Use and abuse of non-standard employment contracts

A survey based on the results of the 2006 Participation, Labour, Unemployment Survey (Plus), carried out by the Vocational Training Development Agency in Italy, investigated the reasons for using non-standard employment contracts. By mapping over 40 types of employment contracts resulting from the 2003 labour market reform, the survey reveals that a large proportion of fixed-term and freelance contracts are used when a standard employment contract would be more appropriate.

Background

Labour market reforms in 1997 (IT9709310F, IT9707308F) and 2003 (IT0307204F) introduced new forms of employment contracts, such as temporary agency work, staff leasing and on-call work. The reforms also reclassified most non-permanent employment contracts and various attempts have since been made to categorise these according to their degree of ‘atypical’ or ‘non-standard’ content. Research studies have found that many of the features of these non-permanent employment contracts are actually very close to those of standard employment contracts. In other words, a large proportion of those working on atypical contracts are in fact ‘quasi employees’ or may be termed as an economically dependent worker.

An example of such research includes the survey carried out in 2004 (IT0501NU01) by the Economic and Social Research Institute (Istitituto di Studi e Ricerche Economiche e Sociali, Ires) and the Union for Atypical Workers (Nuove Identità di Lavoro, Nidil-Cgil). The latter organisation is affiliated to the General Confederation of Italian Workers (Confederazione Generale Italiana del Lavoro, Cgil), which is the largest Italian trade union. Other research on this subject includes further Ires reports on atypical work, and a 2002 study by Magatti and Fullin.

About the study

The Vocational Training Development Agency (Istituto per lo Sviluppo della Formazione Professionale dei Lavoratori, Isfol) has published a report entitled Classifying work between standard and atypical employment: the 2006 Isfol Plus survey (La riclassificazione del lavoro tra occupazione standard ed atipica: l’indagine Isfol Plus 2006). The study is based on the results of the 2006 edition of Isfol’s Participation, Labour, Unemployment Survey (Plus) and examines to what extent non-standard employment contracts are atypical within the current regulatory framework.

This second wave of the Plus survey includes a full section on types of employment contracts. Special emphasis is given to the investigation of atypical contracts. Following the design of the 2005 edition, the 2006 survey is based on a multi-stage sample of over 40,000 interviews, using computer-assisted telephone interviewing (CATI) methodology (see IT0611049I for further information on the survey methodology). In the Plus survey, the occupational status is self reported, that is, interviewees are asked to specify their main occupation.

Survey findings

Many atypical workers act as employees

Table 1 shows the extent to which conditions of work generally applying to a standard employment relationship also pertain to atypical workers who are formally self-employed. According to the Plus survey, 81% of those holding a ‘project collaboration’ work contract (contratto a progetto) and 66% of those holding a ‘continuous and coordinated collaboration’ contract (contratto di collaborazione coordinata e continuativa) became self-employed at the request of their employer. It is worth noting that most of the latter type of employer-coordinated freelance contracts were converted to project collaboration work contracts following the 2003 labour market reform implemented through Biagi Law No. 30/2003 (IT0509104F). However, they are still in use in the public sector and in some liberal professions.

In all categories of atypical workers, excluding self-employed persons who have registered a value-added tax (VAT) number, a significant proportion of persons work for just one employer. Moreover, a regular presence at the employer’s premises is required, and they have to comply with daily work schedules and use the employer’s facilities. Furthermore, their work contract has already been renewed at least once.

Those who are self-employed with a VAT number are subject to these constraints to a lesser extent than the other categories of atypical workers. Nevertheless, the majority of them work for just one employer (55.64%), use their employer’s facilities (48%) and have had their contract renewed at least once (48%). Unlike other atypical workers, this group has higher levels of autonomy at work – which partly explains why only one in four of these workers claimed to be interested in converting their current employment contract into a permanent one. Conversely, 79% of those holding project collaboration contracts, 73% working on continuous and coordinated collaboration contracts and 58.45% holding occasional collaboration contracts report being interested in such a possibility.

Table 1: Subordination constraints for atypical workers (%)
  Holders of continuous and coordinated collaboration contract Holders of occasional collaboration contract Holders of project collaboration work contract Self-employed, with VAT number
Self-employed at employer’s request 66 55 81 7
Working for one employer only 78 78 78 56
Regular presence at workplace 64 74 69 39
Daily work schedules 60 73 70 19
Use of employer’s facilities 85 75 34 48
Contract with current employer renewed at least once 62 51 62 48
Interested in converting current contract into a permanent one 73 58 79 25
High or fairly high likelihood of conversion into a permanent contract 39 28 31 16

Source: Isfol Plus, 2006

According to the Isfol report, when respondents report at least three of these features, they should not be considered as self-employed but rather as economically dependent or ‘parasubordinate’ workers. Therefore, they should be classified as non-standard employees.

Table 2 illustrates the distribution of the Italian labour force according to the type of employment contract. It shows that economically dependent workers, labelled as ‘false’ self-employed, account for 5.6% of the labour force. Furthermore, 52% of those holding a fixed-term employment contract do not believe that the temporary nature of their contract is related to any production needs of their employers. Combining these two factors, the Isfol report considers that a misuse of such employment contracts is apparent in the labour market.

