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  1. 1. 1 Digital Cowboys Developments in the labour market for self-employed workers Dennis Bouwman
  2. 2. 2 Digital Cowboys Developments in the labour market for self-employed workers Digital Cowb oys • Cha pter •
  3. 3. 3 | Colofon Digital Cowboy Developments in the labour market for self-employed workers | Author Dennis Bouwman | Publication Dennis Bouwman Oktober 2008 Translated by Paula Maathuis @ 2009 Dennis Bouwman No part of this publication may be reproduced, stored in a retrieval sys- tem or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, with- out either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the author: Dennis Bouwman, Postbus 685, 7500 AR Enschede, the Netherlands. Requests to the Publisher for permission should be addressed to Dennis Bouwman, Postbus 685, 7500 AR Enschede, the Netherlands, or online at
  4. 4. Contents Page Foreword 5 Chapter 1 The importance of self-employment 7 Chapter 2 A description of self-employment in the ICT sector 11 Chapter 3 Trends and developments in self-employment 17 Chapter 4 Trend I: Diversity in forms of working relationships 22 Chapter 5 Trend II: The rise of employment agencies for freelancers 30 Chapter 6 Trend III: The paradox of terms of employment for self-employed workers 35 Chapter 7 Trend IV: The importance of growth and development 40 Chapter 8 To a strategic agenda for self-employment within ICT 46
  5. 5. Digitale Cowboys • Foreword 5
  6. 6. Foreword 5 Work has become more flexible and workers have become more inde- and flexible. Diverse, because it doesn’t consist only of employers and pendent. When and where work is done, and in which form, don’t matter employees. flexible not because of an increasing number of employees much, as long as it is done. These are the most important trends in the la- with temporary contracts, but because of an increasing number of self- bour market for the coming years. More and more employees want to be employed workers. self-employed. The growth in entrepreneurship is a result of the growth in The labour market is the domain in which FNV Zelfstandigen operates. the number of self-employed workers. Although self-employed workers As a group caring for the interests of self-employed workers, our job is don’t legally exist in the Netherlands – in legislation no description can be to follow trends and to translate these trends into concrete services for found – more and more people are choosing this flexible and free manner our members on both the individual and collective levels. We are the pio- of work above fixed forms of employment by others. neers of the self-employed labour market sector. We are therefore proud An important reason for becoming self-employed is the wish to be en- to present to you Digital Cowboys, Developments in the labour market gaged in a craft, with real work. Self-employed workers flee from labour for self-employed workers. Our vice-president, Dennis Bouwman, also a organisations. They want control of what they do and how they do it. self-employed worker in the ICT sector, offers you a look into develop- They want to take on assignments which provide personal development ments in this sector, known as a frontrunner in economic developments. and to do so independently. Within labour organisations there is a shell Which developments and which initiatives must we, as an association for of flexible forces, the self-employed workers, around the core of fixed self-employed workers, develop in conjunction with the public and pri- employees. vate sectors to ensure that the self-employed worker can truly be a self- Because of these developments the labour market has become diverse employed worker? Or should we simply let the self-employed worker be
  7. 7. 6 an entrepreneur and interfere as little as possible? This publication an- swers these questions. Above all, Digital Cowboys outlines a framework to support self-em- ployed workers in their entrepreneurship. As an association we take this issue to heart and resolve to use the coming period to further improve the protection of our members’ interests. | Linde Gongrijp Director FNV Zelfstandigen Digital Cowb oys • Chap ter 1 • The i mp o r tance o f self - em p loy m ent
  8. 8. Chapter 1 7 The importance of self-employment At present the labour market is changing rapidly. Although at first This publication is about the trends and developments for self-employed sight there seems to be an evolution, in a broader historical perspec- workers in the labour market. ICT is not only interesting because of the tive it must be asked whether the flexibility of the labour market is developments in this sector, but also as a trendsetter for developments characteristic of our modern times. After all, self-employment was in the labour market in general. As an association within the trade union very common until the industrial revolution. Traders, bankers, fish- FNV, FNV Zelfstandigen plays the role of pioneer in the labour market. ermen, smiths, and farmers were often self-employed. This is not only logical for a young association, but is also appropriate to the association’s target group: self-employed workers. | Self-employment: exceptional or standard? Both the ICT sector and the rise of self-employed workers show charac- Even in these modern times, from an international perspective, self-em- teristics of receiving too much hype. Open any newspaper and there are ployment sets the tone of the labour market. In developing countries, articles about automation, digitalisation, and their applications. Ask any most citizens survive by producing or selling goods, or by offering per- politician what he thinks of self-employed workers, and he will react en- sonal services. It is therefore remarkable that the employer-employee thusiastically, speaking about the modern employee who does his job relationship has set the standard in the western world. Nevertheless, po- without hindrance from others and at his own risk. litical parties in the Netherlands, from left to right, unanimously expect self-employment to increase rapidly. We live in the age of information | Research project FNV Zelfstandigen technology. Both the current developments in work relations and the im- This publication aims to make clear what is going on in the labour market portance of information technology explain my choice for the ICT sector for self-employed workers. It analyses this labour market and examines as research subject. the subject of four observable megatrends. The publication is a result of a
