Access to social protection, for some

The Council of the EU has agreed a recommendation on access to social protection. Is the glass half-full or half-empty?

Over a year and a half after the European Commission presented its proposal for a recommendation by the Council of the European Union on access to social protection for workers and the self-employed, the council has finally adopted the long-awaited recommendation. The adoption process proved challenging, given the reluctance of some member states to accept EU influence in this arena.

The recommendation draws on principle 12 of the European Pillar of Social Rights (EPSR) and was put forward by the commission in March 2018 as part of the Social Fairness Package. The recommendation aims to implement the right to adequate social protection for workers, and under comparable situations the self-employed, regardless of the type and duration of the employment relationship.

Transformative challenges

Access to social protection is key not only for the economic and social safety of the workforce but for the good functioning of labour markets. For reasons of national traditions, political preferences and budgets, social-protection systems differ greatly among member states, yet they face similar transformative challenges.

A new world of work is rapidly shaping, which drastically exposes the coverage gaps in current systems; these leave a growing number without sufficient access. To make social protection fit the current labour market, a common approach is key—future-proofing the European social model and the welfare systems of member states.

In light of the many challenges traditional systems face—from increasingly dynamic, flexible and segmented labour markets, driven by globalisation, technological developments, changes in individual preferences and demographic ageing—the council recognised the need to adopt a common European mechanism. Given the lack of consensus on the direction of reform among the member states and social partners, and the general absence of political support, however, the commission opted for a soft-law council recommendation, as foreseen in article 292 of the Treaty on the Functioning of the European Union.

It argued that whereas a directive would impose binding outcomes, a recommendation would allow the EU institutions and member states to co-operate to address the various problems and anticipate their evolution, to stimulate and guide national reforms and ensure comprehensive progress. The commission highlighted how social protection could be addressed through the European Semester or the Open Method of Coordination for Social Protection and Social Inclusion (Social OMC).

Non-standard employment

The preamble to the recommendation makes clear that the main objective is to support the workforce engaged in non-standard forms of employment and self-employment, not sufficiently covered by social-security schemes because of their employment status, which makes them prone to higher economic uncertainty. Hence, the urge to provide adequate social protection to all workers and the self-employed and establish a minimum standard for non-traditional employment relationships.

Accordingly, the recommendation aims to increase income security, reduce precariousness, fight poverty, reduce unfair competition and create more stable economic structures. Social protection is considered adequate when it allows individuals to uphold a decent standard of living, replaces their income loss in a reasonable manner so they can live with dignity and prevents them falling into poverty—while contributing, where appropriate, to activation and facilitating a return to work (recital 17).

With this aim, the recommendation covers the right to participate in a social-protection scheme, as well as the accumulation and take-up of entitlements, where coverage is formal, effective, adequate and transparent (article 2). ‘Formal’ means stemming from legislation or collective agreements ensuring workers are entitled to participate in a specific branch of a scheme. ‘Effective’ refers to real protection where workers have the opportunity to accrue adequate benefits and the ability, when the corresponding risk materialises, to obtain a given level of benefits.

The recommendation applies both to workers and the self-employed—as well as to people transitioning from one status to another or having both—and those whose work is interrupted due to incidence of one of the risks covered. It applies to all social-security branches: unemployment, sickness and healthcare, maternity and equivalent paternity benefits, invalidity, old age and survivors’ benefits, and benefits with regard to work and occupational diseases (article 3). As opposed to the commission proposal, however, the recommendation excludes social-assistance, minimum-income schemes (article 4)—although member states are not constrained from maintaining or adopting more advanced provisions on social protection (article 5).

Definitions missing

Definitions are provided with regard to type of employment relationship, labour-market status, social-protection schemes, benefit, formal and effective coverage, reservation of rights, accumulation of rights, transferability and transparency (article 7). But essential definitions are missing from the recommendation, compared with the commission’s proposal—most remarkably, of a worker and an employment relationship, which is crucial when determining beneficiaries.

