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Wednesday, 5 February 2014

Large percentage of Dutch freelancers works for a remuneration, which is well under their cost price. In this demand market, ‘you are down or you are out’ as a freelancer.

The longterm crisis, which already lasts for almost six years, has made life much more difficult for the large – and growing – group of freelancers in Dutch society.

Their main principals had to battle with dropping sales (in case of procyclical companies, small and medium enterprises and especially building and construction companies) or higher demands with respect to capital buffers (the whole financial industry).

In combination with the ubiquitous cost awareness of most companies, this led to dropping investments in innovation and research, costs of labour, maintenance (when it could be postponed) and large change programs.

In many service industries, companies did only the unavoidable projects and changes. Further they ‘kept open the shop’ and hoped that they would survive the crisis.
As a consequence, there has been a substantially dropping demand for both manual labourers and highly skilled knowledge workers; especially in industries, like building & construction, transport and distribution, telecommunication, ICT services, commercial services, financial services and facilitary services.

At the same time, there has been a large influx of workers from the European and global low wage countries (f.i. Poland, Spain, Portugal, the Baltic states, Romania, Bulgaria, Ukraine and India).  These were people, who were willing to work very hard for a fraction of the price that a Dutch worker or freelancer charged.

Especially when the working skills of the foreign worker were as good as those of his more expensive Dutch competitor, the foreign worker often got the job. This was not only true for low qualified, hands on-jobs, but also for the highly qualified knowledge jobs.

These two factors have put enormous pressure on the remuneration fees for especially the many freelancers in The Netherlands.

Both their awkward negotiating position against large principals and the strongly diminished number of available assignments, as well as their need for a constant flow of work and income, makes that freelancers have been quickly giving in on their remuneration demands.

Today, the economic online economic newspaper Z24 presented the results of this deflationary development for the almost one million freelancers in The Netherlands. Here are the pertinent snips:

Almost 60% of the freelancers charges remuneration fees to their principals, which are way too low. This is stated by Martijn Pennekamp of ‘’ (i.e. ‘I become freelancer’) and Arjan van den Born, professor Creative Entrepreneurship of Tilburg University.

Freelancers receive lower hourly payments than they would have preferred. This was disclosed by both an inquiry among freelancers and analysis of the data from a special calculation website for freelancers:

That freelancers can ask less money than they desire seems obvious: everybody would like to earn more money than they do. However, in this case it is the price that is necessary for freelancers to cover all their expenses and owe decent monthly wages on top of that.

On average, these wages should supply a gross income of €2,850 per month. To reach this basic income, a freelancer has to charge €49.92 per hour. Realistically, a freelancer works only 29 chargeable hours per week at his principal. The other 12 hours are needed for unpaid labour, like acquisition and bookkeeping.

About 38% of the freelancers charges 25% less than the minimal hourly rate that covers their expenses;  this rate can of course be lower or higher than the €49.92 from the example. Only 18% is above the minimum rate, while the other freelancers own their minimum rate or a little less.

The freelancers, who earn too little money can stay in business by saving on their insurances and retirement expenses, or by just being satisfied with less income per month.

To start with: I am not very impressed with the math that has been done in the article.
I know now that only 18% of the freelancers earns more than their minimally required wage, but nowhere is disclosed (not even in the full article) how they reached the 60% rate of underpaid workers. I consider this the weakest part of this quite poorly elaborated press release.

Nevertheless, I am convinced that, by itself, these data are right. They simply match with my personal impressions from my own line of business, where the battle for lower remunerations is fought the hard way by the main principals.

“You are down (with your price) or you are out!”

That was, roughly translated, the message that many freelancers in the ICT business and financial and commercial services heard from their (often large) principals lately: especially when their skills were quite commonly available and replacement for them would be easy to find. In the building and construction industry and in the transport business, it is undoubtedly the same story.

As a long-term ICT consultant, I heard similar stories from all around me. Stories of how freelancers had to accept what they were offered, even if this meant 10% - 20% less money than just months before. Senior ICT consultants suddenly became juniors again and juniors became trainees.

At the same time, the list of demands from the principals soared, as they knew very well that there were ample highly qualified and highly skilled freelancers available.

Nowadays, the best freelancers sometimes work for the tariffs of trainees and unexperienced workers.

And I read what happened with the numerous freelancers in the building &c onstruction or the transport & distribution industries: how they had to adjust their prices to the prices of their peers from Poland, Lietuva or Romania.

In the short term, freelancers can still survive this way, as the aforementioned article shows. They live more austere and save money, by reducing their income and working incapacity insurances and by saving on their education and trainings. Or by simply postponing the payments for their retirement plan.

However, when these freelancers will get injured or ill or when their retirement age is approaching quickly, they will pay the price for the fact that they have worked under their cost price for too long.

Either they have to continue working as an elderly worker or they have too live in poorer circumstances than they would have anticipated initially.

And the worst case is, when such a freelancer becomes unassigned/ unemployed for an extended amount of time. His reserves (if any) will run out soon and then he will have to live from welfare payments, as he is not entitled to unemployment benefit; this means in practice that the freelancer first has ‘to eat’ his financial belongings (house + savings accounts), before he will receive welfare. 

This is a nightmare scenario for many freelancers and unfortunately a very plausible one too…

1 comment:

  1. As Freelancer by profession you have to work harder and for the whole life since you are getting remuneration on hourly basis really very tough to earn money in this way.

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