The government should ensure that everyone can earn enough - but is failing in many sectors. Meanwhile, there is talk of compulsory pension accrual and compulsory disability insurance (AOV) for self-employed workers.
Competition pushes rates in certain sectors below a viable level, and this can come at the expense of a pension and AOV. What options can we create to ensure that every self-employed person has sufficient financial resources to build up a pension and an AOV?
This article was written by me, professional photographer Wilmar Dik from The Hague. These are ideas of mine that are not necessarily good or perfect. But without ideas little progress. Whether my ideas can be implemented and whether that should be via the Vbar or the self-employment law I like to leave to policymakers in The Hague. I would be happy to come and have a coffee .
Since there are quite a few sectors with problems, I am happy to explain my ideas. Let's look at the similarities in those sectors and the opportunities we have to tackle false self-employment and then also look at an income with subsistence security right away.
Struggling sectors show similarities
What are those similarities? Let me take you through: They are really fun things to do. A journalist, photographer or anyone working in the creative sector knows that a modal income is often not realistic. A consequence in many of those sectors that are popular is that there is a lot of supply of people and services. As long as the government leaves sectors in the Netherlands free and you don't need much more than a kvk number, that balance in terms of supply and demand will not change overnight.
Livelihood security does not play a major role in all sectors.
You may not earn very much per hour as a self-employed worker in healthcare, security or delivery. However, 1 thing those sectors do have in common: people in those sectors are in high demand. Because as a security or care worker, you can certainly work 32 or 38 hours a week if you want to. If you then want to create a livable income, rates below EUR 45 per hour are still an excellent income. In sectors where a lot of hours can be worked, one fixed low amount (33, 37, 38 euros - see chart below) will do just fine to check for false self-employment. But this only solves a small part of the entire problem.
From appearance to certainty: tailoring minimum rates for self-employed workers
The government is constitutionally obliged to ensure citizens' livelihoods. While these fundamental rights are not directly enforceable through the courts, they do provide a clear standard and mandate for legislators and policymakers. But ensuring subsistence security is currently an illusion in many sectors.
Example of a poor earning model for self-employed workers.
In some sectors, it is difficult to scrape together an income above a subsistence level. An example from the NVJ Labour Market Monitor: self-employed journalists 'work' an average of 37 hours a week, 24 of which are billable. Freelance photojournalists work an average of 40 hours per week, 23 of which are billable. Then you are talking about around 1,035 hours per year, and these are mainly billed at around €30.72 per hour (DPG work code). 1035 x 30,78= € 31.857,30. With 35% deduction for all operating expenses and taxes, that yields a net of about 20.7K per year, about 1,725 per month.
So then you are working full-time for an amount €600 below the minimum wage of €2,315 (21+).
So the fee given by DPG media combined with the number of hours paid is not at all profitable. And that is allowed by the government. Still strange when you consider that the government has to provide livelihood security. Clearly, the earning capacity of self-employed workers within certain sectors is not too good.
Causes of underpayment
In some sectors, the demand for services is lower than the supply of freelancers. This leads to fierce competition, falling rates and, on average, fewer billable hours per freelancer. Especially in popular professions, rates drop below subsistence level. This is called market forces. As a result, freelancers sometimes do not earn enough to build up a good pension or an AOV. Companies benefit from low rates, while freelancers are left empty-handed. The government is considering mandatory pension and AOV schemes for the self-employed. So let us now look at how to give self-employed people the financial space to make these provisions affordable.
Possible solutions: protect the market
According to the Consumer & Market Authority (ACM), you are allowed to discuss rates with other freelancers. As long as you have a market share of less than 10%. So you are allowed to consult with 20 other freelancers and charge minimum rates to clients. But I don't think that works adequately if supply and demand are not balanced. For you a lot of others if they are available.
The business community is very creative in creating value with (too) inexpensive services from self-employed people. If only they would just be paid for that by default like in Belgium? So far, the Netherlands has chosen not to do anything about it. But as long as you don't, you have to deal with the reality that self-employed people have to deal with. Building up a pension or an AOV is not very realistic in certain sectors.
Looking at Belgium, 1 thing strikes me: You are not allowed to work for companies there as an individual. So having a free dancer or band perform at your company party is not allowed. Getting a photographer to photograph your 8 million renovation for free is also not allowed. Everyone who works should be paid properly and normally. And in euros per hour. That helps, especially in sectors where supply and demand are not in balance. Earlier I wrote about the differences and what the Netherlands can learn from Belgium in terms of market protection for self-employed people.
Pay freelancers normally and define what is normal by sector
In many sectors, you don't have to look at billable hours and rates. If you want to work 32 or 38 hours a week in healthcare or security, you can. Then a standard legal presumption enforcement rate works well. You can see the calculation basis for those rates here:
But there are also sectors where it is not at all possible to get paid 38 hours a week as a freelancer. I previously published there this about.