Member states are enjoined to ensure mandatory access to adequate social protection for workers, regardless of type of employment relationship, and for the self-employed at least on a voluntary basis and ‘where appropriate’ on a mandatory basis. It is not clear, however, who a worker is and when it is appropriate for the self-employed to enjoy mandatory coverage.

The commission had proposed that all branches of social protection would be mandatory for workers and the self-employed, with the exception that unemployment benefits, in the case of the self-employed, might be determined on a voluntary basis. The commission referred to the entrepreneurial risk taken by the self-employed—though it recognised that many did not genuinely choose to be self-employed but rather were pushed into self-employment because they could not find a job as an employee.

The recommendation urges member states to maintain proportionality among rules governing social-protection schemes that differentiate between market statuses or types of employment relationship and to ensure their schemes safeguard a decent standard of living via income replacements, but this adequacy is to be in line with ‘national circumstances’. Comprehensive, accessible, user-friendly and clearly understandable information is sought for individuals to secure transparency, while member states and the commission are called upon to collect and publish reliable national statistics on access to social protection.

Watered down

Most striking is how much the council has watered down the initial proposal. The tone of the recommendation is far softer: the proposal enshrined what member states should do while the adopted text merely recommends. It erases the definition of a worker and an employment relationship, as well as references to relevant case law of the European Court of Justice. This opens the door to member states to embrace restrictive definitions and exclude individuals in grey areas from access to social protection.

As well as excluding social assistance, the council diluted the provisions relating to the transferability of protection. As to its adequacy, the caveat was introduced that member states’ social-protection systems had to be considered as a whole. Finally, the council levelled down the rights relating to transparency, by eliminating an exemplary set of information about social security to be provided.

From a positive standpoint, the recommendation does recognise the coverage gaps in social-protection systems across the union and the need for a common approach to avoid further segmentation of the internal market. But the delivery process, especially in the council, has seen harsh political reality prevail over EU social policy once again.

Economy of wellbeing

Yet Finland’s council presidency programme is emblematic of a sustainable Europe and seeks to make the EU more competitive and socially inclusive. The presidency aims to assess the need to update employment legislation and revise social-protection systems to address the new forms of employment and aspire to an economy of wellbeing.

The recommendation attempts to respond to the new labour-market patterns which have emerged in the wake of the platform economy, as traditional labour-related social security schemes have mirrored past policy conceptions. While it does not call for drastic redefinition of national social-protection systems, the recommendation aims to guide member states as how to adapt their systems to current realities and challenges. It does not provide any criteria for how to define adequacy of provision—one of its major flaws—but it sets the right tone in shifting the focus on to social protection for all, instead of highlighting the binary divide between workers and the self-employed (though it recognises inherent differences).

This represents a step in the right direction, while the conundrum of misclassification of the workforce engaged in new forms of work remains unsolved. Placing the spotlight instead on the social rights of the workforce by safeguarding a floor of rights changes the discussion and steers it on to calmer waters, with hope to deliver a sound instrument on that very politically sensitive matter.

Initiating debate

At the very least, the recommendation initiates a debate in the EU institutions on the adequacy of social-protection systems and puts pressure on the member states to accommodate to the new labour realities. Moreover, it provides an opportunity for the stakeholders at various levels to get engaged in the debates and express their position.

It is a pity that a binding legal instrument was not proposed, such as a framework agreement by the social partners and the commission. From a political point of view, it is however understandable that the commission, after sounding out the positions of the governments, did not dare to put forward a proposal for a directive which would be quashed and could result in closing the door for a long time on any advances in social policy.

Perhaps, despite its soft language, the recommendation can yet be a turning point on the EU social agenda. This could especially be the case when more data on social protection are collected by the member states, with the follow-up of the Social OMC and the European Semester, which would be key in developing a common European strategy to make the union more socially inclusive.