  9. 9. 8 research project on the developments of the labour market in ICT, carried Additionally, quantitative research of self-employed workers was carried out by FNV Zelfstandigen. out. In this research, questions were not only asked about developments The research project consists of literature and news article reviews, in- in the labour market. Special attention was paid to conclusions and as- terviews, and quantitative studies of self-employed workers (member sumptions which emerged from the qualitative interviews with self-em- panel). The emphasis of this project was on the latter two parts. ployed workers. Literature review focused on research in several recent publications Finally, the combined results of the four research methods were analy- regarding developments in the ICT sector, the labour market for self- sed. employed workers, and the labour market for ICT workers. The results are used as background information for the interviews and member re- | Reading guide Digi tal Cowb oys • Ch ap ter 1 • Th e im p o r t an ce o f self - emp loy me nt search, as well as for the descriptions of the ICT sector, the labour market, In Chapters 2 and 3, the ICT sector, and trends and developments of this trends, and future expectations. News article research used recognized labour market, are discussed. There follows a description of four trends: professional ICT literature, especially Computable, Automatisering Gids diversity in work relations (Chapter 4), the rise of conciliation offices and IT Executive, as well as daily papers such as de Volkskrant and Finan- (Chapter 5), the paradox of terms of employment (Chapter 6), and the cieel Dagblad. personal growth of self-employed workers (Chapter 7). The largest part of the project was spent on interviews with self-em- Finally a strategic agenda is set to anticipate developments in self-em- ployed workers and organisations. There were extensive interviews with ployment. The strategic agenda is aimed at both individual self-em- seven self-employed workers: two project managers, three software ar- ployed workers and self-employed workers as a sector. The problems and chitects and developers, a website designer, and a web host. The inter- successes of self-employment are relevant not only to the self-employed views are examined in this publication. Interviews were also held with worker, but also to the whole of society. three employment offices, directors of FNV Bondgenoten, and other so- cial interest groups.
  10. 10. 10 Digital Cowb oys • Ch ap ter 2 • A de sc r i p t io n of self- employment in the IC T s ec tor
  11. 11. Chapter 2 11 A description of self-employment in the ICT sector The ICT sector was central to the research project. As stated in the on a more executive level. The programmer is faced with totally different previous chapter, the ICT sector has always been an example to developments and trends than the project and interim managers. and trendsetter for other market sectors. Outsourcing, individual- oriented collective agreements, and personal bonus systems are ex- | Three groups of self-employed workers amples of labour market developments in the Netherlands, which The ICT sector is characterized by a great diversity of companies, of all initially existed only in sectors like ICT and financial services, after forms, shapes, and sizes. This is also evident in the diversity of self-em- which they also became common in other sectors. ployed ICT professionals who were interviewed for the FNV Zelfstandi- gen project. These professionals varied from the owner of a one-man The choice of ICT as research area was not only made because of the hosting company, to a self-employed software engineer who is active interesting companies and developments in the sector, but because of throughout Europe, to a website constructor, to a self-employed interim this industry’s role as trendsetter for developments in the labour mar- project manager. They all engage in different activities and reflect differ- ket in general. Before the developments and trends in the world of self- ent definitions of the ICT sector. employed workers are discussed, a description of self-employment in the From the interviews with self-employed workers and conciliation offices, ICT sector is provided. The ICT sector has a number of specific character- roughly three groups of self-employed workers can be distinguished: istics, with which it distinguishes itself from other sectors. web designers and web hosts, architects and developers, and interim ICT This chapter gives a simple description of self-employment in the ICT sec- project managers. tor, divided into three different types. The self-employed project manager as ‘high professional’ differs from the ‘artisan’ programmer, who is active
  12. 12. 12 | Self-employed web designers and internet hosts The first group within the self-employed ICT professionals is web de- IT or ICT? signers and internet hosts. Internet hosts (hosting providers) offer web space and web services, such as photo books and web logs. They main- Information and communication technology are more and more a continuation of each other. That’s why the term Information and Communication Technol- tain files for websites, which are owned by individuals or companies who Digital Cowb oys • Cha pter 2 • A descr ip ti o n of self - emp loy ment i n t he IC T s e c to r ogy (ICT) is often used instead of Information Technology (IT). Post and telecom don’t have their own web servers. The size of this group is very difficult activities are included in the definitions and research of the Dutch Ministry of Economic Affairs and the Dutch Central Office for Statistics (CBS). These make to determine; factual data about the size and qualifications is scarce. This up a significant part of the total activities of the ICT sector. In this book postal group is not mentioned in the statistics of the Central Bureau for Statis- activities are not included. Telecom activities are more and more part of auto- mation activities. Just consider the developments in VoiP (telephone over the tics in the Netherlands. internet). Communication devices are business-like services, and aren’t includ- The group of internet hosts is very small, unlike the group of self-employed ed in the definition of the ICT sector. web designers. Estimates by the self-employed workers themselves sug- gest that roughly half of the self-employed workers in the ICT sector are web designers. Many of these self-employed web designers combine their web design work with other assignments. This assumption is sup- ported by the results from the digital research panel, in which half of the self-employed ICT professionals show the characteristics of web design- ers; that is, they do executive work for many different clients. In explana- tion, these workers point out that as the work becomes more large-scale, co-operation becomes more fixed. Moreover large employer companies seek large ICT companies to do the work, while smaller companies work more often with smaller ICT companies. Bigger, more complex projects are therefore executed by big companies, in which a multidisciplinary
