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Dossier 20/12/2015

What statuses will new digital workers have?

In 2014, France had 2.7 million non-salaried workers, compared with 26 million salaried workers. This figure has been slowly increasing since 2011, explained by a rapid increase in companies' multi-form outsourcing, facilitated by digital technology.

Described as freelancers, micro-entrepreneurs, auto-entrepreneurs or self-employed workers, what statuses do these new digital workers have?

In France, any person working for themselves and paid other than through a salary is considered a self-employed worker. Other than self-employed workers who belong to a specific group of regulated professions - such as doctors or lawyers - and those, such as freelance journalists and entertainment workers, who are paid with a salary or who are subject to specific union-based agreements, self-employed workers now have various profiles: farmers, construction specialists, carers and now, the new digital workers.

The latter can choose to operate under three different statuses: sole proprietorship (the only status which doesn't have a turnover limit) and two more or less simplified offshoots: the micro-enterprise and auto-entrepreneur. Whilst the sole proprietorship status is rarely used by digital workers, the micro-enterprise and more specifically the auto-entrepreneur statuses are frequently used by this new class. But how are they adapted?

Encouraging business creation


Their main common characteristic is, legally, to make the individual and the company one and the same. These statuses do not therefore need start-up capital, instead relying on the worker's personal assets. However, since 2010, it has been possible to add limited liability to the sole proprietorship status, subsequently becoming an EIRL: a limited liability entrepreneur; this status allows them to allocate part of their assets as start-up capital in order to protect themselves during bankruptcy proceedings.

We note, however, that unlike the micro-enterprise and auto-entrepreneur statuses, the sole proprietorship status requires the entrepreneur to have their accounts checked by an accountant or management company, and to pay VAT.

Other than certain restrictions in activity, the micro-enterprise and auto-entrepreneur statuses require self-employed workers to not exceed an annual turnover of €82,200 for business activities and €32,900 for services, or they must change to sole proprietorship status. Created as part of the 2003 law regarding financial initiative, the micro-enterprise status should encourage the creation of small companies, offering a simplified scheme and a taxation system which includes lump-sum allowances for the turnover.

The auto-entrepreneur system was created in 2008 as part of the economy modernisation law (LME). Its main goal: to simplify the incorporation of the majority of small companies, from salaried workers to retirees, including the unemployed and students. Initially, this system was designed to allow the accumulation of income, before becoming a tool to support entrepreneurship and competition.
Whilst the statuses of micro-enterprise and auto-entrepreneur are different, particularly in terms of the payment of social contributions (micro-enterprises pay it regardless of turnover, whilst auto-entrepreneurs only pay in accordance with income), this will end in 2016. The Pinel law merges these two VAT-exempt statuses and bases the payment of social contributions on the auto-entrepreneur model, in accordance with turnover.

Testing an idea or getting started


An INSEE survey lists, in decreasing order, activities that make use of the auto-entrepreneur status: it includes design and photography, non-store based retail trade, administrative and support services, teaching and training, art, entertainment and recreational activities, personal services (excluding hairdressing and beauty) and information and communication. Looking at this list, there is a large number of activities which rely on digital intermediary platforms (freelance.com or hopwork.com covering design, information, communication, photography and training). For Hervé Novelli, Secretary of State in charge of Trade, Craft, SMEs, Tourism, Services and Consumption, "three-quarters of new businesses (in the digital sector) use the status of auto-entrepreneur." For him, "Digital technology is one of the sectors where you can start up with a good idea and little or almost no capital. The status of auto-entrepreneur is perfect for that." The idea being that this status allows an entrepreneur to test an idea or business plan at a lower cost.

The weaknesses and limits of simplified schemes


Despite their flexibility, these simplified schemes are often subject to criticisms from new online workers. The status of auto-entrepreneur is too often used by online platforms or classic companies to bypass the salary system and ensure production using a flexible, insecure and cheap workforce which is not protected if made unemployed. According to Nadine Levratto and Evelyne Serverin, sociologists at the CNRS, despite the success of the auto-entrepreneur status, it mainly benefits people looking to supplement their income, rather than those looking to make a living. To arrive at this conclusion, the two researchers suggested three reasons.
Firstly, this status prevents independent production due to limitations in activity and turnover. Often isolated, lacking in capital and without the possibility of employment or subcontracting for certain tasks, auto-entrepreneurs are not free to develop their activity.

The second reason is the high risk which accompanies the adoption of this status: not only the risk of business failure which, if involving a large debt, endangers the auto-entrepreneur's assets, but also the risk of dependency on the online platforms which employ them.

The third and final reason concerns the self-sufficient income, deemed inaccessible by the researchers. Outside of some success stories, INSEE notes that in 2012, the overall business income of employees who are also auto-entrepreneurs reached €2,070 per month, of which barely 15% (€320) was earned through a non-salaried activity. For auto-entrepreneurs who do not carry out any salaried work, they noted an average of €520 per month. They are therefore far from the limit of €32,000 per year. For Nadine Levratto and Evelyne Serverin, these conditions reinforce the risk of transforming auto-entrepreneurs into poor workers, and the status therefore being used as a "cover" for unemployment.

Finally, the status of auto-entrepreneur offers a specific issue for freelancers working exclusively via online platforms like Uber or Mechanical Turk. While they are legally self-employed workers, they are actually financially dependent on these platforms, especially as the work schedule is controlled by an algorithm which generates a de facto but hidden subordinate relationship. Even if they decide how long and when they work, Uber drivers are constantly monitored by the platform's programme which assigns them customers, sets the price and indicates the route to take in accordance with their location, as if it were a manager. This subordinate relationship and the associated rights are not, however, recognised by companies like Uber, which describes drivers using its application as "partners". Midway between freelancers and employees, these para-subordinate workers are in a grey area in terms of labour law.

Improvements in sight?


Whilst in France the status of auto-entrepreneur may not provide a decent living, several solutions have been developed to help, particularly CAEs (Employment and Activity Cooperatives) such as Artéfacts in Tours or Coopaname in Paris. Created in 2005, the latter receives European and Ile-de-France regional funding and takes 11.5% of the gross margin of self-employed workers' income. In exchange, it allows them to receive payslips, to benefit from social protection if they become ill or unemployed, but also to share certain tools and services within a collective framework.

In the USA, the status of a self-employed worker remains quite vague, which leads to many companies overusing it to avoid the salary system. By providing a low-cost workforce, self-employment allows them to be much more competitive than companies that follow the rules. In California, Uber is facing a collective legal action by tens of thousands of drivers, who want their status to be changed. More globally, the American government, in association with the tax administration (IRS) and twenty-two partner States, has provided reinforced controls over companies since 2014. The goal: if the worker's activity is the same as the company that employs them, and if they have no choice in the tasks that they complete nor in their working schedule, they will now be considered as an employee. In the past year, 109,000 workers have been reclassified as employees.


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