Forced and bogus self-employment

What situations may involve forced or bogus self-employment?

Forced self-employment may be established in situations where work is available without any opportunity for an employment relationship. Work usually takes place in an employment relationship, and the terms and conditions of employment resemble those of work carried out based on an employment relationship. However, the work is reported or agreed to take place as self-employment, and part of the business risks are transferred to the worker. The purpose of bogus self-employment is to mask an employment relationship as self-employment to avoid the obligations laid down in employment, social security and tax legislation.

For example, in contractor obligation monitoring, the employer’s status is often concealed because in all sectors other than construction, the Contractor’s Obligations and Liability Act applies only to employers. False entrepreneurship has also been observed in the case of foreign operators, for example, who apply for work permits for entrepreneurs.

Self-employment is not always voluntary

Those who are in the weakest position in the labour market may be forced into self-employment. Foreign employees and asylum seekers are used in different jobs under the status of a self-employed individual so that the responsibility for the employer’s obligations is artificially transferred to the worker. Compensation for work may be below the minimum level set for wages in collective agreements and, in the worst case, the situation may meet the characteristics of extortionate work discrimination. 

Roles related to forced and bogus self-employment:

• Bogus self-employment – intentional or unintentional avoidance of the employer’s obligations
• Exploited individual – in most cases a foreign individual is forced to work at a low price and with weak terms and conditions of employment without the individual being aware of their situation
• Victim – in the worst case, criminal activities are linked to human trafficking
• Gainer – the individual who benefits from the activities, often financially
• Enabler – the individual who brings people to the country (marketing work, running advertising campaigns in departure countries, helping with paperwork and in establishing companies, and preparing assignment agreements – illegally starting employment before all permits are in place)
• Individuals who cover up the activities – long subcontracting chains enable covered-up activities, a client at a higher level may not be aware of any problems at lower levels or know who works where

Motives of different operators:

• Financial motives for gainers and enablers
• An individual may still be satisfied with their earnings, even if they are below the minimum limits set in the legislation and collective agreements
• Obtaining a residence permit
• Receiving flexible workforce quickly for a short period
• With regard to bureaucracy, easier to hire undeclared workers or legal workers through invoicing service companies

Direct and indirect impact of forced and bogus self-employment:

• The worker may not have the appropriate social security
• Employer contributions often remain unpaid
• The worker’s position is usually weak
• The worker does not obtain information about their rights if they have to depend on others due to ignorance, the lack of contacts or insufficient linguistic skills
• In the worst case, the situation involves human trafficking