The boundaries between dependent employment and self-employment have become increasingly blurred in some sectors in recent years, in a context of changing labour markets and the spread of practices such as outsourcing and contracting-out. This process has led to a growing interest in ‘economically dependent workers’ – workers who are formally self-employed but depend on a single employer for their income.
The issue of economically dependent workers has not yet come to the fore in Romania, and only some aspects of the issue, which are usually not related to industrial relations, emerge in public discussions. However, from the statistics available, it is clear that some workers in Romania fall into the category of economically dependent workers.
The boundaries between dependent employment and self-employment have become increasingly blurred in some sectors in recent years, in a context of changing labour markets and the spread of practices such as outsourcing and contracting-out. This process has led to a growing interest in ‘economically dependent workers’ – workers who are formally self-employed but depend on a single employer for their income.
Nature and extent of economically dependent work
The category of economically dependent workers is not explicitly defined in Romanian legislation. However, the Household Labour Force Survey (Ancheta Integrată asupra Forţei de Muncă în Gospodării, AMIGO) conducted and published by the Institute of National Statistics (Institutul Naţional de Statistică, INS) includes data on individuals working on the basis of employment arrangements other than regular employment contracts. In 2005, this category represented 1.2% of the total number of workers. To date, this particular issue does not figure on the agenda of the social partners. However, regulating these employment arrangements by collective agreements or specific legislation would be in the national interest, if for no other reason than combating undeclared work.
Employment arrangements
As the classification of economically dependent workers is not specifically defined in Romanian legislation, such workers could be assimilated into the category of workers who do not conclude any employment contract and are not under the rule of any collective agreements. These employees work on the basis of other types of work arrangements, including the provision of services agreements which are outside the reach of employment relations.
The nature of such service provision agreements is an issue that has given rise to debate and tensions, particularly during successive amendments of the Labour Code in 2003, 2005 and 2006 (RO0507102F, RO0602102F). Prior to 2003, employers could conclude service agreements for the provision of services with workers without an individual employment contract, if they carried out activities not within the core activities of the company. These service agreements were considered a precarious form of employment, often used by employers as a means of circumventing the payment of social security contributions. In 2002, approximately 1.5 million people worked on the basis of such service agreements. The new Labour Code, enacted in 2003 (RO0401107F), abolished this form of employment, with the exception of strictly regulated cases for certain liberal professions, for example lawyers.
At the time, both employers and employees voiced their disapproval of the restrictions imposed on the duration of and possibilities for concluding fixed-term employment contracts.
Amendment to Labour Code improve flexibility
With the amendments to the Labour Code in 2005, the flexibility of the labour market improved. This came from the lifting of restrictions related to the duration of employment contracts, as well as with regard to the possibilities for concluding individual employment contracts; up to then, fixed-term employment contracts had seldom been used. In compliance with the new regulations, the duration of a fixed-term employment contract was extended from 18 to 24 months.
In the course of a 24-month period, three successive fixed-term employment contracts can be concluded, after which an employer must fill the vacant position with an employee on an open-ended employment contract, and not the previously single fixed-term employment contract. In other words, the content of the contract can be modified three times within 24 months, compared with one single contract valid for 18 months as stipulated in the former Labour Code.
Subsequently, at the occasion of a further amendment to the Labour Code in 2006, debates between social partners focused on a clear definition of the rights and obligations of workers employed on the basis of fixed-term contracts.
Essential criteria to identify ‘employees’
According to article 10 of the Labour Code, ‘an individual employment contract is a contract based on which a natural entity, called employee, undertakes to perform work for and under the authority of an employer, which may be a natural or legal entity, in return for remuneration, in the form of wage’.
Official statistics define employees as people who undertake to perform work based on a work agreement in return for financial remuneration or in kind, in the form of wage or commission.
At present, no debate takes place at national level concerning a distinct definition of ‘employee’.
No significant labour disputes, grievances or case law have emerged which address the demarcation between the ‘employee’ and ‘non-employee’ status, in order to grant to the latter protections and rights currently granted to the former.
