1. Introduction
Akava’s goal is to help raise the employment rate to 75 per cent. This requires numerous measures, including an increase in entrepreneurial activities. Akava’s guiding principle for the supervision of interests within the scope of entrepreneurial policies is to promote the conditions for full-time and part-time entrepreneurial activities and self-employment through the development of taxation, educational policies and social security. All of these areas affect how people view entrepreneurship and its viability as a profitable endeavour. Akava’s opinion is that all types of work and industriousness are worthwhile and should be encouraged.
Akava is aware of the diversity that exists in working life, the different forms of work and the current shift taking place in the field. We are already seeing a lot of movement between employment relationships, self-employment and entrepreneurial activities. According to Statistics Finland, there were 270,000 entrepreneurs and 177,000 sole entrepreneurs registered in Finland during 2015. The number of part-time salaried employees and self-employed persons is increasing. At the beginning of the 2000s, the number of self-employed persons was around 120,000, and by 2015, the figure was already as high as 157,000. At the beginning of the millennium, self-employed professionals with a higher education totalled 33,000, and 15 years later, that figure was 59,000. Of all self-employed persons, the share of those with a higher education has risen in 15 years from 28 to 37 per cent.
Within working life, certain phenomena are increasing and becoming more common – the atypical is becoming typical. Flexibility is sought in working life, for example, through temporary agency work, zero-hour contracts, independent part-time work, so-called light entrepreneurship, co-operatives and invoicing services, part-time entrepreneurial activities, cloud work, self-employment and, for example, commissioned work as a result of outsourcing.
The employees’ unions still play a vital role as developers and supervisors of the game rules governing working life. As changes in the working environment are taking hold, it is important to ensure sufficient security for employees. The employment legislation has been unable to keep up with the changes and largely still views working people as either employees or entrepreneurs. There is no need to create a third category for self-employed persons, but there will be a need to deal with problem areas that arise.
There are many levels on which to improve the operational environment for entrepreneurial activities. The supervision of interests concerning economic policy focuses, for example, on investment and innovation policies, digitalisation and financing, which all support growth, while on the grass roots level of entrepreneurial policy, daily issues for entrepreneurs, namely income, occupational health care, outsourcing, platform-based work and taxation, are all important.
This document focuses on micro-enterprises (1–9 employees, annual turnover of less than 2 million euro), self-employed persons without employees and part-time entrepreneurs, and the factors affecting their position. Self-employed persons without employees, as defined by Statistics Finland, include sole entrepreneurs, independent professionals, freelancers and grant recipients. The concept covers many forms of work that involve an entrepreneurial approach.
2. Akava’s principles and proposals for action concerning the supervision of interests of entrepreneurs and self-employed professionals
2.1 Improving the social security of entrepreneurs and self-employed persons
Concurrent entrepreneurial activities and paid employment, and alternation between the two, have increased considerably, and the number of self-employed persons has nearly doubled since the beginning of the 2000s. Conceptually, “earned income recipient” depicts the reality better than the differentiation between wage and salary earners and those earning an entrepreneurial income.
Presently, people can insure themselves against unemployment only on the basis of their status as wage or salary earners or their entrepreneurial income. The result of this situation is that sole entrepreneurs, freelancers, self-employed persons or grant recipients may find themselves completely outside of the sphere of unemployment security if they become unemployed. Akava has presented a model for combined insurance that allows for any work done as a wage or salary earner, as an entrepreneur or upon assignment to accumulate the period of previous employment as required by unemployment insurance.
The funding of unemployment security is structured differently for wage and salary earners and for entrepreneurs. For wage and salary earners, the earnings-related component is financed by unemployment insurance contributions and membership fees paid to unemployment funds. For entrepreneurs, the earnings-related component is financed only by the membership fees paid to unemployment funds. In both cases, the State finances the component that corresponds to the basic daily allowance.
