On behalf of the European Commission, EIM has carried out a comparative study of good practices in the area of social protection for new entrepreneurs and their assisting partners and to analyse the degree to which the level of social protection acts as an incentive to business creation. The study covers the 27 EU Member States, Turkey, Iceland, Norway and Liechtenstein.

Entrepreneurship as an occupational choice has been the subject of analysis in many empirical studies. Determinants of entrepreneurial activity include economic as well as technological, demographic, social and cultural factors. A potentially relevant determinant that has so far received little attention is social security entitlements. Institutional social security arrangements may influence decisions taken by individuals when choosing between wage employment and self-employment in various ways. The issue of social security cover for entrepreneurs is very complex, due both to the interaction between public and private systems and to the fact that, during their careers, entrepreneurs often go through various changes in their occupational status (education, unemployment, paid employment, selfemployment, etc.). Along with the social security position of the entrepreneurs, it is important to assess the position of the assisting partner. Partners play an important role in many small enterprises.

When comparing the social security position of entrepreneurs and employees, a majority of entrepreneurs indicate that the position for entrepreneurs is worse. This is supported by the public administrations. The aspects that are mentioned most in this respect are unemployment benefits (51%) and prevention of unemployment (48%). Temporary disability/sickness is also often mentioned. Entrepreneurs who are insured for some social security aspects often indicate that the insurance is insufficient. In total, more than half (54%) of the entrepreneurs who are insured by the public system feel that the insurance benefits are insufficient. With regard to old-age pensions, almost 80% indicated that the insurance for this aspect is insufficient. Between 35% and 45% of entrepreneurs indicate that they do not know whether the expected benefits changed when they started as an entrepreneur. Almost one fifth of the entrepreneurs surveyed indicate that the expected benefits decreased when they started as an entrepreneur.

The majority of entrepreneurs indicate that the assisting partner is insured by the public system for an old-age pension, temporary disability/sickness and permanent disability (97%, 94% and 87% respectively). As indicated for their own position, the entrepreneurs perceive the public insurance cover for their assisting partner as insufficient. The majority of entrepreneurs (60-70%) with an assisting partner indicate that the expected social insurance benefits did not change when their partner started as assisting partner in their business.

Most important shortcomings of the social security schemes as indicated by the entrepreneurs are: contributions are too high compared to employees, level of benefits is too low and there is a lack of family arrangements. With reference to the first mentioned shortcoming (contributions), good practices have been identified that e.g. reduce the contributions for entrepreneurs during start-up or have entrepreneurs exempted from paying contributions in the first year (e.g. good practice Decree-law no. 328/9 - Portugal). Good practices that are related to the second mentioned shortcoming (benefits) refer to the support given to entrepreneurs in financial difficulties, benefits in case of business failure (e.g. good practice Voluntary unemployment insurance ? Germany) and regulations to increase the level of potential benefits. Good practices concerning the third mentioned shortcoming (family arrangements) are among others extending the social security provisions applicable to the entrepreneur to the assisting partner (e.g good practice Family partnership - Italy), obligatory insurance for the assisting partner and a status (e.g. good practice Law number 2005-882 section 3 - France), possibility for the entrepreneur to transfer the rights to scheme to a dependent adult (e.g. Back to Work Enterprise Allowance - Ireland) etc.

The results of this study are included in the report "Good practices on social protection of new entrepreneurs and assisting partners and the impact on business creation". Please click here to view the report. In addition, an abridged version of the report was prepared, presenting the main highlights of the report. This version was published in English, French and German.

For more information you can contact Jennifer Telussa or Jacqueline Snijders.