Union advocates better social security cover for self-employed

The Dutch Trade Union Federation (FNV) is attempting to close gaps in social security by negotiating with insurance companies on collective pensions and occupational disability insurance schemes for self-employed individuals without staff. FNV is also urging politicians to ensure that legislation, such as the new pensions act, takes self-employed workers without staff into account. As many as 50% of such workers do not appear to have taken out any pension and/or occupational disability insurance, generally because of the high costs involved.

In the Netherlands, self-employed individuals without staff (zelfstandigen zonder personeel, ZZP) need to take out a private pension and/or occupational disability insurance (NL0405102F). It now appears that a high proportion of ZZPs choose not to insure their income in relation to pensions, occupational disability or maternity because of the high costs: such insurance policies are simply too expensive for many ZZPs. These workers have the option of building up pension provisions based on annuity policies; however, such policies are expensive and offer uncertain yields. Many ZZPs see their own company or business as a pension provision, although this is not without risk either. Moreover, ZZPs are familiar with the special tax allowance for self-employed individuals. However, even this arrangement carries a certain amount of risk, because many ZZPs do not actually manage to set aside these tax reserves by the time they reach the age of 65 years.

Low level of occupational disability insurance

The average annual occupational disability insurance premium is currently around €2,700, although the amounts range from €600 a year for some individuals to €6,600 a year for others. Apart from the costs involved, the fact that few ZZPs take out occupational disability insurance ties in with two other factors, the first of which is the ratio of costs to income. The average level of annual occupational disability insurance benefits for ZZPs lies between €20,000 and €30,000. The benefit level is linked to income levels. As a result of their ‘limited’ income, many ZZPs only have a right to limited occupational disability benefits. These ZZPs believe that the limited benefit level is not in proportion with the premium level. The second reason for not taking out occupational disability insurance is attributed to the fact that insurance companies require ZZPs to undergo a medical examination. Insurers require applicants for such policies to submit a health certificate, which in some cases is highly detailed. Moreover, occupational disability insurance policy conditions often specify exclusion clauses, premium surcharges and qualifying periods, therefore making them less attractive to ZZPs.

Provisions for maternity benefits

Since the Occupational Disability Insurance (Self-employed Persons) Act (Wet arbeidsongeschiktheid zelfstandigen, WAZ) was scrapped in 2004, arrangements for 16-week maternity benefits for female ZZPs have been left to the private insurance market. Maternity benefits form part of occupational disability insurance, which more than half of ZZPs have not taken out. Moreover, insurance companies also uphold a qualifying period of two years to cover risks related to pregnancy. As a result, female ZZPs who have taken out such insurance are not covered for maternity risk within the first two-year period of policy commencement.

Coverage under collective agreements

The Trade Union for Self-employed People (FNV Zelfstandige Bondgenoten), affiliated to the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV), is currently engaged in negotiations with a number of insurance companies and hopes that the 25,000 ZZPs who enjoy trade union membership will be able to benefit from a collective pension scheme with effect from 2007. This scheme will consist of an annuity structure enabling participants to build up an individual pension on the basis of their contributions. The Trade Union for Knowledge, Information and Media (Vakbond voor Kunsten, Informatie en Media, FNV Kiem), also affiliated to FNV and representing graphic designers and musicians, will be going one step further and will be the first union to include ZZPs (in this case concert substitute musicians) within the scope of the collective labour agreement; a desire to enable these ZZPs to build up pensions was among the reasons for this move. By including them under the coverage of the collective agreement, it will now be possible to check if employers also pay this group of ZZPs an additional 17% to enable them to contribute to pensions. FNV would also like to see the government, which will soon vote on the new pension system, permit new ZZPs who have an employment history of salaried service to voluntarily continue participating in their pension fund. At present, this is the case only for an initial period of three years.

Stand of political actors

Since most insurance companies exclude maternity benefits for the first two years, the Labour Party (Partij van de Arbeid, PvdA) is calling for these benefits to be taken up as part of the public system with effect from January 2007. The Minister of Social Affairs and Employment, Aart Jan de Geus, believes that public involvement is unnecessary since such risks can be covered by the private insurance market. The Amsterdam Court of Justice finds it acceptable for most insurance companies to work on the basis of a qualifying period for self-employed individuals. The Christian Democratic Alliance (Christen Democratisch Appel, CDA) believes that the minister should cover the two-year gap by introducing a public arrangement. FNV has reached agreement with two insurance companies about a collective occupational disability insurance scheme for ZZPs. These private insurance schemes include maternity benefits and even cover ‘uninsurable’ risks, such as writer’s block.

Monique Aerts, Hugo Sinzheimer Institute (HSI)

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