The pension security of entrepreneurs is determined in accordance with the Self-Employed Persons’ Pension Act (YEL). In terms of its content, this pension security corresponds to the pension security of wage and salary earners. The pension is calculated on the basis of the estimated income reported by the entrepreneur, which is a minimum of EUR 7,645.19 per year (2017). The YEL income is equivalent to the self-employed person’s work input, which means that its amount must correspond to wages or salary that would be paid to an equally competent employee doing the same work. The confirmed YEL income also determines the self-employed person’s social security benefits, such as unemployment benefits, parental allowances and sickness allowances.
The level of the YEL pension insurance contribution is the same as the average level of the TyEL contribution. Annually, the State finances the portion of the expenditure for self-employed persons’ pension that is not covered by the insurance contributions. In 2014, for example, the State’s share was EUR 67 million, which corresponded to approximately six per cent of the expenditure. There is no transfer to a reserve fund as part of the self-employed persons’ pension scheme.
The income estimated by a self-employed person is, however, often lower than the actual income amount. The reason for under insuring is a reaction to the perceived high level of YEL contributions and a lack of information about the impact of the YEL income on other social security benefits, the level of one’s future pension and the flexible opportunities offered by YEL pension insurance. This is problematic in the long term, when it begins to have its effect on the pension and benefits received by the self-employed person. A comprehensive evaluation of the system is necessary in order to ensure an adequate level of social security for entrepreneurs.
Akava’s aim is for the social security of sole entrepreneurs and self-employed persons to be brought closer to the level of wage and salary earners, thereby preventing them from falling through the cracks.
Proposals for action
Unemployment security shall be reformed by developing the system of combined insurance.
It shall be investigated whether the waiting period for sickness allowance could, for entrepreneurs, be limited to the day of falling ill and the required financing could be managed collectively by entrepreneurs.
The definition of a self-employed person shall be made clearer and uniform in public administration and legislation. The family members of a self-employed person who do not own any part of the business should be removed from the definition of a self-employed person for the purposes of unemployment security.
2.2 Facilitating part-time entrepreneurial activities
An increasing number of people have some type of dormant company or company name alongside their salaried employment or pension that enables them to realise their potential in a certain field and try out a business idea with minimal risk as a part-time entrepreneur. When planning part-time entrepreneurial activities, it is wise to clarify the impacts on one’s taxation, social security benefits and unemployment security, among other issues. Those with part-time entrepreneurial activities must also take YEL insurance if their estimated annual YEL income is a minimum of EUR 7,645.19 (2017) and their activities have lasted a minimum of four months.
As of the beginning of 2016, the definition of a self-employed person for the purposes of unemployment security has expanded. Today, self-employed people also include persons who are not obligated to take insurance under the Self-Employed Persons’ Pensions Act (YEL) or the Farmers’ Pensions Act (MYEL). The legislative amendment does not weaken anyone’s unemployment security nor does it change any assessment conditions for part-time or full-time entrepreneurship. Even if someone is considered a self-employed person, the individual retains the right to a daily allowance during part-time self-employment.
In the current situation, the TE offices determine whether a person is a part-time or full-time self-employed person for the purposes of unemployment security. A part-time self-employed person is entitled to an adjusted unemployment allowance. The Ministry of Employment and the Economy has issued written instructions on the matter, but there are differences in the way that local TE offices interpret these instructions. The decision is always based on the overall labour-political consideration of the TE office, which takes into account the reported extent of the activities in terms of work and employment. The determining factor is the amount of work required for the business activities, not the income earned from the activities. In other words, the decision depends upon whether the amount of work carried out has prevented the individual from taking a full-time job. The labour policy-based statement issued by the TE office is submitted to the unemployment fund.
Akava’s aim is to ensure the equitable position of self-employed persons throughout Finland in terms of how full-time and part-time entrepreneurial activities are interpreted. The overall assessment must be an income-based consideration in order to reduce insecurity as concerns one’s eligibility to receive benefits. Akava’s aim is also to facilitate the initiation of part-time entrepreneurial activities while unemployed.
