Rivermate | Product owner - Andrew Simon

Global Work Glossary

What constitutes disguised employment?

Disguised employment refers to a scenario where a worker performs duties akin to an employee but is categorized as an independent contractor or freelancer. This misclassification can result in the denial of benefits and protections typically afforded to employees.

Recognizing Disguised Employees

Identifying disguised employment involves scrutinizing the working relationship between the employer and the worker. Factors such as control over work schedules, workspace, equipment usage, and imposition of instructions and deadlines are pivotal in discerning disguised employment.

Risks Associated with Disguised Employment

The repercussions of disguised employment vary across jurisdictions. Some countries, including the Netherlands, France, the United Kingdom, Serbia, and Germany, have implemented regulations to combat this issue and mitigate associated risks.

Disguised Employment Across Europe

In the Netherlands, the 2016 Assessment of Employment Relationships Act was introduced to address misclassification. France mandates detailed employment contracts specifying compensation, work hours, duties, and obligations. The United Kingdom's IR35 legislation aims to ensure fair taxation for off-payroll workers, while Serbia has implemented an Independence test to assess contractor status. Germany relies on case-by-case assessments by the Federal Labor Court.

Disguised Employment vs. Disguised Unemployment

Disguised unemployment, or hidden unemployment, occurs when individuals are employed but lack sufficient work opportunities, resulting in underemployment. This phenomenon is prevalent in both rural and urban areas across various sectors, leading to diminished productivity.

Strategies to Avoid Disguised Employment

To mitigate the risk of disguised employment, it's crucial to draft comprehensive contracts outlining the nature of the working relationship. Key elements include identifying parties, defining services, specifying obligations and compensation, detailing means available, outlining the duration, and obtaining signatures from both parties. These measures help safeguard against potential reclassification and legal ramifications.

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