If an actually dependent employee appears on the market as an independent contractor, one speaks of a pseudo self-employment. Distinguishing between the two activities can be difficult in everyday life, however, it is important as a self-employed person benefits from neither labour law nor social security protection measures and the tax consequences are different.
A new directive by the State Secretariat for Economic Affairs (SECO) entered into force on 1 July 2015 which will help make this distinction easier. Most important is the question whether there is a regular employment relationship. To this end, the employment relationship must be distinguished from other similar contractual arrangements, such as the work contract or the order.
According to the SECO the following is evidence in favour of an employment relationship:
if it is the performance of a task rather than production of a product which has to be completed by a deadline;
if the service provider is integrated in the employment organization of the contractor;
if the service provider is bound by the contractor’s instructions;
if the service provider cannot move freely in the market and e.g., cannot unilaterally negotiate contracts;
if the service provider has only one principal contractor, and thus is economically dependent on it;
if the service provider is not paid in a lump sum but rather by the hour;
if the service provider is not only accountable, but rather the contracting party has the right of control and determine the performance;
if the service provider has a need for protection.
The more dependent the service provider is on a contractor, the more likely an accidental or pseudo self-employment will be assumed. Decisive is not how the involved parties designate a contract but the actual cooperation practiced.
The new SECO directive concisely summarizes points of reference from the existing labour law practice, allowing a distinction between independent service providers and actual employees to be assessed more easily. Although, a detailed examination of the case is still necessary, the directive provides some useful criteria for the assessor.