Proposals for action
The impact of entrepreneurial activities on unemployment security rights shall be developed in favour of jobseekers so that any entrepreneurial activities initiated while a person is unemployed are considered part-time work and the right to an adjusted unemployment benefit would remain for the first four months. After this point, the activities shall be assessed as either part-time or full-time work.
The labour policy-based consideration concerning part-time entrepreneurship shall be changed so that the earned income and the fact that the activities do not hinder one’s ability to take a full-time job are used as the primary bases for any decision.
The assessment of entrepreneurial activities as full-time or part-time work shall be simplified, and predictability shall be increased. The assessment shall be transferred from the TE offices to the payer of the benefit.
2.3 Improving the well-being at work of entrepreneurs
The arrangement of occupational health care is voluntary for entrepreneurs. Particularly at the initial phases of entrepreneurial activities, financial resources are often tight, so the promotion of one’s own well-being and well-being at work is not a priority. A large percentage of entrepreneurs and, in particular, sole entrepreneurs have not arranged for their own occupational health care, despite the fact that Kela compensates for 50–60% of the costs, with certain restrictions.
In 2009, Varma Mutual Pension Insurance Company conducted a survey among its entre-preneurial customers. The survey revealed that only 25% of the entrepreneurs were cov-ered by occupational health care. Up to 90% of the sole entrepreneurs were without occu-pational health care. Of the entrepreneurs with employees, two-thirds had arranged their own occupational health care.
The problem is the expense of broad, standard service packages offered by occupational health care providers. For an entrepreneur, it may be more sensible to take private health insurance or accident insurance instead, or to simply rely, primarily, on the services provided by the local public health clinic. Service providers should make note of this and tailor their services to the needs of the entrepreneurs, rather than offering only broad, standard service packages. This would also keep the price from rising too high.
Akava’s aim is for all sole entrepreneurs to be included in the occupational health care scheme.
Proposals for action
The needs of sole entrepreneurs in terms of well-being at work and occupational health services shall be clarified.
Entrepreneurs’ competence in terms of occupational health care acquisition and safety at work shall be increased.
2.4 Limitations to competition legislation and collective supervision of interests for the purpose of improving the position of self-employed persons
The current competition legislation does not allow for the collective supervision of interests of self-employed persons. This prevents balanced negotiations between the commissioning party and person carrying out the work in question. It leads to a distorted bidding competition concerning the price of the work as well as obscuring the reasonable and appropriate level of compensation. The possibilities for self-employed persons who are dependent on work commissioners to negotiate their fees are often very limited.
As regards the competition legislation, there is cause to investigate how it deals with the right of self-employed persons to request advice and guidance from trade unions on issues such as wage and salary recommendations, and whether or not these recommendations are interpreted as cartel agreements between private traders. This matter is being investigated on the European level by the European Trade Union Confederation (ETUC).
Akava’s aim is for competition legislation to be amended so as to facilitate the right of self-employed persons to collective professional, financial and social supervision of interests.
Proposals for action
Competition legislation shall be changed so that it allows for the collective supervision of interests for sole entrepreneurs and self-employed persons in all its different forms.
The legislation concerning non-competition agreements shall be reviewed and, if necessary, amended so as not to become a hindrance to entrepreneurial activities and self-employment.
2.5 The challenges and possibilities of the platform economy for sole entrepreneurs
Collaborative economy is not a new concept, since resources and work have always been shared and exchanged. The digital revolution facilitates and changes the way in which work is being done and managed, the way our labour force is being used and the way work input is offered.
In terms of work, the collaborative economy brings with it so-called cloud work and the related supply of cloud workers. Cloud work is performed via different digital platforms, and thus, it is also referred to as platform economy. This type of work increases the number of those working within independent commission relationships. Workers, themselves, have contributed to this change, since, professionals or experts, in particular, are currently no longer willing to enter into permanent employment relationships, but rather opt to tender their own resources, competence and time.
