What is probably the largest governmental effort to shore up the economy since the Second World War has been taking place across the world now in response to COVID-19.
And perhaps the greatest saving grace is that interest rates are so low that large-scale borrowing is possible, at least for the larger economies. It is certainly the case that in most countries the hyper-protective approach that is being taken by governments is widely accepted as entirely necessary to protect both businesses and workers.
But the protections provided to employees under general employment law are also important in underpinning both the health of the workforce and, in wider terms, the stability of the business environment. These factors typically include elements such as a national minimum wage, maximum hours of work, rest and breaks, adequate health and safety protections, guards against discrimination, protection against dismissal and state unemployment benefits, along with the possibility to unionise.
In the UK, employment protections are relatively strong, with well-developed anti-discrimination laws, although the trade unions are generally weak in the private sector. In Belgium, state protection against work insecurity is also strong, having all the usual elements, including a minimum wage, working hours laws, well-developed health and safety laws and strong collective bargaining practice.
In Canada, the government supports workers by means of a range of policies and tools, with an emphasis on income support programs and skills training. Recently, the federal government has introduced stricter rules for federally regulated employers around the use of part-time, temporary, casual or seasonal work. These changes include a presumption of employee status that puts the burden on the employer to prove that a worker is not an employee.
In addition to a well-developed social system (e.g. health insurance, nursing care insurance, unemployment insurance, pension insurance and accident insurance), in Germany, there is a multitude of protective regulation under labour law – and the rules are of a high standard.
Brazil also has the traditional mechanisms, of minimum wage, social security and unemployment insurance, plus it has active unions – and, most notably, the Public Attorney's Office, Labour Branch, the MPT (Ministério Público do Trabalho) – which has been very vociferous against any form of insecure work. The MPT tends to be praised for defending fundamental rights in situations of obvious work insecurity but criticised for pushing too far on collective rights, so causing litigation risks for new forms of businesses.
Tax and social security regimes
One of the key aspects of government influence over the labour market comes from the tax and social security regime. Colin Leckey, in our UK firm, reports that employer social security contributions are low compared to continental Europe (maximum 13.8%), and independent contractors pay a lower rate of social security (although they pay the same income tax). "This is intended to incentivise entrepreneurialism and risk taking." In Germany, companies can maximise profits by using self-employed workers because no social security payments need be made, but this also means that independent workers, such as those in the gig economy lose out on social security. Similarly, in Canada, non-standard workers do not qualify for benefits such as old-age pension and temporary income support.
In Belgium, whether someone would like to be an employee or an independent will depend to a large extent on how much they can earn. If they can charge good rates for their time, self employment may be the best option – and businesses often prefer to work with self-employed people, based on the tax and social security regime. But for those workers on lower pay, it will be significantly better to work as an employee, as they are covered by a more extensive social security system.
In Brazil, Jose Carlos Wahle reports that "although the social security system is intended to cover self-employed workers through contributions and pensions, it's rarely affordable for an informal worker to contribute in this way. Therefore, reform of the social security system is necessary to provide the population with a better-balanced pension scheme and support for the unemployed."
The Brazilian view that reform is required may have resonance in a number of countries, as balance is sought between those workers given the full social security protection and those who don't qualify. Changes to the tax and social security regimes are certainly a tool that governments could choose to deploy to rebalance the workforce for the future.
COVID support as a catalyst for change
COVID has brought the role of government into sharp relief and put pressure on them to provide support, acting as something of a catalyst for change. The support offered under COVID has evolved over time, but most governments across the world have offered furlough and short time working schemes and the like, in response to the significant needs of their populations.
Governments have also been thinking more generally about whether there need to be any changes to employment law to take account of the prevalence of newer ways of working. Some countries are at the stage of commissioning research to help them understand labour market conditions better and others are making piecemeal changes. The changes may involve a recognition that work needs to be made more flexible, or they may be ways of rebalancing the workforce to ensure greater equality. Here's what our lawyers say is happening in their countries:
The Belgian government recently announced that as of 2021 paternity leave for self-employed people will be increased from 10 days (or 20 half days) to 15 days (or 30 half days), and to 20 days (or 40 half days) as from 2023. This measure should ensure a more balanced distribution between men and women in terms of childcare. In addition, the legal pensions of the self-employed will be calculated in the same way as pensions for employees and the minimum pension for self-employed people will be increased. These measures should incrementally align self-employed people with their employed equivalents more closely over time.
In Brazil, the government has proposed a bill setting out a new simplified employment agreement aimed at improving opportunities for young people in their first jobs. It has not been approved in the congress, amidst political turmoil, but might eventually be the first step towards future law providing an intermediary legal status between employment and self-employment."
The Canadian government recently did a study of non-standard employment in Canada in recognition that the nature of work is evolving, and that further research is required to define and understand non-standard employment. The goal was to better understand the impact of non-standard work and use it as a foundation for developing policy.
In Germany, those working in businesses with more than 15 employees can request a reduction of working hours. In companies with more than 45 employees, employees who have worked more than six months at the business can ask for reduced working time for a fixed period, after which it will revert to the original working time. The period of the reduction must be from one year to a maximum of five years. During parental leave, employees can work part-time up to 30 hours for at least 2 months. Further there are possibilities to reduce the working hours for the care of close relatives and for employees with a severe disability.
The UK government's 'Good Work Plan' proposed a number of reforms to employment law, but while the government is still formally committed to implementing these at some point it remains unclear when exactly this might happen and what it might do.
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