Innovations in extending social insurance coverage to independent workers
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few years, CCSS, the entity responsible for the social contribution collection has implemented a series of programmes essentially directed at hiring administrative staff and
inspectors, in order to reinforce the follow up of cases of evasion by employers and independent workers.
Costa Ricas social insurance institution includes a corps of specialized inspectors for overseeing the registration of independent workers, who work in several economic sectors
and according to different schedules, to enable both daytime and night-time supervision. In addition to good human resources, the programme also has allocated resources to
acquire the physical, material, and technologic resources needed to successfully implement this strategy. The incorporation of a greater number of social security inspectors has
allowed for the extension of contributory coverage to all parts of the country, including to independent workers in rural areas.
3.4. Mechanisms aimed at including micro and small companies
In order to extend contributory coverage, social insurance systems may integrate specific mechanisms to cover different company categories, such as micro and small
companies. This type of measure has primarily facilitated the formalization of companies, but has also simultaneously contributed to reduce exclusion from the social security
system. In this section, we introduce three successful examples of such schemes. The first is the simplified scheme
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currently in force in Uruguay, called Monotributo. The second example is located in Brazil and is called Simples Nacional National Simple or Super
Simples Super Simple. The third is the French Auto-entrepreneur scheme. The case of Monotributo in Uruguay
The Monotributo scheme consists of an optional unified tax package, which includes the payment both of social security contributions and of taxes. This scheme covers micro
and small companies performing their activities mostly in the informal economy. In addition to Uruguay, Monotributo was also implemented in other countries, including
Argentina.
From the year 2000, the Board of Directors of the Social Security Institute of Uruguay, which is responsible for managing social insurance, has acknowledged that an
important sub-set of own-account workers was governed by inadequate rules which had contributed to its potential marginalization from the social protection system. Several
studies have shown that more than 80 per cent of this type of worker was excluded from social security coverage. It was in this context that the Monotributo scheme was promoted.
Its aim was not only tax formalization, but also to ensure social protection to independent workers who up until then were excluded from the system.
Initially, this schemes results were unsatisfactory, which led to a series of internal changes in 2006, allowing, among other things, for the easing of restrictions on access to
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Simplified systems may be used to increase the inclusion of important groups, but at the expense of reducing the coverage of general schemes. This diversion effect has generated much controversy
in social insurance system management.
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Summary of innovative mechanisms to extend social insurance coverage to independent workers
this special scheme
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. One of the most significant reforms that this scheme has undergone was the inclusion of one-person businesses, in addition to de facto companies, with some
restrictions. The reform extended the type and maximum number of activities companies may be involved in
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, and incorporated into the system those companies selling their products by credit card. Before the reform, only small companies selling products to end
consumers were included. Currently, registration for the scheme is allowed not only to companies selling to end consumers, but also to those marketing their products to private
companies and the State, although there are some exceptions. Also, there was an increase in the maximum turnover allowed for a company to entitle it to enter this scheme. This
measure enabled annual increases over 100 per cent both for small commercial companies and service providers.
The scale of the results generated by this scheme is evidenced by the increase in the average annual growth of one-person businesses registered. Between 2002 and 2006 this
amounted to 1.3 per cent, whereas between 2007 and 2009, when the reforms came into force, the increase amounted to 6.5 per cent. In absolute terms, the reform generated an
estimated increase of 12,722 one-person businesses registered between the dates above.
The case of auto-entrepreneurs in France In 2008, the French Government launched a new status for business owners. Auto-
entrepreneurs are independent workers with an annual turnover under € 81,500, for trading activities, or under € 32,600 for service provision.
Auto-entrepreneurs are subject to specific regulations on taxation and social security contributions. Registration in social security schemes is compulsory for auto-
entrepreneurs. Unlike the rates applicable to other independent workers, contributions are established as a package, in terms of an income percentage which varies from 12 per cent
and 21.3 per cent, depending on the sector within which the business is located. Auto- entrepreneurs also may choose to pay a universal package, determined as a percentage of
income, which incorporates both social contributions and income taxes, thus greatly easing the accounting in the business creation stage.
―Auto-entrepreneur‖ is a flexible independent worker status which aims to encourage and facilitate business creation and development. An auto-entrepreneur may for instance
also undertake some wage labour. It can be seen as a tool to formalize work which was previously undeclared for several reasons procedure complexity, incompatibility with
other declared income sources, etc., especially in service providing cleaning, gardening, etc.. This initiative was very successful from its inception, in terms of business creation.
In 2011, there were more than 700,000 active business owners.
The case of Super Simples in Brazil In Brazil, Simples Nacional has become an important mechanism to protect workers
in micro and small companies. This special scheme was established in 1996 under the terms of the
Lei do Simples
―Law of Simple‖, and has been the object of important changes since its enactment.
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These changes were introduced through the Ley de Reforma Tributaria de 2006, 2006 Tax Reform Law in force since July 2007. The reform was promoted by the BPS Board of Directors,
and subsequently undertaken by the Executive and the Parliament.
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There was an inclusion of companies selling goods, and providing services, as well as of small artisan producers.
