Freelancers unite to get sickness and other employment benefits

http://www.theguardian.com/money/2015/jan/14/freelance-payment-sickness-leave

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The growth of freelancing has exposed many holes in our systems of social support. The idea that more than 15% of the European workforce could become self-employed didn’t occur to the planners of our employment, welfare and taxation laws, who were writing at a time when everyone worked for one company for life. It doesn’t seem to have occurred to today’s rule writers either, even as freelance numbers skyrocket.

As every freelancer knows, being your own boss means doing without traditional safeguards. The freelancer who gets sick has no statutory sick pay to fall back on to cover their costs. The freelancer who has been left unpaid by a weaselly client must struggle alone for compensation.

Independents are coordinating to demand political action to improve their conditions through the European Freelancers Movement. But rather than simply wait for policymakers to change existing social structures, some groups are taking a proactive approach. They are building solutions to the problems commonly experienced by freelancers, using old fashioned methods of mutual support.

Support in sickness – the Netherlands’ Broodfonds

Falling ill is so problematic for freelancers that most don’t allow it to happen: studies show that the self-employed take three times fewer days off work for illness than traditional employees.

Being sick means the loss of clients and income, and falling behind on fixed costs like housing and health insurance.

In the Netherlands, self-employed workers have created a system to financially support each other when they fall ill. It is called Broodfonds, “bread funds”, and it works by creating small groups whose participants pay into a mutual sickness fund. The first Broodfond group was founded in 2006, and the scheme has now grown to 123 groups with almost 4,200 participants.

Between 20 and 50 individuals can join each Broodfond group, and beyond that a new group must form. The small number ensures the group remains a close community and reduces the incentive of any member to attempt to cheat.

Each member pays a monthly amount into the system based on how much they wish to receive if they fall ill. There are eight payment levels, starting at €33.75 (£26.40) a month for those who require a payout of €750 a month when ill, ranging to €112.50 a month for those needing a €2,500 monthly payout. If a freelancer gets sick, there is an own-risk period of one month, after which they may receive their monthly support payment from their Broodfond.

The system has many clever features that keep it fair and sustainable. A member pays a maximum of 36 contributions, unless their fund requires topping up due to a claim. Each member’s contributions are saved in an individual account, and transfers are made to a needy member if a claim is made. Payouts are called “gifts”, which reinforces the concept of mutual support, and members meet twice a year to establish a sense of community. A member who wishes to leave the scheme can withdraw the balance of their account after a six-month wait.

Each Broodfond is an independently incorporated association, and all 123 groups are assisted by a central administration called the BroodfondsMakers, which operates as a co-operative. Biba Schoenmaker, one of the three founders of the BroodfondsMakers, says: “We saw what happened to colleagues who became ill, and what happened to their company. That’s why we started a collective solution for illness.” She and her colleagues took two years to fully develop the concept, launching the first experimental group in 2006 with 20 members.

“In the first year we couldn’t find out if it was working because our members didn’t become ill. But later we saw it worked as we wished, and we helped new groups start,” she says.

Most Broodfonds process very few claims from members. The general Dutch workforce has an absenteeism rate of over 4%, but for members of Broodfonds the rate is around 1%, Schoenmaker says.

Aside from the task of devising the fund, another challenge was to obtain permission from the Dutch financial services authority. The regulator had to be convinced that Broodfonds did not constitute a traditional insurance company, which would have triggered crippling requirements. They won the necessary approval, but the risk of tripping over international insurance regulations has slowed expansion. Schoenmaker says they are now investigating the idea of internationalising, starting in the United Kingdom.

Sickness and self-employment in the UK

There are no comparable mutual sickness support models for freelancers in the UK. Self-employed workers can purchase relatively affordable private income protection insurance.

Another option is to join Ipse, a British association for the self-employed, which offers a premium membership package for £239 annually. This includes an insurance policy that pays out up to £2,000 if a member is sick for more than three weeks.

Getting paid not played – SMart’s mutual invoicing system

Nearly every freelancer has a story about a client who delayed or refused to pay an invoice. Chasing down non-paying clients is time consuming and demoralising. Outstanding invoices can severely disrupt a freelancer’s livelihood. Rent, loan repayments, insurance bills and groceries still need to be paid, and landlords – unlike freelancers – are hard to ignore.

Some advances have been made at a policy level. The European commission’s Late Payments Directive of 2011 introduced new automatic penalties for recalcitrant debtors. The directive allows creditors to add an extra €40 to any invoice that is more than 60 days overdue, plus interest on the unpaid amount.

But 60 days can still be a long time to wait.

In several European countries, freelancers have built mutual invoicing systems that allow them to prosecute non-paying clients with their collective force. One of them is the Belgium-based SMart, a non-profit organisation founded in 1998 to assist cultural workers – hence its extended name, Societe Mutuelle pour Artistes. SMart has grown into a sizeable organisation with more than 58,000 members and 155 staff working from 10 offices across Belgium.

SMart is a kind of modern day guild. The society acts as an administration hub, issuing invoices and collecting payments on behalf of its members, who avoid having to set up their own company to operate. It pays members within a few days by pooling some of the income in a mutual guarantee fund, and takes over the responsibility of chasing down nonpaying clients using in-house debt collection staff.

For this impressive suite of services, Belgian members pay a €25 annual fee as well as 6.5% from each invoice processed through SMart.

SMart was able to develop largely thanks to Belgium’s generous welfare and taxation provisions for artists. But having used this funding base to build its infrastructure, it is now expanding across Europe. It has opened branches in eight other countries – Austria, France, Germany, Hungary, Italy, Netherlands, Spain and Sweden.

Members outside of Belgium pay higher contribution rates of between 7% and 9% of each invoice issued through SMart. Higher costs and reduced services may make SMart’s international branches less attractive than its Belgian operations. Nevertheless, SMart’s model of mutual services has the potential to ease many of the financial challenges facing Europe’s creative workers.

Late payments in the UK

SMart’s services are not available in the UK, although the organisation says it is considering expanding here in the future.

Premium members of Ipse are covered by an insurance policy paying out up to £10,000 if a client goes bankrupt leaving debts. The association recently launched a campaign to encourage the government to improve late payment protection for the self-employed.

Mutual services for freelancers – a new twist on an old concept

Both Broodfonds and SMart are modern expressions of an old idea – the mutual society. These function by combining members’ contributions into a collective fund which is administered under a co-operative or not-for-profit model. This is different from insurance companies or banks, which operate for the benefit their shareholders rather than members.

Mutual and friendly societies blossomed in the 1700s and 1800s, when individuals worked under precarious conditions with few employment protections or social benefits. The parallels with today’s freelance employment market are hard to ignore.

The concept of mutual support has again become relevant and freelancers are leading the way in developing their own innovative and efficient structures to deliver it.

• Joel Dullroy is editor of Independents Unite! Inside the Freelancers’ Rights Movement