Table 2: Italian labour force, by type of employment contract
  Fixed-term employment Apprentice ‘False’ self-employed Part time (voluntary or involuntary)* ‘True’ self-employed** Standard employment Total employed
Open-ended contract       1,821,503*   12,441,125 14,253,628
Fixed-term contract 1,075,122           1,075,122
Work training contract ( contratto formazione lavoro) 133,822           133,822
Apprenticeship   346,912         346,912
First job contract ( contratto d’inserimento) 180,425           180,425
Temporary agency work ( lavoro interinale) 147,575           147,575
On-call work ( lavoro a chiamata) 157,950           157,950
Continuous and coordinated collaboration contract     276,650   98,526**   375,176
Occasional collaboration contract     248,950   109,711**   358,661
Project collaboration work contract     436,987   122,574**   559,561
Self-employed with employees           2,449,413 2,449,413
Self-employed with VAT number     295,697     1,345,547 1,641,244
Family worker ( coadiuvante familiare)           147,215 147,215
Traineeship 123,625           123,625
Other employees             423,798
Total 1,827,395 346,912 1,276,865 1,821,503 376,041 16,363,299 22,618,512
Total (%) 8.1% 1.5% 5.6% 8.1% 1.7% 72.3% 100.0%***

Notes: * Those working part time could specify whether this was voluntary or involuntary in nature. According to the survey responses, 1,233,004 persons (5.5% of the total) work part time voluntarily, while 579,499 (2.6% of the total) do so involuntarily. ** ‘True’ self-employed refers to those who are formally self-employed and report fewer than three subordination features, as outlined in Table 1. *** Some 423,798 employees and 191,699 self-employed persons responded that they did not know the nature of their employment status; this total of 615,497 persons corresponds to the remaining 2.7% of the employed labour force not shown in the table.

Source: Isfol Plus, 2006

Varying classifications of atypical worker

While full-time permanent employees account for almost 51% of the Italian labour force and ‘standard’ workers for 72.3%, the extent of atypical workers varies according to the definition adopted. Table 3 summarises eight typologies of atypical workers: they represent between 8.1% and 20.5% of the Italian labour force according to the particular definition. Non-standard employment contracts are more likely among young people aged 15 to 29 years and those living in southern regions of Italy. Women are more likely than men to work on such contracts, as are those who hold a third-level degree and workers in small companies employing four to 50 personnel. These factors contribute to segmenting the Italian labour market, with a strong polarisation between standard and non-standard workers (IT0801019I).

Table 3: Different typologies of atypical workers
  Employees % of total employed
Fixed-term employees 1,827,395 8.1%
Fixed-term employees and apprentices 2,174,307 9.6%
Fixed-term employees and ‘false’ self-employed 3,104,260 13.7%
Fixed-term employees, apprentices and ‘false’ self-employed 3,451,172 15.2%
Fixed-term employees, apprentices and all dependent self-employed 3,827,213 16.9%
Fixed-term employees, apprentices, ‘false’ self-employed and involuntary part-time workers 4,030,671 17.8%
Fixed-term employees, apprentices, ‘false’ self-employed and don’t know 4,066,669 17.9%
Fixed-term employees, apprentices, ‘false’ self-employed, involuntary part-time workers and don’t know 4,646,168 20.5%

Source: Isfol Plus, 2006

Commentary

The Isfol report, based on the 2006 edition of the Plus survey, shows that non-standard employment contracts are misused, affecting almost 10% of the Italian labour force. Such misuse is due to several reasons. A significant proportion of employers in small companies seek both higher numerical flexibility and lower labour costs; an even less desirable way to achieve this objective than through the misuse of atypical employment contracts is through undeclared work. Furthermore, the public sector makes extensive use of atypical employment contracts, particularly in the social work sector, mainly because of restrictive hiring policies and budget constraints.

While a notable share of small employers believe that undeclared work or self-employment is an acceptable standard among their personnel, workers still perceive standard full-time employment contracts as the norm. Therefore, workers tend to accept less qualified jobs in order to benefit from employment protection. This partly explains the widespread occurrence of people being overqualified in their work, reported by both the 2002 and 2006 editions of the Isfol Quality of work survey.

References

Giovine, M., Curtarelli, M., Incagli L. and Tagliavia, C., Isfol, La qualità del lavoro in Italia [Quality of work in Italy], Isfol, 2004, available online at: http://www.isfol.it/isfol/dnload/pub_temstru2 qualita lavoro.pdf

Isfol, La qualità del lavoro in Italia – seconda indagine [Quality of work in Italy – second survey], Isfol, 2007.

Magatti, M. and Fullin, G. (eds), Percorsi di lavoro flessibile [Paths of flexible jobs], Rome, Carocci, 2002.

Regalia, I. (ed.), Regulating new forms of employment, London, Routledge, 2006.

Mario Giaccone, Fondazione Seveso

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