Fake Freelancing: Not Only In Spain

Fake freelancing is when a company hires a self-employed person to do the work of a full-time position, without providing the benefits that come with it. It is an illegal cost cutting strategy that some companies use.

Since the economic crisis, fake freelancing has been on the rise. It allows companies to avoid the taxes and other costs they would incur by hiring someone full-time.

While this can be beneficial to businesses in the short term, it is fraudulent and has serious legal implications. We will discuss here how to identify fake freelancers and the legal implications of hiring these freelancers.

What Is Fake Freelancing And How Can You Identify It?

Spain has no official legal definition of fake freelancing. In fact, a fake freelancer is someone who is registered as a self-employed person for tax purposes but who works for a company as if they were a full-time employee.

To better understand this situation regarding fake freelancing, let’s look at the statute of Spanish workers. There you will see the following features:

• The company determines the employee’s wages.
• An employee must adhere to company rules and guidelines. In other words, they don’t work independently.
• An employee uses the company’s resources, facilities, and business strategies.

Fake freelancers are self-employed entrepreneurs who follow company guidelines and use company resources. They also receive a reasonable and fixed salary.

Of course it depends on the number of hours the freelancer works, but it is always within the margins set by the company. So they have no work autonomy. They do what their supervisors tell them to do and they act like a full-time employee.

It is a contradictory and harmful situation. This is because employees have certain rights that fake freelancers do not have as they are not considered full-time employees.

The legality of this situation

Legally, the most important thing is not what the documents say. It suffices to refer to the typical “contracts are what they are, not what employees say they are.”

Ultimately, the ‘freelancer’ follows the requirements and conditions of a full-time employee. As a result, the parties involved commit fraud. The company does not pay what it would have to pay if they actually hired someone full-time.

Companies use fake freelancers to avoid the costs they would incur in hiring employees. But this type of fraud has serious consequences, including fines.

What are the disadvantages of fake freelancing?

Since the employee is technically a self-employed person, the normal laws protecting employees do not apply to them. That means there are no minimum wages, paid vacation, sick days, bonuses or other benefits that a regular employee would have.

At the same time, freelancers register and pay self-employment tax. Fake freelancers should do the same. Not only this, but if something happens, fake freelancers are not entitled to unemployment benefits (unless they paid into the system themselves).

Finally, they will not receive severance pay if they are fired or if their position becomes redundant unless they have an initial agreement with the company.

This illegal situation is easy to prove. So if you’re working as a fake freelancer, speak up. The company will be fined for not registering you as an employee and not providing the benefits. You can also require them to pay social insurance costs and taxes retroactively to the past four years.

If you find yourself in this situation in Spain and you decide to speak out against the company, you can file a complaint with the Social Court or with the Labor Inspectorate. (We are talking about Spain here, but of course every country has rules on how to act in this kind of situation).

Economically Dependent Freelancers

To solve this problem, the Spanish government has created a category called ‘Economically Dependent Self-Employed’.

This is a type of contract that freelancers can use if they receive 75% or more of their wages from a single client. At first glance, this may seem like legalizing fake freelancing. However, it offers some advantages for the self-employed:

• The right to unemployment benefits.
• Maternity leave.
• 18 days of unpaid vacation.

But is this solution suitable for the current problem? After all, the contract for economically dependent freelancers does not offer many advantages. It also makes it impossible to subcontract to another employee, and you still have to pay self-employment taxes and social security contributions.

In short, it is important to keep these possibilities in mind when it comes time to sign a contract with a company. Don’t let them take advantage of you and pressure you into a legally precarious situation.

Many companies, such as Glovo and Deliveroo (both with undecided lawsuits against them for fake freelancing), are profiting at the expense of their employees’ rights.