News / 24.11.2015

UJF: government proposals on unemployment benefit need clarity

In a statement to the parliamentary committee on social affairs and health, the UJF welcomes the broad aims of the government’s proposed changes to the law on unemployment security to improve the situation of the self-employed. It also welcomes the efforts to draw a clearer distinction between entrepreneurs and people who are self-employed.

The new rules would put more people who work as freelancers on a level with entrepreneurs, comparable to wage earners. Freelancers in this situation could join entrepreneur unemployment funds and gain the work requirement needed to qualify for unemployment benefit. Entrepreneurs comparable to wage earners are eligible for unemployment benefits, if their commissions decline and their work becomes part-time.

Under the Act an entrepreneur deemed a wage earner works on commissions in a manner determined by a client, works for the same limited number of clients and has no permanent premises for buying and selling or anything comparable.

Unemployment security for freelancers in such a position would improve. 

The UJF has suggested refinements to the government’s proposal that would better clarify the status of entrepreneurs deemed as wage earners.

It points out that some of the detailed rationales used could make it more difficult for self-employed people to receive unemployment benefit. Though the government’s aim is to lower the threshold to obtaining new work, this would not happen in practice for everyone.

One problem is that in order to receive unemployment benefits, self-employed people deemed wage earners would have to give up their self-employed pension insurance cover (YEL).

Amounts of unemployment compensation, sickness allowance and parenthood allowance are calculated based on the YEL earnings of the applicant.

In practice, the proposed legislation would mean that self-employed people would have to give up their YEL cover for their main occupation to be considered a secondary activity. Loss of YEL insurance would result in a loss of earnings related unemployment benefits.

For freelancers this would mean having to stop working altogether unless their work was classified as a full-time activity. Potential loss of benefits would discourage them from taking smaller work assignments. Because of this the impact of the draft legislation could be a disincentive to getting work.

There is no justification for this, the UJF noted, considering the changing nature of the labour market in which there are increasingly more self-employed people. The union stressed that the reform of the unemployment security act needs to take better account of this situation.

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