One feature of cloud work is that a service platform or invoicing service co-operative handles the administrative tasks for a fee and pays the individual worker a compensation or ‘wages’ as invoiced from the commissioning party. In these types of administrative services, the worker is usually responsible for acquiring, contracting and performing the work.
Platform economy brings with it both earnings opportunities and problems. A differentiation must be made between platforms that create new work and those which reduce the volume of employment relationship-based work.
Commissioned work can lead to situations which obscure the definition of the employment relationship. Presently, platform operators are not considered employers as stipulated in the Employment Contracts Act, which means that platform work is not considered to be an employment relationship nor temporary agency work. The lack of an employment relationship may lead to a lack of the right to earnings-related unemployment security. Without an employment relationship as specified in the employment legislation, the individual is left without working hour supervision, without support for the maintenance of competence, and without occupational health care and safety.
Platform work requires the clarification and resolving of, among others, the following issues: Does the platform offer the possibility to evade an employer’s obligations and taxes? When does the platform serve as the employer and is the individual carrying out the work an entrepreneur or a paid worker? What is the consumer protection in platform economy? How are cloud workers and those within commission relationships secured and guaranteed social security and occupational health care? Who determines the price of the work? How are consultation and product liabilities taken into account in the work assignments? Are copyrights being evaded?
Akava’s aim is to achieve a clear role, rights and obligations for both platform workers and platform operators.
Proposals for action
It shall be clarified, on the national level, when the characteristics of an employment relationship are met within platform economy and how the responsibilities, obligations and rights of the various parties involved are realised.
The possibility for platform workers to have occupational health care and social se-curity shall be safeguarded.
2.6 Development of taxation for entrepreneurs
New jobs are being created by small and medium-sized businesses. Of all the enterprises in Finland, nearly 99 per cent employ less than 50 people. The majority, as much as 95 per cent, are micro-enterprises (Statistics Finland 2015). Approximately 66 per cent are sole entrepreneurs. Efforts must be made to increase employment and entrepreneurial activities through concurrent measures, and to improve the operational environment for micro-enterprises and small businesses.
For entrepreneurs, taxation comprises corporate tax, capital income tax and personal income tax. The entrepreneur carries all the risk involved in the business activities, and this should be taken into account in the entrepreneur’s income. For most entrepreneurs, personal income tax has the greatest impact, so a reduction in this tax would support entrepreneurism. The difference in the treatment of capital income and earnings must be diminished primarily by means of a reduction in personal income taxation.
Entrepreneurs can apply for a tax relief if their annual turnover from business activities is between 10,000 and 30,000 euro. The current lower limit for the tax relief in value-added taxation creates an incentive for enterprises to keep their activities small. On the other hand, the alleviation of administrative obligations (in 2010, small enterprises were given the right to make annual VAT notifications instead of monthly notifications) will reduce the accumulation of enterprises that fall below the VAT limit.
Akava’s aim is for sole entrepreneurs and micro-enterprises to be given the opportunity to get their business activities on a solid footing and for the overall taxation of entrepreneurs to be reduced primarily through measures affecting personal income taxation.
Proposals for action
The overall taxation of self-employed persons shall be lightened primarily through a reduction in personal income tax.
The upper limit for the tax relief in value-added taxation shall be raised to support entrepreneurial activities and self-employment. The value-added tax obligation shall be reviewed, in its entirety, in terms of promoting employment and entrepreneurial activities.
Tax incentives shall be created for small and medium-sized enterprises in order to support the activities, growth and investments of businesses that create jobs.
2.7 The health and social service reform brings with it opportunities for entrepreneurs and self-employed persons
The central aim of the structural reform of public services, for example, in the field of health and social services, is to promote the free choice of the customer and to provide more equitable services to all citizens.
