The fourth industrial revolution brings about changes to the industrial process by way of progressive digitalization. A trend towards the use of “the crowd” in production processes is becoming increasingly visible. Atypical employment relationships can be seen across all industries and they bring flexibility to both service providers and “workers”. This evolution in employment relationships does mean, however, that there is a risk that the status of self-employed individuals will be contested later on.
Distinguishing between employees and self-employed persons in Austria is not a novel issue. Multiple factors help to determine whether a person qualifies as an employee or as self-employed. These include the nature of the contractual obligation, the existence of authority and subordination, the basis of payment calculation and most importantly, the integration of the individual into the “branch” of the principal or employer.
In Austria, the classification of a person as self-employed, a freelancer or a (regular) employee has not only had an impact on protection through employment laws but also on the areas of social security and tax.
The highest risk when using independent contractors is that competent authorities question the status of these individuals which leads to them being reclassified later on. This can lead to considerable claims in respect of tax, social security contributions and ancillary wage costs. The consequence of this could be a demand for social security going back five years, and potentially a demand for tax going back ten years as well.
A draft bill for the Social Security Assignment Act was released in April 2017 and has passed the parliamentary legislative process; it is awaiting signature by the Austrian Federal President, and the Federal Chancellor before it can be formally announced and enacted, which is expected shortly, (the act will then apply retrospectively as of 1 July 2017). The idea behind the bill is to establish a procedure which brings certainty regarding the employee status at the outset, at least for social security purposes.
Whilst the intention to provide certainty to service providers and “workers” is welcome, it remains questionable whether the draft legislation does enough to provide the necessary level of clarity. A common understanding of the respective social security authorities (in Austria there is one for employees and one for the self-employed) needs to be reached. Despite both being state owned entities, competition rather than cooperation exists between them.
Whilst the draft legislation could be enacted as early as July 2017, any proposed simplification of the rules is in doubt due to anticipated changes in the Austrian government with elections having been brought forward to autumn 2017 instead of 2018. It therefore remains unclear whether the new law will be enacted at all.