Legal status of the self-employed person in the field of social protection in Ukraine

Legal regulation of the status of self-employed persons in the field of social protection: Basic principles of social security of self-employed persons

Self-employed persons are endowed with certain characteristics, which include the following:

- A self-employed person is an individual who is a party to economic, tax, labour, social and other types of legal relations and has the appropriate legal personality for this purpose;

It is also important to note that in order to determine the legal status of a self-employed person at the level of the European Union, practitioners have developed a Code for determining whether a person belongs to the self-employed or an employee. It is worth noting that the main criteria for classifying a person as self-employed in accordance with this document are as follows:

- such a person is the owner of a business as a tool and means of implementing labour activity;

Thus, based on the above analysis, a comprehensive definition of a self-employed person can be formulated. Therefore, a self-employed person is an individual who engages in independent labor activity and is required to register according to the procedures established by current legislation. Through this registration, they acquire a specific legal status with defined rights and obligations. As a general rule, in most cases, this is the legal status of an individual entrepreneur engaged in independent professional activity, taking into account all the features analysed above.

In turn, the legal status of a self-employed person as a subject of social protection is a rather dynamic legal category. It is this feature of dynamism that is a characteristic factor of the legal status, since it is aimed at forming a comprehensive vision of such a legal status. Through the phenomenon of dynamism, the main properties of this legal status in terms of social security and protection can be revealed, and its connection with actual legal relations can be understood. Taken together, this makes it easy to improve the existing rights and obligations of the subject of social protection (i.e., the self-employed person) in line with certain changes in the life of society, the emergence of new risks, threats and challenges. These threats are closely linked to the proactive implementation of innovative ideas in social security practices. By viewing the legal status of self-employed individuals through a dynamic lens, they can be understood not as abstract concepts but as specifically defined subjects within existing legal frameworks (Zhovnir, 2020a).

It should be noted that the basis for the continuous development and improvement of the legal status of the self-employed person as a subject of social protection is the complex interaction between the self-employed person and the state, with the latter acting as the guarantor of the right to social security itself. Based on the above statements, it is evident that the legal status of a self-employed person as a subject of social protection forms the foundation for identifying and legally regulating self-employed individuals within the framework of existing legislation. This involves a defined process of personalization within the legal system, including the acquisition of legal features and relations, and is based on the distinctive characteristics of self-employment’s legal status. All of the above in combination reveals the characteristic features of the self-employed person as a full-fledged subject of legal relations, his or her strong connection with other subjects of legal relations and the State.

The main elements of the legal status of a self-employed person as a subject of social protection are as follows:

1. The presence of signs confirming that such a person has acquired all the necessary characteristics of a subject of law and legal relations, including the very procedure of acquisition and other specified essential conditions; that is, in short, the process of personalisation of the self-employed person in the system of law (Tarakan, 2021);

With regard to the basic principles of social protection and social security of the self-employed, it should be noted that they are provided for in the current legislation of Ukraine in the context of legal norms on compulsory state social insurance. These legal provisions state that self-employed persons are entitled to social security and social protection and are subjects of compulsory social insurance (Verkhovna Rada of Ukraine, 1999). It is also worth noting that there are other legislative acts that also reflect important aspects of social security for the self-employed, namely the Laws of Ukraine «On collection and registration of the single contribution for mandatory state social insurance» (Verkhovna Rada of Ukraine, 2011), «On mandatory state pension insurance» (Verkhovna Rada of Ukraine, 2003), «On mandatory state social unemployment insurance » (Verkhovna Rada of Ukraine, 2000).

In terms of pensions, self-employed individuals are covered by the state pension system. They can pay certain contributions to increase the amount of their future pension. However, in addition to the state pension system, self-employed persons can choose to participate in additional pension programmes or accumulation funds to ensure a higher level of pension security. The procedure for implementing this type of social insurance is regulated by the Law of Ukraine “On pension provision” (Verkhovna Rada of Ukraine, 1992). In general, its provisions explicitly state that self-employed persons are entitled to an occupational pension, as they are fully and completely subject to social insurance.

Taken together, the legal acts cited above, by their very nature, establish and enshrine for self-employed persons a similar range of social protection and social security as for all other persons entering into an employment contract. Therefore, it can be confidently stated that the issue of social security for self-employed persons is adequately addressed through legislative regulation, as self-employed individuals benefit from a similar scope of social protection as employees. This scope of social protection is ensured by the possibility of making all necessary and statutory payments to the relevant social insurance funds. However, on the way to European integration, Ukraine faces a number of steps, including in the area of social protection of the self-employed, which need to be taken and thus strengthen existing legislation (Yaroshenko et al., 2023).

As part of this study, it is also advisable to review the problems and challenges that self-employed persons most often face in the area of social protection. One of these challenges is the presence of variable income and the financial insecurity associated with it. Due to the nature of self-employment, this is a logical problem that has a direct impact on the difficulties associated with planning social security contributions. One solution could be to introduce an inclusive social security policy that fully takes into account the unique needs and activities of the self-employed. Furthermore, the creation of additional financial assistance programmes specifically designed to support the self-employed during economic downturns or crises could have a positive impact in this regard.

However, for the purposes of this study, it is also important to mention the material scope of social protection. An important nuance is the fact that the material scope of the self-employed in Ukraine is not always the same as the material scope of social protection for employees. Access to certain social insurance benefits, such as old-age pensions and medical care, is indeed available to both groups, but differences in coverage of other risks cannot be overlooked. For instance, employees have access to social insurance programs for sickness, unemployment, pregnancy, and childbirth under current legislation, highlighting a notable contrast. At the same time, in contrast, self-employed persons may not have such access to cover various social risks and have equivalent benefits and coverage in each area. Undoubtedly, Ukraine allocates significant resources to extend social protection to the self-employed through voluntary participation in certain social insurance programmes. However, such participation is logically analysed to be influenced by both the level of income of the self-employed person and the field of activity (Liubchenko et al., 2019).

As far as the regulation of participation in these programmes is concerned, such regulation is generally carried out on a voluntary basis. As previously noted, certain social insurance systems, like the old-age pension system, may be mandatory for self-employed persons, while participation in other systems is typically voluntary. It is important to note that the legal framework, while regulating these issues, does not fully take into account such aspects. As a result, this creates problems for the self-employed in understanding their rights and obligations with regard to social protection. Therefore, it is very important to provide self-employed persons with clear and accessible information about the social insurance options available to them.

The self-employed may also experience a high tax burden, which may affect their ability to contribute to social security systems, especially in times of economic downturns or instability in the country.

Considering the realities of today, particularly those of war, the vulnerable state of all segments of the population, including the self-employed, within the labor market must be acknowledged. Self-employed persons, along with others, also need appropriate additional social protection measures in the course of their activities. The state has taken these issues into account and provided benefits. For example, self-employed persons are called up during mobilisation for positions that are directly provided for by wartime regulations. Also, self-employed persons are not required to file tax returns on personal income tax and the single tax during military service. The above is regulated by the Law of Ukraine “On mobilization preparation and mobilization” (Verkhovna Rada of Ukraine, 1993).

The introduction of financial education and planning programmes for the self-employed to help them manage variable incomes and contribute to social security schemes is also a necessary step. The wide possibilities of advocacy, aimed directly at ensuring legal protection of the self-employed, provide a certain guarantee that their rights and access to social protection measures will be clearly defined in legislation (Yaroshenko and Lutsenko, 2022). Thus, as subjects of social protection and social security law, self-employed persons have a specific legal status that includes such elements as rights, obligations, guarantees of their observance, and the ability to bear liability under the law.

Foreign experience of legal regulation of social protection of the self-employed and the possibility of its application in Ukraine

Employment and the labour sector are of interest not only in Ukraine but also abroad. Achieving a high level of employment and, accordingly, reducing unemployment is a key objective of any country, and Ukraine is no exception. As previously mentioned, self-employment represents a form of employment. As of today, it is significantly affected by the economic crisis associated with the war, and as a result, unemployment is growing rapidly in the country and the demand for any hired labour is significantly limited. Moreover, the deterioration of the financial situation due to lower wages not only at state-owned enterprises but also at private ones is also a negative factor - it is important to note that many of them still have 2022 salaries, and now all related prices have risen along with the dollar. Equally important is the formation of a certain market outlook, which in the end can pose a very real threat to the well-being of society and the state.

As a general rule, self-employment and the level of its regulation depends on the effect of regulatory and legal factors, which primarily include

- stability of legal norms and the current legislative framework;

At the same time, it is important to note that, on the contrary, the instability of legislation, constant amendments to existing regulations, and the resulting conflicts and contradictions make the development of the self-employment institution very difficult (Grabovetska, 2015). As of today, the basis of regulation for self-employed persons, as mentioned in the previous section, consists of the Constitution of Ukraine and specific regulations. Of course, it would be a mistake to say that the legal status of the self-employed, including in the area of social protection, is completely unregulated in Ukraine. However, it must be recognized that the legal regulation of self-employment still requires improvement (Liubchenko et al., 2019).