If you want those sectors to also earn enough to pay for a pension and an AOV, you could present/advisable and/or oblige those freelancers to pay a minimum hourly rate. Because what we have seen in recent years is that freelancers in certain markets are far from always able to earn a healthy income above a subsistence level.
Since the government is constitutionally obliged to ensure citizens' livelihood security, an income above a subsistence level should be the standard in every sector. Working full-time should result in adequate income. And working full-time as a freelancer in certain sectors can therefore also mean being billable for 15, 22 or 28 hours a week. That is also the consequence of market forces.
Sectoral legal presumption or also livelihoods in each sector?
To ensure a realistic minimum income in a specific sector, look at how many hours an average freelancer can work in that sector. The Knab rate booklet already lists 50 freelance professions with billable hours.
Based on realistic billable hours and average operating costs by sector 2 amounts: 1 hourly rate based on a minimum wage and 1 hourly rate based on a modal income. You might consider not doing so in sectors where a freelancer's operating costs are low and billable hours are high.
But certainly in sectors where average operating costs are higher and billable hours are lower, you will be able to make calculations. After a certain standard, you can also leave the making of those calculations to professional organisations. They can then also adjust the average billable hours and average operating costs of that sector annually, for example, so that the minimum and modal rates continue to fit the reality of doing business as a self-employed person in a particular sector.
By calculating those 2 hourly rates, you indicate several things:
A minimum rate lets see what an hourly rate should be at a minimum to arrive at a comparable minimum salary (full-time about 2300 euros). Rates lower than these amounts are unlikely to be thought of by self-employed people. After all, who wants to work full-time for a monthly rate that does not reach a minimum salary?
A rate based on a modal income shows what a self-employed person needs for hourly rate to arrive at about modal per year.
Once a certain lower limit is calculated per sector, you can look at how freelancers and clients adhere to those minimum rates and preferably rates that provide a modal income. Platform ACCT's current Chain Tables can be maintained because BIS institutions have to adhere to Fair Pay. So the subsidy serves as a guarantee of Fair Pay. But with commercial parties, you cannot enforce in that way because they have other interests. Then you can look at how to get self-employed people to work for healthy rates that you can at least live on.
Reward use of healthy rates with access to social services
If freelancers work with healthy rates then you could also give those people some financial security. During a down period in terms of turnover, a government can supplement income up to a certain level. For example, supplement to an average monthly turnover of the most recently closed financial year. You could also impose additional requirements on this, such as preferential payments for a maximum number of months over a certain period.
You could make such a benefit available to (only) self-employed people who work for at least a healthy rate. If they work for rates that are too low, they would no longer be eligible for an allowance in case of a dip in turnover. This will create an incentive for freelancers to keep rates at a viable level. They are then in a stronger position towards clients. It can also reduce price competition in vulnerable sectors.
If you can make government benefits available to self-employed people under certain circumstances, there could be other benefits. The market of supply and demand will recover in certain sectors and rates could become healthier. Higher rates and profits are also taxed more.
Should you move in this direction, it does make sense to invoice based on hourly rates. This sounds very normal, yet there are industries where hours are charged differently. Like a fee for x number of photos, words, blog posts, etc. Usually, these kinds of payments are devised by clients in sectors where freelancers' rates are already under considerable pressure. Earlier I wrote this about that: 7 ways to calculate the cost of your freelance service.
The ill effects of too low rates now lie with freelancers. Take-it-or-leave-it rates that are too low ensure that there is too little financial room among freelancers in certain sectors. The benefits lie with companies and their shareholders who make frequent and good use of too-low rates.
Customisation of minimum rates: a solution for self-employed workers?
If you look per sector at what a rate should be to really live on, you have already come a long way. At various Chain Tables (of Platform ACCT), Fair Pay rates are determined. As an example: At the Photography Chain Table, we determined that for a modal income, you need 102 euros per hour as a professional photographer. If you want to earn an income of around minimum wage as a professional photographer, you need at least 66 euros per hour. So you could say that the lower limit for a professional photographer is around 66 euros per hour.
So whereas the hourly rate for legal presumption only exposes false self-employment among self-employed people who can make a lot of hours, a minimum Fair Pay hourly rate gives an amount that results in a turnover based on a subsistence level. Below that, therefore, you may be a sham self-employed person based on too low a rate. Of course, there are more factors that determine whether someone is truly self-employed, but rate is definitely 1 of them. Because if you calculate a rate properly (and self-employed people should do so), you will not and cannot work for amounts that result in income lower than a minimum wage. Yet this does happen in certain sectors now. Those low rates are usually not devised by self-employed workers but by clients.
If you calculate a minimum and modal hourly rate for each sector and assign a value to it, it can ensure healthier incomes for freelancers who are currently struggling. Reward freelancers who stick to a healthy hourly rate with the possibility of a temporary benefit. This provides security, peace of mind and a financial cushion that may allow for an AOV and pension accrual. Also for the sectors where it is now very difficult to make ends meet.
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