  13. 13. team often works together, whereas self-employed workers tend to han- The interviewees state that secondment and outsourcing abroad often 13 dle smaller cases, such as web design. take place. Although the software developer stated that this doesn’t bother him, he does notice that many of his large clients are sensitive | ICT architects and developers about outsourcing. He thinks outsourcing is an alarming development The second group of self-employed workers in the ICT sector consists of for the Dutch economy. He is concerned about companies that arrange architects and developers. Programmers (developers) and the system an- outsourcing because their approach is aggressive. Finally, the software alysts (architects) are part of this group. The Central Bureau for Statistics developer states that he talks to many professionals ICT colleagues in in the Netherlands gives numbers for this group in its yearly report on his environs who work for large software houses. He states that these De Digitale Economie (The Digital Economy): in 2005, the total number companies, which used to have a reputation for software development of self-employed ICT architects and developers was 21.800; at a rough and system management, are now more and more occupied with sec- estimate the number in 2008 was about 25.000. ondment. Number ICT professionals in Number of self-employed | Self-employed ICT project managers The Netherlands ICT professionals (9%) Programmers 87.800 7.900 The third group within the self-employed ICT professionals is the self- System analysts 154.300 13.900 employed project managers. Depending on the level of specialization Number of ICT architects and developers in 2005 (source: De Digitale Economie 2006) within the ICT sector, this group also calls itself “(register) information scientists”. The third group is, according to interviews with self-employed The architects interviewed stated that they work in companies of differ- workers and the data of the Vereniging voor Register Informatici (the ent sizes, thus the tasks they are assigned differ enormously. With larger Association for Register Information scientists), also the group with the clients, half of the ICT professionals work as architects or executors and highest level of education and which mostly hires itself out for long-term the other half as project managers. With smaller clients, a personal match assignments with one client. is much more important: ‘small seeks small’. In the smaller companies the When one does not look purely at the specialized ICT project managers, demand is also different: here more ‘statute-labour’ is required. but also at project managers for whose projects ICT or company process-
  14. 14. 14 es form an important part, then the total number of ICT project manag- ers is, according to the interviewees, about 10,000. Characteristics of the ICT sector There are quite a few changes occurring in the domain of tasks. Self-em- ployed project managers see a movement in the ICT sector from ‘hard’ (ap- The ICT sector is so diverse that the differences within it are at least as numer- ous as the similarities. There are significant differences in the character and plication development, website building and techniques) to ‘with it’ (ICT working methods of ICT companies. Whereas within bigger companies more supportive of company processes, which have to fit in with the strategy of and more frequent takeovers and mergers take place, the smaller parties are Digital Cowb oys • Cha pter 2 • A descr ip ti o n of self - emp loy ment i n t he IC T s e c to r often niche entrepreneurs who work with subcontractors. the organisation). The aim of ICT, then, according to the project manag- ers, is much more about change management and business; for example A known general characteristic of the ICT sector is economic conjuncture sensi- tiveness. There is a so-called short-cyclic character of activities: a rapid change handling business cases, business goals, and business enablement. between boom and recession. In a boom there is a shortage of ICT profession- The project managers also sense four developments within the ICT sec- als. In a recession the supply is greater than the demand. At the same time the intake of young qualified workers remains lower than the expected demand tor as a whole. These are for staff. 1. A strong trend to increase companies’ efficiency and costs with the Company branches characterise themselves further by strong competition be- help of ICT tween specialists in the area of maths, information, and systems management 2. An increasing focus on what companies see as their core business, on the one hand and in organisational structure and communications on the influencing the use of ICT other hand. Because of the ongoing nature of technological developments, continued investment in human capital is necessary to attain profit in the long 3. Increasing numbers of ICT professionals involved with the tangent term. Short term conjuncture cycle investments aren’t always efficient because plane between ICT and business companies have shortages or surpluses of staff. Investments will not occur au- tomatically, because within ICT knowledge is volatile and work relationships 4. The increasing importance of change management in organizations, are sometimes short; undoubtedly there is a connection between these two with a resulting influence on the need for competent ICT professionals characteristics. This last development means that ever higher demands are made on ICT The Central Bureau for Statistics (CBS) in the Netherlands describes a number professionals, especially in the fields of competence, behaviour, and cer- of lesser known characteristics of the ICT sector in De Digitale Economie 2006 (The Digital Economy 2006). The profile of ICT professionals clearly differs on a tification. According to the project managers, this is justified because of the magnitude of money and risk involved.
