Lessons learnt and way forward

Chapter 8

Module content

©Zhuo Cheng

©Zhuo Cheng

The extension of social protection coverage to workers in the informal economy requires an integrated strategy to overcome the various barriers to social protection coverage. In most cases, a combination of different measures will be necessary to offer an effective, equitable and sustainable solution. As sketched out in the previous chapters, there is no one-size-fits all approach – solutions always need to respond to the concrete challenges and realities. However, some general lessons can be drawn based on international experience.

This module provides a summary of lessons learnt and discusses the way forward and how to strengthen social protection for the future of work.


Lessons learnt on the extension of coverage to workers in the informal economy

  •   Promoting a comprehensive and integrated strategy for the extension of coverage: The extension of coverage to workers in the informal economy should be part of a comprehensive and integrated national social protection strategy, led by the government and built around fundamental principles, including the universality of protection; adequacy and predictability of benefits; financial, fiscal and economic sustainability; non-discrimination, gender equality and responsiveness to special needs; transparent and sound administration; and tripartite participation.
  •   Meeting priority needs and designing adapted solutions: Social protection benefits should be designed in a way to meet people’s priority needs, covering both short-term and long-term risks and providing quality benefits and services in a transparent way.
  •  Extending legal coverage and adapting the legal framework: It is important to extend legal coverage to previously uncovered categories of workers. Legal frameworks should be tailored and adapted to the needs of both workers and employers, and encourage transition to the formal economy.
  •   Facilitating access and simplifying administrative procedures: Administrative procedures, including the registration of enterprises and workers, payment of taxes and contributions, should be as simple as possible, ensuring that these are adapted to the needs and capacities of the target group.
  •   Taking into account the financial capacity of workers in the informal economy: It is necessary to design schemes in a way that takes into account the contributory capacity of the workers, and foresees appropriate mechanisms to adapt contribution rates and contribution schedules.
  •   Facilitating the enforcement of the law and enhancing compliance: Ensuring compliance with the legal framework is essential in enforcing the law in a uniform way and ensuring a level playing field for enterprises.
  •   Complementing the extension of contributory coverage with non-contributory schemes, and building national social protection floors: To guarantee a basic level of protection and avoid the exclusion of those groups of workers that do not have access to any other mechanisms, especially low-income groups in the informal economy, the extension of contributory social protection coverage should be complemented by efforts to build and strengthen non-contributory schemes.
  •   Embedding access to social protection in an integrated approach to facilitate transition from the informal to the formal economy: The extension of social protection coverage is one important component of larger strategies to facilitate transition from the informal to the formal economy. Linking different policy areas, and strengthening synergies can multiply positive impacts.


How to provide universal and adequate social protection for the future of work?


Key questions

  •   How to provide adequate coverage for workers in all forms of employment, including those in new forms of employment?
  •   How to prevent the informalization of formal employment, and ensure that workers in “new” forms of informal employment can transition to the formal economy?
  •   How to ensure a good financing mix for social protection systems, based on a combination of contributions and taxes? 


Main barriers

  •  In many cases, new forms of employment are found in non-standard forms of employment. Much of the work is part-time and temporary, with blurred lines between genuine self-employment and dependent self-employment.
  •  Many workers, but not necessarily all, have lower job and income security, poorer working conditions, coupled with significant deficits in social protection coverage, as compared to workers in standard forms of employment.
  •  Where social protection coverage exists, it often stems from the workers’ previous or additional jobs, or through family members, which raises questions about the new economy freeriding on the traditional economy with regard to the financing of social security.


Possible solutions

Adapting legislative frameworks and ensuring compliance
  •  Adapting legal frameworks, e.g. by removing or reducing legal minimum thresholds on working time, earned income or duration of employment (see Chapter 4).
  •  Instituting policies that can help clarify the nature of the employment relationship, prevent misclassification and clearly establish rights and responsibilities of platforms, requesters and workers.
Adapting and simplifying the administration and financing of social protection, harnessing the potential of digital innovation
  •  Using simplified tax and contribution collection mechanisms, more flexible contribution collection schedules or flat contributions or broad contribution categories as well as developing electronic and mobile registration and payment systems, coordinated data systems, smart cards as well as other emerging technologies, such as artificial intelligence and big-data analytics (see Chapter 5 and Chapter 6).
Adapting schemes to workers with multiple employers
  •  Developing effective mechanisms that facilitate labour market transitions and ensure the portability of rights and entitlements.
  •  Streamlining administrative procedures including the simplification and facilitation of electronic access to registration, consultation and contribution payment mechanisms, as well as unified social security numbers (see Chapter 5).
Developing mechanisms to deal with situations of complex or unclear employment relationships, for example through alternative financing arrangements
  •   Determining contributions based on alternative reference values (other than workers’ earnings).
Establishing coordination mechanisms and clarifying the applicable legislation and institutional arrangements
  •  Clarifying the applicable legislation and institutional arrangements to ensure social protection in the case of cross-border arrangements.
Strengthening the role of workers’ organisations
  •  Exploiting the potential of intermediary bodies to fulfil some employer functions, particularly with regard to aggregating information and contributions across multiple employers and reducing the administrative burden for workers by liaising with the social insurance institution.


Key messages

  •  The extension of social protection to workers in the informal economy requires a comprehensive approach, which addresses the various barriers to social protection coverage, provides coverage solutions adapted to their needs, and facilitates their transition towards the formal economy.
  •  It is paramount to close the coverage gaps and adapt social protection systems to the evolving demands in the world of work. In particular, social protection systems need to be adapted to the specific situation and needs of workers, including those in new forms of employment. Social insurance will continue to play a key role in ensuring broader scope and higher levels of protection.
  •  Some of the policy measures instituted by countries to facilitate the coverage of workers in the informal economy can provide valuable pointers on how to extend coverage to workers in new forms of employment. However, additional measures need to be taken into account and more needs to be done, so as to realize the right to social security for all.
  •  Strengthening and adapting social protection systems for the future of work requires a combination of different social protection mechanisms, with appropriate financing mechanisms available through contributions or taxes. Non-contributory social protection schemes are essential to guaranteeing a social protection floor for all, in line with Social Protection Floors Recommendation, 2012 (No. 202).