Government clampdown on 'invoicing cooperatives' and temporary job contracts

These cooperatives take on people who work for themselves as employees and, instead of members sending out their own invoices as the self-employed are required to do, these would be issued in the name of the cooperative, who also handled all their accounting transactions.

This way, members would save money on accountants' fees, be partially protected from non-paying customers, and would be paying their 'stamp' as an employee of the cooperative rather than the fixed self-employed monthly fee, which starts at €275.01 and is not graded according to earnings.

This monthly Social Security fee is a headache for seven in 10 self-employed workers, according to a recent survey, and the number of sole traders who work cash-in-hand because they cannot afford the fixed amount is difficult to ascertain.

Cooperatives, which have been advertising widely in the last few years, appeared to be a solution as membership fees were a percentage of earnings.

But employment minister Fátima Báñez says they are not legal and calls them 'a company structure used to commit Social Security fraud'.

As a result, her department has removed 6,000 workers from the Social Security's 'general régime', which covers employees, and forced half of these to sign onto the Self-Employed Workers' Special Register (RETA).

This means they will have to start paying Social Security, although it is not thought that they have been pursued for back payments, which the work inspectors can legally do for the last four years.

Sra Báñez's crackdown has also targeted what is known as 'false self-employed persons', or those who work for a company full-time, or whose income is at least 75% from the same firm, but who invoice monthly for their wages and are registered as sole traders instead of having job contracts.

This practice has become more common since the financial crisis due to the high costs involved in employing staff – approximately 50% extra on top of the staff member's take-home pay.

Campaigns against 'false self-employment' have unveiled 6,785 cases since 2012 after 17,483 inspections were carried out.

Whereas in 2011, before the PP got into power, 1,200 inspections were carried out that year, 2017 saw the number rise to 7,500.

Additionally, Báñez has announced fines for companies who employ staff on temporary contracts unless they can justify doing so.

Whilst unemployment has dropped dramatically in the last decade, down to about 15%, a disproportionate number of workers are on temporary contracts of anything from a few days to six months – a situation the European Union has called 'unacceptable'.

“Unjustified temporary contracts repel talent, distort the market and decrease companies' competitiveness and productivity,” Báñez states.

In the past, any fines dished out have been based upon numbers of workers per firm affected, but the ministry will now penalise companies for each and every staff member on a temporary contract when they do not need to be.

“We want temporary work to be justified, not abusive,” she says.

Temporary workers also pay less in tax, meaning less money for the public coffers, as well as having minimum rights and being unable to plan their lives – especially buying property.

“It's an attack on the most basic rights of workers – the loss of stability in employment – as well as being a type of fraud that acts as unfair competition, prejudicing the vast majority of honest firms in this country who comply with their obligations, even though it costs them more.”

Proposals have been on the table for a while now to reduce the long list of types of employment contract to just three – permanent, temporary and for training – with redundancy money, which is paid whether the employee is fired or laid off, increasing in line with length of service from 12, 16 and 20 days' pay per year worked.

Historically, for any potentially contentious redundancy or firing, firms had to pay the maximum that could be required of them – 45 days per year worked – and many did so even though the severances were above board, in order to prevent possible disputes.