  15. 15. number of points from that of the average working Dutch person. ICT profes- 15 sionals work considerably more often in a fixed working relationship and less often as a flexible employee or self-employed worker. They also work 35 hours or more per week more often. Their age is somewhat lower and their level of education is higher, compared to the total active working population. The big- gest difference lies in the percentage of women working in the ICT sector: the total working population of women is 42%, but in ICT this is merely 11%. Number of ICT professionals in the Netherlands Number of self-employed ICT professionals (9%) Information scientists 26.600 2.500 Other ICT project managers - 7.600 Total number ICT project managers - 10.000 Number of ICT project managers in 2005 (source: De Digitale Economie 2006)
  16. 16. 16 Digital Cowb oys • Chap ter 3 • Tren ds an d develo p ment s in self - e m p l oy m e nt
  17. 17. Chapter 3 17 Trends and developments in self-employment The previous chapter described the ICT sector and its labour mar- | The rise of open innovation ket. The ICT working population appears to be highly educated and The scientific literature on economic developments and labour market very stable. A large demand for ICT professionals remains, but the policies is vast. Much of this literature was reviewed for this research proj- number of young ICT professionals is decreasing while many people ect. Only a small part has a tangent plane with the labour market of self- over 45 are looking for work. In spite of a downfall in the outlook in employed workers. the coming years, it is expected that this will have little influence on Of interest is the study of ‘open innovation’ by Henry Chesbrough. In his the quantitative supply and demand in the labour market. Historical book Open Innovation, Chesbrough considers the contrasting principles data (in the recession at the start of the 21st century the ICT working of closed and open innovation. He observes a slow transition from closed population scarcely decreased) and the decreasing growth in num- innovation principles to the new open innovation principles. bers of young ICT professionals seem to support this expectation. For self-employed workers, open innovation offers many possibilities for Quantitatively, trends and future expectations for the labour mar- work and innovation. Also for companies which adhere to the open in- ket seem almost monotonously stable. novation principles, the innovative power of self-employed workers, who move between different companies, offers great opportunities. Eventu- Qualitatively speaking, based on the research and news articles studied, ally, this open innovation principle seems to create a ‘proliferation of combined with many interviews and conversations with self-employed knowledge’, which produces a win-win situation for companies and self- workers, the labour market in the ICT sector seems to be stirring violent- employed workers. ly. In this chapter, we will examine these developments and expectations In the interviews with self-employed workers it is stated that assign- for the future. ments for clients which bring the open innovation principle into practice
  18. 18. 18 are both much more successful and much more likely to produce con- the part of the tax office, which now considers the hired self-employed tented workers. The interviewees also state that more and more clients worker as a disguised employee, which can lead to an additional tax as- are bringing the principles of open innovation into practice. sessment. | The secondment worker prefers to be his own boss A further development is the rise of commercial mediators. In Chapter 5 Almost all ICT architects and developers have noticed that the smaller, we will discuss the rise of employment offices. nicer companies (with about 100 employees) are disappearing. Because Digital Cowb oys • Chap ter 3 • Tren ds an d develo p ment s in self - e m p l oy m e nt of this development the stimulus to work for these smaller, more creative | Big puts out to small: the rise of tender chains companies has disappeared and still more ICT professionals are choosing One of the most interesting developments in the labour market for self- to be self-employed. employed workers is the rise of the tender and client chains. The links between ICT companies and employment offices have led slowly to the At the beginning of November 2007, Financieel Dagblad reported that creation of a whole chain between the ultimate client and contractor. more and more secondment employees are choosing to become self- In this way, big puts out to smaller, and so on. This is especially true for employed. According to company economist and advisor Kees de Kruijff, the programmers and the developers. They work as self-employed work- this is a result of the worsening of the terms of employment for second- ers through employment offices for bigger companies, sometimes even ment employees. The commitment of secondment worker to the second- through several employment offices. ment office is not strong in any case and the secondment worker doubts the worth of the secondment office, De Kruijff believes. | Personal skills become more and more important De Kruijff estimates that, a year after takeover, from five to eight percent The interviewed self-employed project managers stated unanimously of secondment workers choose to become self-employed. But even those that the ICT sector is slowly changing from ‘hard’ (engineering) to ‘soft’ who take that step still often have to deal with a commercial mediator, (business). This means that more demands are made on the behavioural because companies don’t always want to do business with an individual competence of ICT professionals. In addition, certification is more and freelancer. That’s too much bother. Moreover, there has been a change on more important. This applies not only to certification for technical skills,
  19. 19. but especially for management skills, which are tested with 360 degree ment and negative experiences with ICT in the past. ‘The time has passed 19 analyses, for example. when you could work somewhere without being tested.’ Also, the technical programmers and developers state that their clients As a reason for this increasing need for certification, the project manag- increasingly think that social skills and the ability to imagine oneself in ers mention, among other factors, the report of the Dutch Government other situations are important. For the ICT technicians this is a cultural Audit Office about serious losses on ICT projects by the Dutch Govern- change; irreversible, but also difficult. Contrasting principles of ‘closed’ and ‘open’ innovation Closed innovation principles Open innovation principles The smart people in our sector work for us. Not all smart people work for us. We think it’s necessary to work with smart people in and outside our company. To profit from Research & Development, we have to discover, develop, and Research & Development outside our company can create much more in- exploit innovations ourselves. novation value; R&D inside our company is necessary to be able to use a part of that innovation value. Whenever we discover an innovation ourselves, we are the first to bring it To profit from innovation, it isn’t necessary to start research ourselves. to the market. The company that gets an innovation to the market first wins. It is more important to make a better business model than to get to the market first. We win when we create the most and the best ideas in the industry. We win when we use ideas from in and outside the company best. We must defend our intellectual ownership, so that our competitors can’t We must profit from the use of our intellectual ownership by others, and profit from our ideas. we must buy the intellectual ownership of others’ ideas if this improves our own business model.
