Freelance contractors to get social security cover

In early December 2007, the Austrian parliament endorsed a series of legislative amendments which aim to substantially improve the social security coverage of people working under a ‘free service contract’. This group of economically dependent workers has, in particular, been included in a compulsory unemployment insurance scheme. The social partners had jointly pushed for such a development.

Since 1 January 2008, about 65,000 workers with a ‘free service contract’ (freier Dienstvertrag) are covered by a new social security law and therefore have the same social protection as ‘standard’ dependent employees in many respects. This is the outcome of a series of amendments to social security legislation, which aimed to substantially improve the social protection of this group of workers with an atypical work contract. The Austrian parliament endorsed these legislative amendments on 4 December 2007.

Hybrid character of ‘freelance contractors’

The ‘free service contract’ is a somewhat hybrid legal construction, midway between a standard dependent employment relationship and self-employment. Holders of such a contract, who are also referred to as ‘freelance contractors’, are insured under the terms of the General Social Insurance Act (Allgemeines Sozialversicherungsgesetz, ASVG), which applies to all employees, and are therefore covered by health and occupational accident insurance, as well as by pension insurance (AT0205201N). Up to the end of 2007, however, freelance contractors were excluded from unemployment insurance, and they were also denied any claim on paid annual leave, parental leave, special leave for sickness, as well as sickness benefits, and any severance and insolvency pay. Although freelance contractors are – in terms of social security coverage – generally treated like employees, they are – in matters related to tax – dealt with as a self-employed person. The mixed character of their employment relationship is also manifested in the fact that freelance contractors provide an ongoing service, often on a fixed-term basis. Although such workers are in fact often completely dependent on their quasi-employer, they are, formally, not subject to the instruction of the client and are free to schedule their own working time (AT0701049I). Working equipment must in general be made available to these workers by the client. Overall, their work situation largely resembles that of dependent employees (AT0309201N). Nevertheless, labour law provisions generally do not apply to them.

Joint social partner initiative

In December 2006, the major employer organisations and trade unions drew up a joint proposal to extend the social insurance coverage for formally self-employed people, including freelance contractors. While business representatives aim to minimise the risks of entrepreneurship, trade unions wish to fully integrate workers with an atypical work relationship into social security and, eventually, labour legislation (AT0404202N). With respect to ‘free service contract’ workers, the joint social partner proposal has largely been adopted by the current coalition government of the Social Democratic Party (Sozialdemokratische Partei Österreichs, SPÖ) and the conservative People’s Party (Österreichische Volkspartei, ÖVP). The government bill was endorsed by parliament on 4 December 2007.

New provisions

The new legislation has brought about a series of improvements in terms of social security for freelance contractors, the most important of which are as follows:

  • extension of compulsory unemployment insurance coverage to freelance contractors – accordingly, the employer and freelance contractor each contribute 3% of the latter’s gross income to the unemployment insurance fund, which grants the worker eligibility to receive unemployment benefit on losing his/her job;
  • extension of protection in the event of the employer’s insolvency – in other words, in the case of insolvency, the freelance contractor is granted eligibility to receive insolvency guarantee payments to offset outstanding pay entitlements;
  • inclusion of freelance contractors in the severance pay scheme applying to all employees (AT0211203F);
  • eligibility to receive benefits for sick leave, beginning on the fourth day of sickness, and maternity benefits, in line with standard employees.

With regard to people working on a so-called ‘contract for work’ (Werkvertrag), who are not covered by these recent legislative amendments, the government plans to introduce their inclusion into an optional unemployment insurance scheme at the beginning of 2009. Labour law extension to economically dependent workers, as demanded by the trade unions, has not been on the government’s agenda thus far.

Commentary

It is a common feature of all economically dependent workers that they were not sufficiently protected against risks until recently – particularly against the risks of longer periods of sickness and unemployment. Hence, the government’s decision to close the largest gaps in terms of social security coverage, at least with regard to freelance contractors, has widely been considered to be of major importance. Since the measures taken will significantly raise the overall labour costs of employers, it remains to be seen whether the new legislation will prompt many employers to offer standard employment relationships instead of further free service contracts.

Georg Adam, Department of Industrial Sociology, University of Vienna

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment