Social Security
Argentina
Does not apply to direct sellers since they are regarded as being independent and not employed.
Australia
There is no social security obligations on direct sellers in relation to the earnings of their independent contractors.
Austria
No information
Brazil
See previous section.
Canada
Independent Sales Contractor’s Status. ISCs are self-employed if they meet all of the following criteria:
- Are engaged in the trade or business of selling or soliciting the sale of consumer products, either
- in a home or other place that is not a permanent retail establishment, or
- to any buyer on a buy-sell basis, a deposit-commission basis, or any similar basis for resale by the buyer or any other person in a home or other place that is not a permanent retail establishment.
- Substantially all the earnings (whether paid in cash or not) for services in (1) are directly related to sales or other output (including the performance of services) rather than to the number of hours worked.
- The services are performed under a written contract between the ISC and the person for whom the services are performed, and the contract provides that the ISC will not be treated as an employee for federal tax purposes.
Social Security System: The federal, provincial and local governments participate in a comprehensive system of social security in Canada providing for income security and social service programs. Income security programs provide direct cash payments to eligible recipients.
Coverage: The Canada and Quebec Pension Plans cover almost all employed and self-employed members of the labour force between the ages of 18 and 70. All of the provinces have statutes providing for compensation to workers and their dependants for injuries and occupational diseases arising out of and in the course of employment in certain industrial occupations. Employment insurance covers most workers (about 95% of the Canadian workforce). Self employed persons are excluded from coverage. The provincial health and medical care programs generally cover residents only.
Contributions: Employee contributions in respect of the Canada Pension Plan (CPP), Employment Insurance (EI) and provincial health insurance are normally made via payroll deductions. No such contributions are made for independent contractors.
Chile
- Pension and Health Contributions:All employees shall contribute to the Pension Fund, through paying 13% over their respective remuneration which is administrated by a Benefit Fund Manager (“Administradora de Fondos de Pensiones”), except for certain specific exceptions. The remuneration over which the employees shall make social security payments is capped by law.Likewise, all employees shall pay a 7% over their respective remuneration for health benefits. The remuneration considered for these purposes is also capped by law.The abovementioned contributions shall be declared and deducted by the employer within 10 days as from the date in which the relevant remuneration or salary should be paid.
- Insurance for Work-Related Accidents and Illnesses: There is also insurance for work-related accidents and illness, which is an insurance which provides compensation for employees injured in work-related accidents and professional diseases. For these purposes, employers must make contributions to an employee compensation insurance scheme and may chose between private insurance and public insurance schemes.
- Other social security payments:Additionally, there is an Unemployment Insurance that is co-paid by the employee or dependent worker, the employer and the Chilean government; and a Disability and Survival Insurance for which the employer also contributes.
- Independent Contractors (“trabajadores independientes”):In the past, the above mentioned regulations were only applicable to employees and not to independent contractors, such as the independent sellers or distributors of direct selling companies. However, as from January 1st 2012 those regulations related to pension and health contributions and the insurance for work-related accidents and illness has been made applicable to independent contractors. Therefore, it is now compulsory for independent contractors to contribute to those social security payments. These obligations will be fully in force on January 1st, 2018. In the meantime, they are gradually being implemented.
Columbia
Every independent worker must be responsible for his affiliation to the social security system.
Czech Republic
No information.
Contributions to be paid by direct seller/company:
An entrepreneur must be registered in, and must pay – based on his income – contributions to the social security system (National Social Security Office), which includes mandatory pension insurance, General Health Care Insurance (opt-out for private insurance is possible), which includes mandatory health insurance and contributions to the Sickness Benefit Fund. Contributions are calculated on the same basis as income tax (income minus provable expenses in the preceding accounting period). To be paid monthly and in advance by the direct seller himself. 26% of the social security contributions are allocated to the Old-Age Pension Fund.
European Union
Consult national laws.
France
Employees and independents salespeople benefit from the General Social Security system.
| Non Employees | Employees | |
| Definition | Mostly analogous with Labour Law | Analogous with Labour Law |
| Consequences | Non-employees may insure themselves on a voluntary basis: – Health insurance – Life insurance – Accident InsuranceVoluntary contributions to legal pension insurance fund are possible within 2 years after having left the salaried employee status.It is not possible to conclude any individual insurance against unemploymentThe company is not obliged to pay contributions to private insurances |
Social insurance contributions for all employees Health Insurance Contributions – 50% employer – 50% employee Rate of contribution depends on the individual insurance Max 5,400 DM gross income.Pension Insurance Fund Contributions – 50% employer – 50% employee Contribution rate 17.2% from Max 7,200 DM gross income.Unemployment Insurance Contributions – 50% employer – 50% employee Contribution rate 6.8% of Max 7,200 DM gross incomeSocial Insurance against occupational accidents Occupational ca 150 DM pa: Contribution – 100% employer |
Guatemala
No legislation
Hungary
- Act LXXX of 1997 on social security regulates the field. Social security and pension contribution are payable by both the employers and the employees.
- Health insurance is 18 % of gross earnings total, of which 7 % is paid by the employee and 11 % by the employer. No ceiling defined.
- Unemployment insurance is 6 % of gross earnings total, of which 1.5 % is paid by the employee and 4.5 % by the employer. Self-employed persons pay 4 % of gross earnings total (but at least the minimum wage). No ceiling defined.
- Pension insurance is 29.5 % of gross earnings total, of which 8.5 % is paid by the employee and 21 % by the employer. The pension contribution is only payable up to an annual income of 6 748 850 HUF per year.
Indonesia
No legislation.
Ireland
Pay Related Social Insurance (PRSI) covers social insurance, health contributions and the employment and training levy.
For employees, salary related contributions are paid by both employer and employee based on earnings up to a maximum amount. Such contributions are collected through the Pay As You Earn system separately from Income Tax.
Self Employed (Independent Contractors) also pay PRSI on income as computed for Income Tax purposes.
The benefits provided, depending on qualifying contributions having been made, include occupational injuries, unemployment, disability, maternity, pension, death and health services.
Italy
The Solicitor of Business, whether liable to VAT or not, is subject to a state pension plan only if his annual net income from this activity exceeds 5.000 Euros. This value is to be understood as a yearly exemption beyond which the Social security contribution applies only to new commissions exceeding that limit. In that case the rate of contribution is 30,72% on the 78% of gross commissions (the rate is reduced to 23,50% for retired people and those who already pay contributions because of other employments).
One third of the contribution is paid by the individual and two thirds by the Direct Selling Company.
The one third due by the individual is withheld by the Company on commissions.
The Professional Agent is subject to a state pension plan with a contribution of 22.29% paid directly by the individual, without any involvement of the Company, and to a private pension plan with a contribution of 14.65% paid fifty-fifty by the individual and the Company.
The fifty per cent due by the individual is withheld by the Company on commissions.
Lithuania
Social security tax must be paid on quarterly bases in advance.
The amount of social security tax is 50% of base pension amount approved by government (currently this amount would about 50 euros).
Mexico
The direct sellers are regarded as commercial agents by the Commercial Code http://www.ordenjuridico.gob.mx/ (“Código de Comercio”) and not like companies’ employees, for this reason they are not subject to Social Security obligatory affiliation.
http://www.imss.gob.mx/NR/rdonlyres/15E5C49C-4938-4966-814D-D75878A6CCF1/0/NLeyref.pdf
The Social Security Law is applied only to employees. However, some Social Security authorities have pretended to consider the direct sellers as employees, but up to date there are no official changes in the Labor Law and/or Social Security Law.
For the last twenty (20) years certain companies have executed special agreements with the Mexican Social Security Institute to register some commission agents, under a special system and subject to certain requirements.
As a result of these agreements, amounts to be contributed are based on income for commissions and prizes, gained from their activities as commission agents, whereby their registration with the Social Security Institute is made on a variable income, modified bi-monthly. Labor courts and Courts of Appeal have ruled that there is no working relationship between the company and the agents.
Netherlands
Part of the income tax covers payment for retired people (AOW, Algemene Ouderdoms Wet) and some health insurances (AWBZ, Algemene Wet Bijzondere Ziektekosten).
Most of the other social security payments are only applicable to employed salespersons. Self-employed salespeople have to conclude their own health insurances, etc.
Note:When a self-employed direct seller acts as an agent (ie, concludes contracts between the company and the consumer, not being a party in the contract himself) an employment relation is feigned and social security legislation / legislation on minimum wages is applicable in case the agent:
– works for only one principal;
– does not do that as an adventitious work;
– is not assisted by more than two persons.
New Zealand
New Zealand has a national welfare system where any person unable to work through unemployment, sickness or accident will be looked after with benefit provisions. There is no finite period for entitlements although a range of schemes exist to ensure those able to work are actively encouraged back into work either part time or full time.
The social security system also provides a retirement income from age 65 as a government pension and any other income is subject to tax at the appropriate rate for the income level. Some subsidies exist for persons on the pension for bus and other public transport systems.
Likewise there is public health system designed to provide the same level of support and no cost to New Zealanders who use it. Private health and welfare arrangements are permitted and in the health area thrive as an alternative to the public system.
There are no deductions or payment required to fund social security as this is funded from central government taxation however a voluntary scheme called Kiwisaver allow employees to join a superannuation fund to save for their retirement and deductions by the employer is mandatory if the employee has opted for this scheme.
The New Zealand tax system provides for low income families to access “working for families” grants which can be negative tax based to encourage people to work. This is based on the family income and the number of children. An independent contractor may still access this subsidy but will have to ensure all tax has been paid or returned correctly first. An application must be made to Inland Revenue to gain this subsidy.
Norway
Direct sellers are responsible for payment of their own social security charges.
Peru
Does not apply to direct sellers since they are regarded as being independent and not employed.
Philippines
No information.Poland
Charges for the state system of social security have to be paid for health, old age and unemployment by both employed and self-employed persons. Employees have to pay 50% of the total contributions. The employer has to deliver to the tax office 100% of the contributions including the 50% withheld from the employee’s salary. Threshold regulation frees most part-time Direct Sellers from any social security charge.
Portugal
As independent professional the sales force must be registered at the Social Security System.
Russia
Individual entrepreneurs are entitled to get pensions if they are properly registered and paying Pension Fund contributions.
Slovak Republic
Each entrepreneur must be registered in social security system carried out by the Social Security Insurance Company (state authority), and must pay contributions to the named system. The amount of contribution is based on entrepreneur’s income and is calculated as a percentage from income tax basis (income (commissions) minus provable expenses). Contributions are paid monthly an in advance, by the entrepreneur (direct seller) himself, in the following percentages:
Mandatory pension (retirement) insurance: 18%
Disability insurance: 6 %
Sickness insurance: 4.4 %
Voluntary unemployment insurance: 2 %
Each entrepreneur must be registered in public health insurance system carried out by the (state) General Health Insurance Company or one of private health insurance companies. Contributions are paid under the same regime as stated above (with respect to social security system) in the amount (percentage) of 14 %.
Slovenia
Pension and Disability Insurance Act
Charges for the state system of social security have to be paid for health, old age and unemployment by both employed and self-employed persons. Employees have to pay 50% of the total contributions.
South Africa
There are no social security obligations on direct selling organisations in relation to the activities of their direct sellers.
South Korea
No information
Spain
All independent traders and sellers operating on a commission basis have to register with the social security run by the Government and pay monthly contributions.
The above also applies to independent direct sellers. The minimum monthly contribution for direct sellers is in the region of 140 Euros.
Sweden
For liability to pay social security, please see above “Taxes and Fees”. The size of the social security payable by employers and by independent contractors amounts to 33% unless the employer is subject to a collective bargain agreement in which case the total amount payable could be higher.
Taiwan
Article 15 of MLMSA states
Multi-level marketing enterprises shall stipulate in contract that the following are breaches of the participant, and shall prescribe methods for handling such breaches in order to prevent such breaches:
1. promoting or selling goods or services, or recruiting participants to the sales organization, by deceptive or misleading means;
2. raising funds from other persons in the name of the multi-level marketing enterprise or through its organization;
3. engaging in sales by means that run counter to public order or good morals;
4. affecting consumers’ rights and interests by improper direct sales calls;
5. engaging in sales that violate the Criminal Code or other laws or regulations governing industry and commerce.
Multi-level marketing enterprises shall enforce the handling methods referred in the preceding paragraph faithfully.