  20. 20. 20 | Networking in a flexible labour market Carnoy also notes that the success of the flexible labour market depends A second development, which is occurring more and more, is the impor- perhaps even more upon networks and contacts outside the workplace. tance of networking and cooperation. A case study of the labour rela- Those who can make their skills known through a network of companies tions strategies in Silicon Valley by Martin Carnoy offers a number of con- have a much better chance of finding work. Also, for workers with lower clusions that are also interesting for the Dutch situation. levels of education, social networks outside the workplace appear to be The culture of labour market flexibility is not only directed by the tradi- more and more important in flexible markets. tional explanations of rapidly changing markets and intensive competi- All in all, many people find work through networks. The key does not lie Digital Cowb oys • Cha pter 3 • Tren ds an d develo p ment s in self - e m p l oy m e nt tion, but also by high turnover rates and the mobility of the most com- in networking itself, but in workers making others aware of their knowl- petent employees between these companies. As a result, knowledge and edge and skills via these networks; it is a way to find work. This also seems innovation power spreads rapidly through the local economy. Special- to be true for canvassing by self-employed workers in the Netherlands, ist flexibility seems to have greater benefits for this group than for the for the more highly educated as well for the less educated. employers, although generally it is assumed that flexibility is especially beneficial for employers. | Conclusion Especially for less educated employees, the assumption is often that flex- This chapter discusses interesting developments in the labour market for ibility is beneficial for employers. In the United States of America, the self-employed workers. These were the developments mentioned most flexibility of this group has led to lower salaries and worsening of terms during the project and interviews and which caused the most indigna- of employment. From this, Carnoy concludes that the success of flexible tion or anxiety. labour markets is clearly dependant on a certain education- and skill The developments can be divided into four different categories. In the level. next chapters these four trends will be examined further.
  21. 21. 21
  22. 22. 22 Chapter 4 Trend I: Diversity in forms of working relationships The first trend that can be seen in the ICT sector labour market is the volved, but the collective labour agreement developments in the ICT shift from being employed by others to being self-employed. sector invite workers to become self-employed. Barely increasing wages Digital Cowb oys • Chap ter 4 • Tren d I: Divers it y in fo r ms o f wo r k ing re t i ns hi s and little improvement in terms of employment are also important fac- Within the sector there is great concern about the outflow of experi- tors. Still, most interviewees state that money is less important than it enced ICT professionals who become self-employed workers. Although seems. “It is true that you make more money as a self-employed worker, each month there are many vacancies filled, this number is lower than but there are also more risks. And my wife does like it when I can pay the the outflow to self-employed work. We will discuss the reasons why so mortgage at the end of the month.” many employees become self-employed workers further. Therefore, financial reasons don’t really seem the main reason to take From the trade and industry point of view, the flexible employment of the step. The interviewees state that “small, nice businesses of about a self-employed workers plays an important role. “Self-employed workers hundred people” are disappearing. Thus, the stimulus to work for these are useful for their ability to adapt to the cycles of the ICT market”, says smaller, more creative companies is gone and more and more ICT pro- Kasteel, the chairman of the board of Ordina. fessionals have become self-employed. If we also take into account the large amount of secondment and consulting taking place by the software For the self-employed worker himself, finances play an important role. houses of old, and that in the evenings there are obligatory teambuilding An ICT professional receives a much higher income as a self-employed sessions “to see the colleagues once in a while”, then the step from being worker than as an employee. It is true that there are also more risks in- an employee to being self-employed is very small.
  23. 23. Recruiting by making noise: employee problems at Ordina | The rise of different types of working relationships 23 Ordina’s Chairman of the Board, Kasteel, expressed the expectation that Ordina is an interesting example of the bottlenecks in the employment poli- the market is going to help decrease the number of workers wanting to cies of ICT companies. Ronald Kasteel, Ordina’s chairman of the board, thinks that structurally there are too few people educated in the relevant skills. “The become self-employed and may even turn that trend around. However problem is getting worse because of the individualization of society. Because the market seems to be developing in another manner. On 29 June 2007, of that, more and more people are becoming self-employed workers.” Bas Linders of ICT Office wrote in Een Paar Apart, the position paper for Because of the loss of workers to self-employment, the turnover of personnel the top dialogue between ICT companies and trade unions, that Human at Ordina is 15%. If the company wants to address the decline and expand the number of personnel, Kasteel states that there must be about 800 to 1000 new Resource Managers (HRM) are looking for contract forms for this new employees recruited yearly. As an important solution to the personnel short- group on the labour market and that a standard on that point had not age, Ordina mentions the takeover of entire ICT divisions from customers. “Re- cently we took over an ICT division of Rabobank, about 150 people, after we been developed yet. signed a seven-year contract with the bank to, among other things, take care of the whole administrative processing of their mortgage portfolio.” The question is whether a standard contract form is necessary for the The alliance between Ordina and American trade companion Cognizant is new. “This club has 80% of its personnel in India and is growing at the rate of over self-employed worker. After all, the fact that it’s an assignment between 14.000 employees per year. We have agreed that they will do work for us in two employer and self-employed worker is in itself a form of economic agree- areas: system development and control and maintenance of systems. For now ment. Still, the rise of different forms of labour relationships within the it’s about 50 to 100 people. We think with that we can render about five to 10% more turnover. So it is not a replacement of work that is done in the Nether- ICT sector is striking, which confirms that Human Resource Managers lands, but an acceleration of the growth.” seem to have found contract forms for self-employed workers. In addi- Finally, Kasteel mentions the ICT professionals who are now self-employed tion to the classic employer/employee relationship, there are now also workers. The self-employed workers are useful in being able to adapt to the secondment, payroll, and self-employment. In between there are also all cycles of the ICT market. Ordina places about 13% of their assignments to self- employed workers by contract, but keeps a bigger number within the company. sorts of constructs like midlance (basic wage with bonuses) and working Kasteel expects that the market will act as a brake to decrease the numbers of from a BV (Dutch legal form of a Limited or Incorporated company) or a those wanting to become self-employed and that there may even be a turn- around in the future. “On the one hand, there is the trend that clients like the partnership construction. These constructs aren’t, economically nor fis- cally, forms of self-employment or freelance work. The form of labour is
  24. 24. 24 still employer-employee, with increased flexibility and decreased risk for the employer and higher recompense for the employee. As this is not, in fact, self-employed work, but is often said to be, we also speak of “so- government want to work with fewer different ICT contractors. They want one called” self-employed work. contact person and won’t give self-employed workers separate assignments. Besides that we are less nice to the self-employed workers that we hire. Just like us, they aren’t paid by the hour any more, but depending on the results. There- fore you’ll have to work harder for your money than before. And then maybe it Digital Cowb oys • Cha pter 4 • Tren d I: Divers it y in fo r ms o f wo r k ing re l at i o ns hi p s is more agreeable to have more security.” Source: Financieel Dagblad, 20 October 2007 Form of labour relationship Legal contract party Employer in practice Labour contract with employer Employer Employer Payroll contract Payroll company Employer (usually stays the same) Secondment contract Secondment agency Employer (changes with new assignments) Self-employed worker Client Client Self-employed through employment agency Employment office Client Constructions like ZZP Oké and Uniforce1 Client through own BV (Dutch legal form of Limited) Client Constructions like FreeICT2 Client through Partnership construction Client 1. ZZP Oké and Uniforce are organizations which created a construction by which people work for a client as employees in their own BV. This is done by forming a ‘one-person secondment agency’ for every freelancer. The freelancer is working through this BV, which, among other things, remits value- added tax, income tax and employer taxes. Clients receive an audit certificate. 2. FreeICT has developed a partnership-model as a labour market-model, in which acquisition and negotiations take place through the partnership.
  25. 25. | The role of the ‘Verklaring Arbeidsrelatie’ (VAR) 25 (declaration labour relationship) Midlance: an example of an HRM construction The rise of new contract forms for self-employed workers in the ICT sec- The secondment agency InWork has launched a new labour market form. Mid- tor invokes the question of what the biggest trigger for this development lance is a variant of the freelance developments and is midway between a free- lance/self-employed worker and an employee. is. InWork observes that in four years the number of self-employed workers has Conversations with employment offices don’t leave any doubt. The Verk- grown by nearly a quarter. Also, the profile of the new self-employed workers has changed markedly compared to a couple of years ago. “More and more na- laring Arbeidsrelatie (VAR) (declaration labour relationship) is causing so tive males (between 25 and 45 years old) are becoming self-employed, in the much confusion that clients would rather hire someone by an acknowl- search for more freedom, self-realization and, especially, higher earnings!”, In- edged construct than directly as a self-employed worker with a VAR. This Work analyses. However, “Freelancing isn’t ideal for many. Midlance is the golden midway is in spite of the fact that with a VAR the self-employed worker as well between freelance and a regular job. A midlancer has the security of a fixed as the client can be certain beforehand of the question of whether the employment. He receives a monthly paycheck and has good terms of employ- ment.” income from a labour relationship is taxed as taxable profit from entre- InWork states that several research agencies predict that midlance is going to preneurship, taxable income, or taxable results from other work. be the trend in the labour market for self-employed ICT professionals in 2008. Actually midlance is nothing other than an individual performance recompense Many self-employed workers think that the application of a VAR is an system, with a traditional employer-employee relationship. administrative bother. Even though they state that other administrative Source: press report, beginning of February 2008 burdens are much more complicated, the VAR is needlessly complicated. InWork For clients, the VAR is, above all, unclear and insecure. The employment Bron: Persbericht InWork, begin februari 2008 offices, partly for marketing purposes, hook in cleverly on this insecurity. Employment office P/Flex, a division of Randstad, acknowledges they hook into the indistinctness of the labour relationship and the risk that the client runs. They refer to an amendment of law per the first of January 2007 through which the burden of proof of the VAR is with the client. In
  26. 26. 26 commercials by P/Flex in 2007 this sense of indistinctness was strength- ened by examples of situations and solutions from P/Flex. Although the (Dutch) tax office clearly states that the VAR gives secu- Hooking in on the insecurity around the VAR rity to the client beforehand about the labour relationship, there is much mistrust over this from clients. It seems therefore that this insecurity HARDERWIJK – Freelancers, interim workers, and about the VAR is crucial. The question that then remains is if the solution Digital Cowb oys • Cha pter 4 • Tren d I: Divers it y in fo r ms o f wo r k ing re l at i o ns hi p s self-employed workers who, for whatever reason, don’t is right. Do we have to develop all kinds of new labour constructs, or do want to work with a so-called Verklaring Arbeidsrelatie we have to improve the information about clientship and the VAR? The (VAR) (declaration labour relationship) can from now latter seems in any case a good recommendation, in order to offer clarity instead work with a Verklaring Uniforce Registratie about the VAR. (VUR) (declaration Uniforce registration). | Changing labour relationships and security The UWV, the Dutch tax office and the Uniforce Group have signed an agree- Although large diversity in labour relationships is typical for a dynamic ment on this, so they reported Tuesday. With that the VUR is a new official na- tional labour form for self-employed workers and their clients. According to economy like the ICT sector, this diversity seems to be a predictor for the undersigners, the VUR forms are “a perfect completion of the grey area” other economic sectors. Gerard Everts and Ton Wilthagen, in De Toekomst between a labour agreement as employee and as self-employed worker. van de Arbeidsrelatie: Een essay over wederkerig risicomanagement (The Fu- Clients ture of the Labour Relationship, an essay about mutual risk management), Many people have difficulties with a VAR, finding that it fills them with ques- give an interesting analysis of this situation. They discuss multiple devel- tions and that the VAR work is restrictive; for example, to new clients. The VUR is a looser form of labour agreement. In particular, specialists in the opments in the labour market. area of financial services, personnel policy, automation, and interim-manage- ment are often hired for their knowledge and experience. Everts and Wilthagen observe new risks in the labour market, like the Source: Automatiseringsgids, 19 August 2008 tendency toward internationalisation and the accompanying interna-
  27. 27. tional competition, migration of labour, and the rise of new economies. 27 They also observe increasing individualisation and the call for custom- made goods. The need for flexibility is increasing. Meanwhile, the Dutch A day later the Dutch tax office gave a totally different explanation. In a press government has withdrawn and is opting for freedom of choice and per- report, the Dutch tax office stated that the VUR is not a new fiscal labour form. sonal responsibility. Deregulation, liberalisation, and privatisation are “Yesterday, in the media, the impression was wrongly given that there is a new fiscal labour form; the VUR”; thus the press report. “The VUR would be a so- key words. lution for freelancers, interim workers and self-employed workers who don’t want to work with a VAR. However a new fiscal labour form with legal (therefore national) basis has not been introduced in conjunction with the VAR. It is the Further, they state that the labour market’s adaptability and manoeu- product of a individual presenter.” vrability are too limited. They believe that people want security. After all, the classical labour relationship always characterizes itself by striving for Source: Press report Dutch tax office, 20 August 2008 long-term fixed contracts, with few risks for the employee. Within this relationship workers have not been encouraged to be mobile. 1. Precaution (prevention). These are efforts to make sure employees In contrast, Everts and Wilthagen argue for a transitional labour market, remain usable. also based on the flexicurity concept (Centraal Planbureau, 2005). Flexi- 2. Protection. These are measures which, for example, cover resignation curity represents the mixture of a flexible labour market with good provi- conditions and collective labour agreements, which make sure that sions and assurances in the area of social security. traditionally unbalanced power balances are righted. Everts and Wilthagen conclude that risks in the labour market must be 3. Recovery. This includes compensating losses of income, assistance in divided between employer, employee and, from a general perspective, finding new jobs, and restoring the capacity to gain new incom society (the government). They quote the Wetenschappelijke Raad voor het Regeringsbeleid (WRR) (Scientific Counsel for Government policies), which makes a distinction between three essential aspects of risk divi- sion.
  28. 28. 28 | Guaranteed basic provisions for self-employed workers also take part more in guaranteed basic provisions, like pregnancy leave, which have previously only been available to employees. Finally, the WRR also draws a few conclusions for self-employed workers. The characteristics of the self-employed worker are thus shifting more To make the flow in the labour market – in, out and through – much more and more towards those of the employee. For some that may seem an flexible in the future, there must always be social security for employees. unwanted development, but frmo an international perspective it is not When this security is lacking, the system itself is not successful because illogical. In Denmark, even employers can derive rights of social security Digital Cowb oys • Cha pter 4 • Tren d I: Divers it y in fo r ms o f wo r k ing re l at i o ns hi p s of resistance from employees. This is the main reason why the (Dutch) for some employees, and therefore don’t run their companies solely at government has to ensure, by flexicurity, that there are basic provisions their own risk. While the self-employed worker is becoming more simi- for all workers, whether self-employed or not. Everts and Wilthagen ar- lar to the employee, the employee is becoming more similar to the self- gue that it would be curious if society were to deny paid pregnancy leave employed worker. Though there is nothing wrong with differentiation of or better career regulation to self-employed workers. labour forms, clarity and transparency are required. If a form of labour becomes a trick on the part of HRM specialists, it is better to legally re- | Where is the limit to flexibility? strict the problems for everybody or to permit labour construction for This chapter notes a large rise in forms of labour relationship. The reasons everybody. behind these developments are also analysed. Indistinctness, as well as the insecurity surrounding existing labour relationships, has been dis- cussed. Changes in the labour market affecting the whole of society, in which flexibility and risk management are more and more prominent, were also discussed. While employee relationships become more flexible, the social security position of the self-employed worker strengthens. From the flexicurity point of view the role and (social) security of the employee will change sooner or later in future years. At the same time, self-employed workers