Data on atypical employment arrangements
Data on the number of economically dependent workers are limited. However, the AMIGO survey includes data related to individuals working on the basis of atypical employment arrangements other than regular employment contracts. In 2005, this category represented 1.2% of the total number of workers (Table 1).
| Total (Number) | Atypical employment arrangements | ||
|---|---|---|---|
| Total (Number) | % of total workers | ||
| Total | 5,920,676 | 70,970 | 1.20 |
| Men | 3,225,287 | 46,139 | 1.43 |
| Women | 2,695,389 | 24,831 | 0.92 |
| Urban | 4,452,602 | 35,440 | 0.80 |
| Rural | 1,468,074 | 35,530 | 2.42 |
Source: INS, 2006
Out of the total number of people (70,970 individuals) with atypical employment arrangements, 46.6% of these worked full time and 53.4% worked part time (Table 2).
| Total (Number) | Working time | ||
|---|---|---|---|
| Full-time (% of workers) | Part-time (% of workers) | ||
| Total employees | 70,970 | 46.6 | 53.4 |
| Men | 46,139 | 41.1 | 58.9 |
| Women | 24,831 | 56.9 | 43.1 |
| Urban | 35,440 | 49.5 | 50.5 |
| Rural | 35,530 | 43.7 | 56.3 |
Source: INS, 2006
In terms of sector distribution, no detailed figures are available for the different sectors of economic activity, nor whether such workers are particularly present in specific industries. According to data of the AMIGO survey, over 87% of workers with atypical employment arrangements were active in the private sector in the areas of industry, construction and services. When it comes to the category of occupation and trade, 18.4% of these worked as operators in services and commerce, 19% were craftspeople and skilled workers in the crafts industry or machines and installations maintenance operators, while 33% were unskilled workers.
As for the age group, 60% of workers with atypical employment arrangements were aged under 34 years.
Legal regulation
To a limited extent, economically dependent employment is regulated by law in Romania. If, for example, workers are registered as self-employed professionals, they have access to the social security schemes. These professionals are covered to some extent by the provisions in the Civil Code through the service provision agreements.
Currently, no draft bills or legislative proposals exist on the regulation of economically dependent employment. Nor is there any debate on the issue in Romania which relates to the formal recognition of those who could fall into the grey area of economically dependent worker, and indeed nothing to highlight the protection and rights of this kind of worker.
Moreover, no indications have emerged that the coverage of industrial relations will be extended to economically dependent workers. Certainly, there has been no debate as to whether trade unions should be created for this type of worker, or whether indeed they can be represented by existing trade unions. As for collective bargaining, the issue is simply not on the agenda.
Commentary
It appears that economically dependent workers are active in the highly dynamic niche sectors of the Romanian economy. For instance, the services sector is still insufficiently developed in the country and is therefore prone to atypical work arrangements. Furthermore, the social partners have not taken up this particular issue on their agenda, and to date no association of registered professionals exist in Romania. Regulating these employment arrangements by collective agreements or specific legislation would be in the national interest, particularly with regard to the combating of undeclared work.
Moreover, given the over-population in agriculture and the prevalence of subsistence farms, the category of unpaid family workers can certainly not be considered negligible. In 2005, according to AMIGO, 2.94 million people of the total employed population of 9.1 million worked in agriculture. Out of the population working in agriculture only 175,500 were employees in the traditional sense of the word, while 1.5 million were included statistically in the self-employed category and 1.23 million in that of unpaid family workers.
The INS defines unpaid family workers as those persons who work in the family business managed by a member of the family or relative and receive no remuneration either in the form of wage or in kind. Of the total number of approximately 1.3 million people with this status, 69.3% were women.
In general, the major part of work in agriculture does not involve any payment in return for work; it does not fall under the scope of labour market regulations, and does not involve the payment of social security contributions or income taxes. It therefore may be regarded as a particular form of atypical or even economically dependent work.
Comparative overview
A comparative overview of the situation in 16 European countries (15 Member States and Norway) was published in 2003 and is available online: Economically dependent workers, employment law and industrial relations. This article, compiled from the same questionnaire, serves to highlight the situation in one of the new Member States.
Constantin Ciutacu, Institute of National Economy
Eurofound recommends citing this publication in the following way.
Eurofound (2007), Economically dependent workers in Romania, article.
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