The reform is based on the idea of creating a functional overall service entity as provided by the public, private and third sectors. As essential aspect of, for example, the private sector in the health and social service field is the entrepreneurial activities of highly educated experts.
A special feature of entrepreneurial activities within the health and social service field is the long duration of the contract period for services, which forces the entrepreneur to state the price of products for several years to come. This presents a challenge for entrepreneurial activities. Service competitions must include quality criteria that take into account (further) education and work experience.
The new Act on Public Contracts improves the possibility for sole and small entrepreneurs to participate in public bidding competitions, since it allows for large competitions to be broken down into smaller parts and increases the weight placed on quality.
The supervision of interests for entrepreneurs and self-employed persons within the health and social service field should be improved as part of the preparation for the reform of the social and health care system. In terms of health and social services, freedom of choice, incorporation and competition and the related advisory services are key issues, and also included on the agenda of trade unions.
Akava wants to advance freedom of choice legislation and feels that it is important that customers can freely change service providers, particularly as concerns the primary level health and social services, on the basis of the quality of the services provided. This would promote competitiveness within the service markets, and improve quality and the efficiency of activities. There must be a way to prevent the formation of regional and national monopolies.
Akava’s aim is to secure the possibility for independent professionals and micro-enterprises to participate in public service production. The foundation for the development of service production must be the creation of a competitive market and regionally balanced supply of services. Freedom of choice must be realised so as to ensure that diverse and differently-sized service providers are able to contribute to service production. The conditions for inclusion as service providers should be such as would give micro-enterprises and independent professionals realistic opportunities.
The matter of how to store patient records, in terms of both paper and electronic archiving, is a vital issue for micro-enterprises. According to law, entrepreneurs or independent professionals operating within the private sector are considered the register controllers regarding their patients’ information. This role carries with it a legal responsibility for, among other things, the secure storage of patient records.
When entrepreneurs cease their activities, there are no statutory regulations concerning the storage of patient records. The supervisory authorities also lack guidelines or instructions on the matter. However, anyone who ceases such activities is obligated to ensure that the patient records will continue to be stored in a secure manner and safeguarded from third party access. The same obligation also falls on any heirs of the entrepreneur in question.
A transitional phase is currently underway in which the first micro-enterprises are making the shift to electronic archives. The transition of micro-enterprises to the use of the National Archive for Health Information (Kanta Services) and electronic record system must be supported, as well as the updating of legislation concerning paper archives. This means a consideration for the costs inherent to the use of the Kanta Services and electronic record system, the timetable for the transition to the system and related investments in order to make sure that they are not unreasonable for micro-enterprises.
Akava’s aim is to ensure that patient records are stored and archived after entrepreneurial activities end. At the same time, there is reason to consider similar issues that arise in other fields as well, such as certain confidentiality regulations and obligations that are comparable to the patient record storage obligations.
Proposals for action
Sole entrepreneurs and small and medium-sized public, private and third-sector providers shall be guaranteed equal opportunities to serve as publicly funded welfare and expert service providers, and the independent status of entrepreneurs shall be safeguarded regardless of the operational environment in which the entrepreneur is operating.
The law shall clearly define the party or parties that have the obligation to accept and store the patient records of private health care service providers and independent professionals who have ended their entrepreneurial activities.
2.8 The conditions for entrepreneurism must be reinforced
Entrepreneurism must be increased. It is, however, not easy for one to become self-employed. It demands solid professional competence, a good business idea and a high tolerance for dealing with insecurity and risk. Entrepreneurism is both a job and a lifestyle.
Within expert entrepreneurship, one’s own competence, the development thereof and marketing are all essential for successful business activities. Along with business know-how, it is important to possess communication skills, sales and marketing skills, and the ability to acquire different networking skills. A sole entrepreneur does not need to be a master at everything, but it is crucial to understand the need for and establish a network of experts in the different areas that, together, can meet the needs of the customers and assignments.
