Magazine ed*
ed* No. 03/2018

Minimum income thresholds

ed* No. 03/2018 – Chapter 5

As is the case for employed persons, there are also low-income thresholds for self-employed persons in most countries, below which there is no compulsory insurance. These thresholds vary depending on the employment status and on the type of insurance. Excessively high thresholds, applied over a long period of time and for different forms of employment without accumulation of income, leave dangerous gaps in a person’s (social) security profile. This is even more the case when several ‘side jobs’ are done simultaneously. Member States deal with these challenges in very different ways. Depending on the sector, the threshold can be up to € 1370, which is the case in France for cash benefits for long-term care, but in many cases there are no thresholds at all (contributions and benefits from the first euro earned). The situation in Belgium deserves a closer look, where there is a threshold of € 425 for work via registered platforms. Only specific platforms can be registered in Belgium. These are platforms that facilitate peer-to-peer relationships between equals, that is, cases where the end-user is a private individual. In this context, Deliveroo has registered itself, but not Uber.

Payment and transfer of contributions: looking for ‘partners’

As self-employed persons, platform workers have to pay their own contributions in full and also manage them – with all problems that accompany this.

Attempts to attract other partners in the relevant business have been basic at best. One exception is the German Artists’ Social Security Fund (KSK). Nevertheless, self-employed platform workers bear the full costs of social security contributions themselves. The only remaining question is whether they meet all reporting and contribution obligations themselves, or whether the digital contract process is not a far more efficient way of taking deductions ‘at the source’. This would kill two birds with one stone: it simplifies the administrative burden on the provider of the service, who usually operates as a one-person business, and prevents contributions from being accidentally or deliberately not paid in full.

There are some examples of payments being shifted to an upstream source. In France, if platform workers meet the conditions of a micro-entrepreneur, they can request the platform to deduct and make contributions on their behalf. In Switzerland, some platforms also take on this responsibility.

Estonia has been trying to find a different solution for platform workers, namely via the banks. However, since the banks are not cooperating, it remains only an ‘idea’.

The monitoring of contributions is also critical. Essentially, the social security institutions must rely on self-employed platform workers knowing that they have to make a contribution and that they are honest about it. However, there have been some attempts to find a remedy for these issues involving platform work.

Belgium and Estonia allow platforms to forward information about the income of platform workers to the tax authorities. In Belgium, only registered platforms are obliged to do this. Data transfer in Estonia is limited to access by the tax authorities; Belgium takes it a step further. The tax authority forwards the income data to the social security authorities. In both countries, the procedure is voluntary. However, even from the platform worker’s point of view, there are compelling reasons to work via platforms that engage in such an activity, as is the case for Uber in Estonia or Deliveroo in Belgium (but not Uber). In Estonia, the tax authority pre-fills the annual tax return, thus saving the taxpayer concerned a lot of work. In Belgium, the incentives are even greater. If the provider of a service works via a registered platform, they receive a tax-free income allowance; only when this is exceeded, do they have to pay social security contributions (minimum income threshold).

The tax authorities in Slovakia also automatically transfer individual income data from self-employed persons to the social security authorities when the relevant threshold is exceeded. However, there does not seem to be any mechanisms in place which allow tax authorities to determine the source of cash flows (platform, bank transfers).

In October 2018, it became law in France for all electronic platforms to automatically provide the tax office with full information pertaining to all relevant financial transaction data and identifying data of all parties, including the provider of the service (the platform worker). The tax office then passes on this data to France’s social security system (ACOSS).