In the world of work, we are witnessing a new phenomenon that is spreading rapidly across Europe. Increasingly, people are choosing to register as sole traders, not always complying with all the legal requirements, instead of becoming employed. This change in the legal status of many workers raises many questions about the future of work and how we should view employment relations.
Why did this trend arise in the first place?
The tax system in many EU countries is set up to favour sole traders. The main goal is to support startups, small businesses and independent contractors. However, despite these good intentions, many have started to abuse the system, whether for lower taxes or other tax benefits.
Why is this trend continuing?
Many employers perceive working with freelancers as more profitable. They don’t have to guarantee them permanent working hours, holidays or invest in their equipment. Plus, if they need to reduce the number of associates, it’s easier with freelancers. However, many individuals are attracted to freelance work because of the higher net income, but often overlook the long-term drawbacks.
Comparison of the number of sole traders in different countries:
When we look at the data on the number of self-employed people in each EU country, we get an interesting picture. In Croatia, we have seen an increase in the number of female tradeswomen from 7% to 15% and men from 15% to 20%. In other countries, the shift may not be as pronounced. However, there are countries with a much higher proportion of sole traders. In Greece, this is 19% of women and 32% of men, in Italy it is 14% of women and 24% of men, and in Poland it is 13% of women and 22% of men. At first glance, these numbers may not seem that high. But when you take into account the total population of the country, it is an incredibly high figure, especially when you consider how many people should actually be employed rather than registered as self-employed.
Why is employment under a contract of employment better than being a sole trader?
Employees on a contract of employment have many benefits, such as leave, job security and institutional protection. When you are employed, you have legal support and security. In contrast, sole traders face many obstacles, such as difficulties in obtaining loans or mortgages due to the unreliability of their income.
Employees also benefit from various social advantages that sole traders may not have. These benefits include, for example, health and social insurance that employers pay for their employees. Also, in the event of illness or other unforeseen situations, an employee may receive sickness benefits, while a sole trader often has to face the costs and losses of these situations alone. In addition, employees have better access to training and opportunities for personal growth and career progression within the organisation, which can be more complicated for a sole trader.
What is the EU doing about it?
The European Labour Authority(ELA) is monitoring this situation intensively. The ELA works together with inspection bodies in different EU Member States to identify and tackle cases of misdeclaration of work or bogus trades. The ELA is trying to build stronger cooperation between countries and ensure that they comply with common European labour standards. By taking these steps, the EU is making it clear that it supports fair working conditions for all its citizens.
Opinion of Atena
At Atena , we value transparency and integrity in our working relationships. We recognize the value of any form of collaboration, whether it be permanent staff or freelancers on a specific project. However, what sets us apart, is our commitment to upholding the law and creating a fair playing field for all our associates. We are aware that a satisfied employee is the key to success and that is why we are constantly looking for ways to provide them with the best possible benefits and conditions. In these turbulent times, it is more important than ever for us to support and protect our team.