Akava’s aim is for entrepreneurism to be discussed in a broader way within higher education, beyond just the ability to establish and lead a company. An entrepreneurial approach and competences shall be reinforced on all levels in all fields.
Proposals for action
The entrepreneurial competence of students shall be reinforced during the basic and secondary levels of education.
In terms of higher education, entrepreneurial studies and competence shall be offered as a part of all degree programmes, both as multidisciplinary entities and as a part of further education and specialisation programmes.
The learning of sales and marketing skills, communication skills and work organisation skills shall get greater attention during studies both on the higher education level and as a part of employment services (growth services).
Business incubators shall be increasingly established at universities of applied sciences and academic universities while also increasing the related external funding.
3. Summary of proposals for action
- Unemployment security shall be reformed by developing the system of combined insurance.
- It shall be investigated whether the waiting period for sickness allowance could, for entrepreneurs, be limited to the day of falling ill and the required financing could be managed collectively by entrepreneurs.
- The definition of a self-employed person shall be made clearer and uniform in public administration and legislation. The family members of a self-employed person who do not own any part of the business should be removed from the definition of a self-employed person for the purposes of unemployment security.
- The impact of entrepreneurial activities on unemployment security rights shall be developed in favour of jobseekers so that any entrepreneurial activities initiated while a person is unemployed are considered part-time work and the right to an adjusted unemployment benefit would remain for the first four months. After this point, the activities shall be assessed as either part-time or full-time work.
- The labour policy-based consideration concerning part-time entrepreneurship shall be changed so that the earned income and the fact that the activities do not hinder one’s ability to take a full-time job are used as the primary bases for any decision.
- The assessment of entrepreneurial activities as full-time or part-time work shall be simplified, and predictability shall be increased. The assessment shall be transferred from the TE offices to the payer of the benefit.
- The needs of sole entrepreneurs in terms of well-being at work and occupational health services shall be clarified.
- Entrepreneurs’ competence in terms of occupational health care acquisition and safety at work shall be increased.
- Competition legislation shall be changed so that it allows for the collective supervision of interests for sole entrepreneurs and self-employed persons in all its different forms.
- The legislation concerning non-competition agreements shall be reviewed and, if necessary, amended so as not to become a hindrance to entrepreneurial activities and self-employment.
- It shall be clarified, on the national level, when the characteristics of an employment relationship are met within platform economy and how the responsibilities, obligations and rights of the various parties involved are realised.
- The possibility for platform workers to have occupational health care and social security shall be safeguarded.
- The overall taxation of self-employed persons shall be lightened primarily through a reduction in personal income tax.
- The upper limit for the tax relief in value-added taxation shall be raised to support entrepreneurial activities and self-employment. The value-added tax obligation shall be reviewed, in its entirety, in terms of promoting employment and entrepreneurial activities.
- Tax incentives shall be created for small and medium-sized enterprises in order to support the activities, growth and investments of businesses that create jobs.
- Sole entrepreneurs and small and medium-sized public, private and third-sector providers shall be guaranteed equal opportunities to serve as publicly funded welfare and expert service providers, and the independent status of entrepreneurs shall be safeguarded regardless of the operational environment in which the entrepreneur is operating.
- The law shall clearly define the party or parties that have the obligation to accept and store the patient records of private health care service providers and independent professionals who have ended their entrepreneurial activities.
- The entrepreneurial competence of students shall be reinforced during the basic and secondary levels of education.
- In terms of higher education, entrepreneurial studies and competence shall be offered as a part of all degree programmes, both as multidisciplinary entities and as a part of further education and specialisation programmes.
- The learning of sales and marketing skills, communication skills and work organisation skills shall get greater attention during studies both on the higher education level and as a part of employment services (growth services).
- Business incubators shall be increasingly established at universities of applied sciences and academic universities while also increasing the related external funding.
