Differences between false self-employed and trade
You can’t deny that the labour market is becoming more and more impossible, it is getting harder and harder to find a competent worker. That’s why many employers decide to hire self employed but they have to be very careful not to be considered as a false self-employed. See in this post the differences between a false self-employed and a trade.
You want to hire the services of a freelancer and they tell you that they are a TRADE because most of their income comes from a single payer. Remember the most relevant characteristics of this figure.
What is a Trade?
A Trade is a Dependent Self-Employed Person.
Characteristics of the Trade
Trade has only one payer
Remember that for a self-employed worker to be considered a TRADE (economically dependent self-employed worker), at least 75% of their income must come from a single payer.
For the calculation of the 75%, all the income received from the main client or from others is taken into account, whether it comes from work (in cash or in kind) or from economic or professional activities.
Example of Trade
The self-employed person earns 34,000 euros per year for the work he does for you, 2,000 euros for his projects as a freelancer for other clients, 8,000 euros for work as an employee and 6,000 euros from the rent of a flat he owns.
Therefore, the total income that counts towards determining whether you are a TRADE is 44,000 euros (the income from your work as a self-employed person and the income you receive as an employee, i.e. not including rental income).
As 75% of this 44,000 is 33,000 euros and you pay him 34,000 euros, this self-employed person will be considered as a TRADE with respect to your company.
Other requirements
In addition to being financially dependent on a client, in order to become a TRADE, the self-employed person must meet the following requirements:
- He/she must not have workers employed by others (except in exceptional cases, such as maternity or paternity leave), nor may he/she subcontract all or part of the activity to third parties.
- It may not carry out its activity in an undifferentiated manner with respect to the workers who provide services under any type of employment contract for its main client (it may not be confused with the workers of the company for which it provides services).
- It must have its own material and production infrastructure.
It must carry out its activity according to its own organisational criteria, without prejudice to the indications it may receive from the client. - It must receive an economic consideration according to the results of its activity, as agreed with its client.
What should a TRADE contract contain?
Trade contract
The TRADE is entitled to have its status recognised in a written contract. Remember that, in order to sign such a contract, the TRADE must inform you that you meet these requirements. Thereafter:
The client may require the self-employed person to prove that he/she meets the conditions to be a TRADE. For example, to prove that 75% of the income comes from a single payer, the TRADE can provide their last income tax return.
If the client refuses to sign the contract, the self-employed person can apply to the courts for recognition as a TRADE.
If the self-employed person informs the company of their TRADE status, the signing of the contract will not be a constitutive requirement for their recognition as a TRADE, but a declaratory one (they will be a TRADE even if they do not sign the contract).
Content of a trade contract
The contract must contain, among other things, the following information:
- It must state that the TRADE’s status as economically dependent self-employed occurs with respect to the client with whom the contract is signed. Specifically, the TRADE must state that at least 75% of its income comes from that client and that it has no employees.
- It must also indicate the annual interruption of the activity (the TRADE is entitled to at least 18 days of unpaid holidays), the weekly rest period and public holidays, as well as the maximum duration of the working day.
Important
The contract may state the period of notice with which the TRADE must inform the company of its intention to terminate the contract, or the reasons that both parties consider may give rise to the termination.
For example, it may be in the company’s interest to state the following in the contract:
- If the TRADE will have contact with the company’s clients, it can be stated that complaints from clients or mistreatment of them will be considered a serious breach of contract and will lead to termination of the contract.
- If the TRADE is a salesperson, it can be stated that the company can terminate the contract if it does not achieve specific sales or clients.
Termination of the Trade contract
Is Trade entitled to Indemnity?
When terminating the relationship with this type of dependent self-employed, the following situations may occur:
- If the termination is by mutual agreement, there will be no compensation (unless the contract states otherwise or there has been an abuse of rights by one of the parties that may have caused damage to the other).
- If the self-employed person requests termination due to serious breach by the company (e.g. because the agreed fees are not paid) or if you terminate without cause and without respecting the agreed notice period (or whatever is customary in the company), you will have to pay him/her compensation for damages. In this case, the compensation will be that established in the contract or the damages that the TRADE is able to prove (if they are higher).
- If it is the TRADE who terminates without respecting the agreed notice period (or, in the absence of an agreement, that which is customary in the company), the TRADE may claim the compensation for damages that it can prove. In the absence of a clear specification in the contract, apply the penalty that is customary with salaried employees (for example, 15 days’ notice and compensation equal to the fees accrued for the days of non-compliance with the notice).
If the contract does not fix the indemnity and the two parties do not agree, the courts will fix the exact amount. For this purpose, account may be taken of the time remaining before the expiry of the contract, the notice period granted, the investments and expenses the freelancer has anticipated or the seriousness of the client company’s breach.
What characterises a TRADE?
Independence - Independence - Independence
What is a false self-employed person?
A bogus self-employed person is a person who is registered in the self-employed regime but :
- He/she performs the same functions as an employee of the company.
- He/she receives orders from the boss,
- The company organises his or her schedule,
- He works the same working hours as the other employees of the company,
- With the same tools,
- etc.
Consequences of hiring a false self-employed person
Is there an employment relationship?
Even if you sign a contract for the provision of services with the TRADE, the agreement reached will not prevail over the reality of the relationship in practice. If dependence and alienation between the parties can be seen and the TRADE is not different from the rest of the workers on your staff, he/she will be considered a bogus self-employed person.
Remember that the TRADE is still self-employed to all intents and purposes, so it is he who has the autonomy to organise his work. If it is you who organises his tasks, provides him with the means, imposes a timetable, etc., then he is a bogus self-employed person.
A bogus self-employed person works as an employee
In case a TRADE is a bogus self-employed, your company faces the following consequences:
- Fine for failure to register the worker in the General Social Security Scheme (a fine of 3,750 euros or more for each false self-employed person). In addition, this fine will be increased by 20 to 50% depending on the number of employees affected.
- Ex officio registration of the worker in the General Social Security Scheme.
- Settlement act for the contributions not paid into the said regime. The ITSS can claim the contributions for the last four years, with a surcharge of 20%.
Social security claim
Although it is possible to claim from the General Social Security Treasury (TGSS) the contributions unduly paid into the Self-Employed Scheme, in the case of bogus self-employed workers, it is common for the TGSS to issue a negative ruling (and in turn claim the contributions due under the General Social Security Scheme, as explained above).
