.4 per cent to income tax, and 3.6 per cent to the mandatory funded pension. The right to health insurance is guaranteed provided the social tax portion allows workers to meet the monthly minimum social tax liability (EUR 215.82 in 2023), and workers can monitor their right by following up on their account status via a dedicated portal.
Figure 3. Depiction of Estonia’s Entrepreneur Account implementation process
While an innovative solution in terms of taxation, simplified registry, and portability, the EA is not without its drawbacks. Given the minimum social tax liability is the same across schemes, reliance on the EA as a single source for social security effectively raises the monthly minimum income needed to meet the threshold from EUR 654 to 1,798.50 as the rate changes from 33 per cent to 12 per cent (60 per cent of 20 per cent) making it best suited to act as a supplement to social security rather than sole source. Notably, the EA is incompatible with unemployment benefits as having an open account, even without registering transactions, precludes the recognition of “unemployed” status, forcing the individual to close the account and later apply for benefits. Still, because it simplifies the process and enables contributions from multiple revenue streams, the EA is particularly well suited for platform workers.
Serbia’s freelancer tax system
As one of the countries with the highest rate of online workers (Stephany et al., 2021), Serbia’s Tax Administration developed a new taxation system for freelancers in 2022. The system applies to natural persons (residents and non-residents) who generate income while working in Serbia from legal entities who, when paying income, do not calculate or pay taxes and contributions in the country. As it is designed for freelancers, it recognises online work with measures in place for income received through web portals and in a foreign currency (NALED, 2023).
Since January 2023, freelancers report their income on a quarterly basis and can choose between two models of taxation: 20 per cent with normalized expenses of 96,000 Serbian dinar (RSD) (Model A), or 10 per cent with normalized expenses of RSD 57,900 + 34 per cent of gross income (Model B) (ibid.). While the contribution rate for social security (pension and disability insurance) is the same (24 per cent) for both models, through model A – designed for those expecting lower incomes – earnings below the level of normalized expenses are exempt from contributions, while model B adherents must make a mandatory contribution of at least RSD 25,218. Health insurance is mandatory for both models if the worker is not already registered for it under another form of employment.
The new system is accompanied by online tools designed to make the process simpler, with a tax simulator allowing workers to estimate contributions and choose a model accordingly. For workers already insured under regular employment (or with payments being made in their name under any other basis) contributions as a freelancer increase the personal coefficient for pension calculation and thus the benefit amount received when meeting the qualifying conditions. By maintaining the two models and with the option to change their choice per reporting quarter, the system allows workers to assess and choose the tax scheme best suited to their income and social security rights they aim to achieve, a strategy that also enables the growth of independent activities.
In Europe, as elsewhere, ensuring full and adequate social security for self‑employed workers is fundamental, both as matter of principle – in fulfilment of the human right to social security – and as a key component of any strategy to extend coverage to workers in new forms of employment, including platform work. Despite the region’s historical position as a leader in providing relatively comprehensive social security, and high coverage overall, the rights of the self‑employed remain incomplete and uneven across much of the region.
Against this backdrop, improving social security coverage for self‑employed persons has been a priority in many European countries in recent years. Key mechanisms have included the extension of coverage to include new benefits; strengthening affordability, adequacy and sustainability; improving the responsiveness of administrative systems; and adapting social security and collection systems to recent trends in the structure of self‑employed work. There has also been a close relationship between social security measures and wider reforms to the tax system of self‑employed workers.
By respecting the principle of adequate and comparable social security for comparable work, as outlined in Principle 12 of the European Pillar of Social Rights (European Parliament, European Council and European Commission , 2017), countries can ensure that the decision to enter and remain in self-employment can be driven by the perceived advantages of being self‑employed – autonomy, flexibility, entrepreneurship, and skills development – rather than by any potential (negative) consequences self-employment might have for worker protections. Achieving full and adequate coverage of self‑employed workers will require a combination of tools that enable systems to better address the challenges of self‑employed workers, while at the same time ensuring that tailored approaches are coherent, sustainable and compatible with the rights and obligations of all workers to cater for increasingly flexible working careers.
Ultimately, the development of more inclusive and flexible schemes in Europe – ones that address the evolving nature of the labour market and dynamic aspect of employment status and income – will enable better coverage not only of self‑employed workers, but of workers in all forms of employment.
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