Moreover, the analysis of foreign countries’ experiences, the difficulties they encountered, and the methods they employed is needed to draw relevant conclusions. These insights can be used to enhance domestic legislation by partially or fully adopting relevant tools and methods. In the context of future European integration, the countries of the European Union are of considerable interest for Ukraine. Therefore, analyzing the regulation of self-employment through the prism of EU member states is proposed. In these countries, employment issues in general and self-employment in particular are important to address, as they directly affect the social and economic stability of the population (Nevmerzhtsytska, 2022). It is Ukraine’s European orientation that stimulates active efforts to update the current legislation and legal regulation of the labour market in general.

In accordance with the provisions of Article 18 of the Treaty establishing the European Community, all citizens of individual member states of the European Union are also citizens of the European Union itself. This means that all self-employed persons and their family members have a direct opportunity to move freely within the European Union. However, it should be noted that such freedom of movement may have a negative impact on the level of social protection of the self-employed compared to the benefits provided by each individual country to its population.

In order to improve the legal regulation of these aspects and provide a high level of social protection, the European Union is taking a number of measures that directly contribute to the coordination of certain actions in the field of regulation of issues related to the self-employed and their social protection. Such actions are aimed at minimising any differences between the regulation of these aspects in different EU member states, as well as taking into account the existing differences when determining the methods and directions of legal regulation in general (Bozhko et al., 2018).

Both Ukrainian and EU legislation specify that the entitlement to social security is directly dependent on the contributions made by a self-employed person, including their amount and frequency. Additionally, the entitlement to social protection such as pensions or benefits may also be contingent upon residency in one of the EU member states. However, each country has its own social security legislation. The category of self-employment in the European space is characterised as a type of commercial activity carried out on one’s own account, on one’s own behalf and in one’s own interests (i.e., not on behalf of an employer or as an employee). In general, a self-employed person is a person who works outside of employment and the system of unpaid family workers.

It is also worth noting that the European Union is considered to be a Pillar of social rights for a reason, as various legal initiatives are being implemented on a consistent basis, which are directly aimed at regulating the activities of self-employed persons. These initiatives relate to various aspects of social security and aim to ensure that self-employed persons have access to adequate and comprehensive protection. These aspects include access to social protection for all workers, both employees and the self-employed. In turn, this includes initiatives directly aimed at facilitating access to social security, such as health insurance, maternity/paternity leave, unemployment benefits and pension schemes. In parallel, significant efforts are also being made to simplify administrative procedures and directly raise awareness among the self-employed of their rights and obligations in relation to social benefits.

An important aspect of the European Union’s policy, not only in the area of social security for the self-employed, but also in general, is the fact that the EU encourages social dialogue and decision-making processes by all means. In this particular case, such dialogues help to provide a platform for dialogue between social partners, including representatives of the self-employed, to discuss issues related to social protection and to find consensus-based solutions. It should be noted that the EU also focuses its policy on supporting the self-employed. This support encompasses training and development, as well as access to finance and business support services. The European Social Fund and the European Strategic Investment Fund, by their very nature, provide funding and support for initiatives aimed at developing entrepreneurship and creating a favourable environment for self-employment (Bozhko et al., 2018).

It should be noted that with the development of digital platforms and the gig economy, the EU is actively addressing the social security issues faced by self-employed persons working under non-traditional labour agreements. The aim is to ensure that self-employed workers on platforms have access to social protection, fair working conditions and representation. This includes exploring ways to adapt social security systems to the changing nature of work and promoting the rights of platform workers through legislative and regulatory measures.

In most foreign countries, self-employed persons are engaged in entrepreneurial activities or direct resources to obtain “non-standard employment”, which consists in carrying out their activities on a part-time basis or performing activities on an hourly basis. To ensure high-quality legal regulation of issues related to the activities of self-employed persons and their legal status at the legislative level, government agencies are implementing various programmes to develop and support this institution. These measures primarily target the unemployed and young individuals, reflecting the state’s efforts to encourage their involvement in innovative processes. Within this framework, self-employment emerges as a vital tool for advancing the state’s development across social, political, and economic dimensions, offering young people a range of acceptable activities to pursue (Mulgina, 2023b).

These programmes were first introduced at the state level in France. The main purpose of such programmes was to acquire new knowledge and basic skills that would further contribute to the formation of a self-employed person. The UK also introduced such programmes when it was still a member of the European Union. The main difference in the UK was the provision of certain periodic state payments to individuals who became a source of funds for starting their own business and obtaining the necessary qualifications. It is important to pay attention to the experience of Great Britain in implementing social security programs for the self-employed, as such experience can be valuable for Ukraine in its efforts to support the self-employed.