Article 16 of MLMSA states
Multi-level marketing enterprises may not recruit incapacitated persons to be participants.
A multi-level marketing enterprise recruiting a person with limited capacity to be a participant shall first obtain the written consent from the legal representative of such a person and also attach the said written consent to the contract.
The written consent referred to in the preceding paragraph may not be an electronic document.
Article 17 of MLMSA states
A multi-level marketing enterprise shall prepare the balance sheet and income statement for its multi-level marketing operations in the previous accounting year before the end of May each year and keep them in its main office.
When the capital of a multi-level marketing enterprise reaches the amount specified in Article 20.2 of the Company Act or the total multi-level marketing business volume in the previous accounting year exceeds the amount announced by competent authority, the multi-level marketing enterprise shall require auditing and certification by a certified public accountant for its financial statements.
Participants may request to inspect the aforesaid financial statements of the multi-level marketing enterprise to which they belong and the multi-level marketing enterprise may not refuse such requests without justifications.
Article 18 of MLMSA states
Multi-levels sales enterprises shall have participants engaged in promoting and selling goods or service in reasonable market price as their major income, instead of earning mainly by introducing new participants.
Article 19 of MLMSA states
A multi-level marketing enterprise may not engage in any of the following activities:
1. requiring a participant to pay any fee obviously incommensurate with the cost in the name of training, seminars, social activities, meetings, promotion or other like activities;
2. requiring a participant to pay any security deposit, breach penalty, or other fee, which is obviously unreasonable;
3. requiring a participant to purchase goods in a quantity that would obviously be impossible for an average person to sell out in a short period, unless it is agreed that the price shall be paid only after the goods are re-sold;
4. giving specific persons preferential treatment in a manner contrary to the multi-level marketing organization or plan and therefore damaging other participants’ rights and interests;
5. unduly request a participant to buy or grant a participant permission in two or more multi-levels sales organizations;
6. requiring a participant to undertake obviously unfair obligations.
Participants shall not engage in the activities referred in subparagraph 1 through, 3, 5 and 6 against the persons he or she introduce to participate.
Completed MLMSA please refer to FTC website: http://www.ftc.gov.tw/internet/english/doc/docDetail.aspx?uid=1297&docid=13426
Thailand
Employees are obliged to contribute a percentage of their monthly salary at 5% ( Maximum 750 Thai Baht ) toward this fund. Besides the employees who gain income more than 150,000 Thai Baht per year are subjected to be taxed referred to above subject.
For the independent distributors, they are not oblique to contribute for social security. But the tax is mandatory to be paid.
Turkey
Not applicable
Ukraine
Individual entrepreneurs are entitled to get pensions if they were properly registered and paid Pension Fund contributions.
United Kingdom
Only direct sellers whose annual net income from self employment exceeds £3,590 (1998/9) are liable to pay social security payments. This Class 2 rate is £6.35 per week..
United States
As independent contractors, direct sellers do not have Social Security deducted from their commission checks by companies. Rather, the individual direct seller is responsible for paying self-employment tax on their direct selling earnings. The self-employment tax paid by direct sellers and other self-employed individuals is similar to Social Security and Medicare taxes that are withheld from employees.
Uruguay
Both Commission Merchant and Agent Direct Sellers must pay Social Security contributions at the rate of 30.5% on a monthly notional salary of approximately US$ 130. Law 16.713 of September 3 1995 – Art. 175 (Exception): Are excluded of the Social Security Regulation:
“those persons that developing an activity which it is not specifically included do not fulfill the usual professional and main nature requirements ….”
In terms of this article of the Social Security Law, our legal advisers understand that the activity of our sales reps has not to be levied. In the case that the sales reps are not included within the exception (Art. 175) they would have to enroll in the Social Security Office and pay approximately US$50 per month.
Law 16.713 (9 / 95) requests that a service contract has to be signed between the company and the individual persons. These contracts have to be registered in the BPS (Social Security Office). If the BPS understands that here is a dependent status, the contract is cancelled and the individual is considered as dependent sales person. If the BPS accepts the contract, the individual will have to register in the BPS and pay approx. US$50 per month. Direct Selling industry position is that this procedure has not to be applied to their sales persons