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  30. 30. 30 Chapter 5 Trend II: The rise of employment agencies for freelancers Digital Cowb oys • Cha pter 5 • Tren d II: The r ise o f emp loy ment a ge nc i e s fo r f re e l a nce r s One of the strongest trends for self-employed workers in the labour Especially in large companies and the government it amounts to a form market in recent years is the rise of employment agencies for free- of secondment. These companies choose this form via an employment of- lancers. This chapter describes how employment agencies work and fice because they want to avoid bother and believe this way offers some the changes occurring in this market which affect the position of kind of continuity. Money interests them much less. In smaller compa- self-employed workers. nies the contacts are often much more direct. In some larger companies, it may also be the case that there is no intermediary. In these instances, | Employment offices in practice contracts of around 100,000 Euros are often involved. Direct hire is then Traditionally, self-employed workers receive assignments through their usually more efficient, more direct, and cheaper. personal networks. Mostly, assignments seem to come officially from employment offices, while in practice they derive from indirect personal Many employment offices have a number of big companies as clients, contacts. However, it is true that the lower the self-employed worker’s who at first let personnel be staffed via the employment office. Actually, level of knowledge is, the more that worker seems to depend on second- in that way the employment office operates as a temporary employment ment work. The employment offices and the self-employed workers both agency. There is also a rising market for freelancers – “which grows by the state this. However, the independently acquiring self-employed worker hour”- which these regular customers also want to use. They offer three also often doesn’t escape having an intermediary between the client and reasons. Firstly, the company usually does not have the resource capac- himself. ity and does not know where to find the specialised ICT professional Within ICT, self-employed workers recognize a distinction between em- required. Secondly, companies are hesitant to do business directly with ployment by the employment offices of smaller and larger companies. self-employed workers. Thirdly, companies want to put the administra-
  31. 31. tive duties out to contract. For these reasons they sign a contract with the 31 employment office, after which all self-employed workers are mediated via this one office. Definition of an employment agency From interviews with employment offices, it is clear that, in their view, An employment agency is an office which first brings a contractor and a client employment and secondment are the same thing. Employment offices into contact, for a fee, and then steps back. The contract agreement between contractor and client is signed by both parties (Article 7:400 Dutch Civil Code); state that they contact the tax office about this frequently, and see this the contractor is not under the authority of the client because otherwise there labour form as a grey area. In the end the differences are negligible. would be a labour contract between the client and the contractor (Article 7:610 Dutch Civil Code). “Eventually the self-employed worker is working under the supervision A variant of the employment agency is the intermediary agency. This also of an ATOS Origin or KPN”, it is said. For the tax office, the question is who brings contractor and client in contact, for a fee, but then keeps the contractual the real client is: the ‘material’ client or the ‘formal’ client. relationship in the form of a contract agreement of assignment (Article 7:400 Dutch Civil Code) until the end of the assignment. The client is neither under the authority of the employment agency nor under the authority of the client. Legally, if a contract is signed in the Netherlands between a self-em- If there is authority between the contractor and the employment agency, then the employment agency is officially a secondment office and there is a labour ployed worker and the employment office, and there is no contract be- contract (Article 7:610 Dutch Civil Code) between contractor and employment tween the customer and the self-employed worker, the employment of- agency. If there is authority between contractor and client, then the employ- ment agency is actually a temporary employment agency and there is a tempo- fice is the only client. The lack of different clients can form a problem for rary employment contract (Article 7:690 Dutch Civil Code) between contractor the self-employed worker. Due to Dutch law the self-employed worker and intermediary agency. then isn’t really a self-employed worker, but someone who is employed by another. Then, of course, income taxes and employment security con- tributions have to be paid. From the interviews with the self-employed in the ICT sector about their experiences, it would appear that they are actually very content with the role that employment offices play and the quality that they provide.
  32. 32. 32 However, they also expressed their concerns about a few negative de- velopments. These concerns relate to the fear of a monopoly of employ- ment offices, the greater and heavier risks of entrepreneurship passed Why do self-employed workers work by clients to self-employed workers, and the extensive chains of indirect via an employment office? client and contractor relations that come into existence. Digital Cowb oys • Cha pter 5 • Tren d II: The r ise o f emp loy ment a ge nc i e s fo r f re e l a nce r s The traditional view that employment offices aren’t good, that they financially exploit the self-employed, and that the self-employed would rather take on as- | Dependency on employment offices increases signments without the use of employment offices, is no longer current. In the In the interviews with ICT professionals, a much heard fear was that the interviews, while the point was emphatically made that the self-employed do worry about some negative developments, it was clear that they do in principle relationship with the employment office was becoming too tight. A self- value the services of the employment offices highly. Many ICT professionals employed worker can’t make a decision to take on an assignment on be- and project managers get in contact with clients or potential assignments via their own networks. Often, they then make use of the employment office. On half of an employment office. It may become impossible to gain an inter- the one hand, they do so to benefit from a sort of safety net to ensure a fixed esting assignment without an employment office. With these concerns in income each month, and on the other hand, to benefit from the handling of ad- ministration. For them, a fixed monthly income and assignment security seem mind, we interviewed a representative group of self-employed workers, to have a higher priority than self-employment and freedom. Additionally, a from both inside and outside the ICT sector. number of engineers state that they aren’t good at acquiring work and there- fore are glad to give this task to professional employment offices, so that they Within the ICT sector, almost half of the self-employed have had experi- can concentrate on the work they are good at. ence with clients who only wanted to do business via an employment office, while this number for all sectors is 25%. The statement that almost half of the ICT self-employed had experience with clients who only wanted to do business via an employment office is interesting in itself. A comparison with historical data isn’t possible, be- cause there is no previous research into the experience of self-employed workers with employment offices. In the interviews with employment offices, they themselves also said that they are indispensable. From the