In general, the UK’s approach to providing support for acquiring new knowledge and basic skills to promote self-employment can be replicated in Ukraine. This can be done easily by providing funding for various training and development programs tailored to the needs of the self-employed. In this way, Ukraine can provide self-employed persons - beginners with many important tools for promising business activities. In general, such areas include financial literacy, marketing basics, business management tips.

Following the positive results of the introduction of such programmes in these two countries, similar actions were taken by other countries around the world, including Canada, Belgium and Finland. As a general rule, the main obstacles have always been financial issues, namely the financial support of these programmes, and subsequently the activities of the self-employed, their taxation and reporting.

It is also worth paying attention to the experience of such a country as Spain. The issues of legal regulation of self-employed persons and their legal status are reflected in the special Law No. 10/2007 “On Self-Employed Workers” of 11.07.2007. This law for the first time defines the concept of “economically dependent worker”, which is used to distinguish those self-employed persons who need additional protection of their rights alongside existing social protection measures (Guide to Business, 2023). This law also stipulates the requirements that a self-employed person must meet in order to have the status of an economically dependent worker, i.e., they must not have their own means of production. Positive developments for the social protection of such workers are the right to accident insurance or unemployment insurance under conditions beyond the person’s control, as well as other rights that are available to employees (Jefatura del Estado, 2007).

Also, as can be traced in the policy of Spain and taking into account the above - self-employed workers have the right to insurance protection against accidents and unemployment, which provides protection in case of unforeseen circumstances. In turn, it can be safely noted that this kind of helps to mitigate the existing financial risks that exist in connection with the possibility of job loss or accidents at work. In the complex, this contributes to the maintenance of general stability and ensuring the well-being of self-employed workers.

The regulatory framework of Spain guarantees self-employed persons access to maternity leave, disability benefits and old-age pensions, etc. In this way, the self-employed have access to the same rights as employees, thereby ensuring equality between the two categories of persons.

The German experience of regulating issues related to the activities of self-employed persons deserves special attention. The state authorities of this country have adopted the Unified Social Code, which contains 12 sections, each of which regulates a different type of social protection and provision. It is worth noting that this Social Code contains all the necessary nuances of legal regulation of self-employed persons, as well as the specifics of their social protection, when in Ukraine such norms are scattered across several legal acts. However, there is a wide range of regulations in Ukraine that separately regulate different types of social benefits (Mishina and Mishin, 2021). It is notable that the German experience, particularly in terms of systematizing and unifying existing legislation, is often cited as an example for Ukraine to develop its own comprehensive code - the Code of Ukraine on Social Protection. This code aims to fully regulate the outlined area, ensuring the integrity of legal regulation and reducing conflicts and problematic aspects associated with legal norms.

In terms of the material aspect, extensive social protection is provided for self-employed persons in Germany, covering potential risks such as old age, disability, sickness, maternity, unemployment, and work-related accidents. This comprehensive coverage of social protection for the self-employed is similar to that provided for employees in other states. In general, the German social security system for the self-employed is built on the principles of solidarity, universality and adequacy. In Germany, contributions to social insurance schemes are mandatory for self-employed persons. But as in Ukraine, the amount of contributions depends on income and risk factors. This ensures that social security benefits are funded collectively and distributed equally among all participants.

It is also important to note that self-employed individuals in Germany have the option of participating in public health insurance programs or private health insurance schemes. In addition, there are provisions for voluntary contributions to pension schemes to supplement pension benefits. It is safe to say that the centre of European social protection policy is a human-centred idea, i.e., all innovations and initiatives by state authorities are aimed at improving the life of society, its proper social security and stabilising the overall situation in the country. The main emphasis of each state in implementing this policy should be the reduction of unemployment and poverty, the appropriate level of financing of social benefits, the appropriate level of social policy itself and the existence of a high level of social protection. The social orientation of the state policy is a guarantee of social stability in the society and a high standard of living (Getman et al., 2023).

It can be confidently stated that Ukraine has not yet achieved the desired level of social orientation due to factors such as inadequate funding, inefficient or inappropriate use of funds, and a lack of understanding of the balance between social needs and state necessity. Of course, the war has left its mark, absorbing significant financial resources for the protection and defence of the state. In view of the above, it is important to conclude that the best option for improving the current legislation of Ukraine may be the experience of Germany, in particular in terms of adopting a single code - the Code of Ukraine on Social Protection. This Code on Social Protection may provide for legal norms that would comprehensively and comprehensively regulate the social protection of such a category of subjects of social security law as self-employed persons. It is also necessary to create various state programmes of social protection of self-employed persons. Thus, it is logical to take into account the experience of foreign countries in improving domestic legislation.