How Politics & Project Market Shape Freelancing in 2023- with Carlos Frischmuth

Carlos, in your role as Managing Director and Head of the Capital Representative Office at the employment services provider Hays and in your role as Chairman of the Board of the Bundesverband für selbständige Wissensarbeit e.V. (German Association for Self-Employed Knowledge Work). you will get to know a lot about the IT freelancing industry. Why don’t you report a little bit: How is the IT-freelancer politics? What is the project market doing?

Project Market: Shortage of Skilled Workers Expected to Worsen

“The shortage of labor and skilled workers will continue to worsen. According to a survey by BITKOM, there would be a shortage of 137,000 IT experts at the end of 2022. This shortcoming is slowing down Germany’s successful digital transformation to a not inconsiderable extent.

These figures cannot be transferred 1:1 to the IT-freelancer market, but they do show that there is a shortage of IT experts up front and behind. For freelancers, we can conclude that despite the difficult economic situation, due to multiple crises and the Russian war of aggression in Ukraine, it can be assumed that demand will not drop significantly. Despite short-term subdued demand, we are still at a very high level. Many digitization projects will be launched in the future and have priority.

Although some initiatives have already been taken on the regulatory side as a result of the multiple crises on hold, we currently expect the BMAS (German Federal Ministry of Labor and Social Affairs) to implement some labor market policy projects before the end of this legislative period. In my perception, the corresponding draft laws are already in the drawer of German Federal Minister Heil. All that’s missing is the right time and hook to get them out.

Therefore, we are not idle, but prepared. Our goal is to engage in dialogue in a constructive manner and incorporate our perspective from the field. After all, we are the ones who will feel the practicality or unsuitability in the end. This is true not only at the national level, but also at the European level.”

Freelancer Policy 2023

Platform Regulation: A European Challenge

Carlos, you were the only German labor market expert to speak on the topic of platform work in the European Parliament (Committee on Employment and Social Affairs) in May 2022.

In doing so, you once again emphasized the importance of self-employed knowledge workers for Europe’s future viability, and in this context, the planned European regulation to improve working conditions in platform work critically analyzed. Specifically: It deals with the demarcation issues in the classification of self-employment and dependent employment and the question of the scope of regulation.

The problem with this, however, is that the draft poses a threat to IT-freelancer under labor law (freedom of contract, classification as an employee, bogus self-employment). Would you like to present this topic to us?

“You have already mentioned the core aspects. One of the thrusts of the directive is to prevent involuntary self-employment. This is also clear from the accompanying texts to the directive published by the EU. In particular, the aim is to prevent critical labor market developments in segments such as cab and delivery services, self-employed household activities or even micro-tasking. The EU’s criticism of platform work: Many employees are deprived of their employment rights by formally working as “self-employed” via platforms. Here, platforms are fueling “down-trading based on price and social.” The concern is therefore quite understandable.”

How were your suggestions received and what has happened since then? Do you think we are heading in the right direction here at EU level?

“The challenge is to define the term platform in a way that doesn’t suddenly include all sorts of services that don’t need regulation at all. A second important point is that a distinction between self-employment and employment is currently under discussion, which is still very undifferentiated and conflicts in many places with established national regulations.

Other points, such as a “reversal of the burden of proof” under discussion, a kind of blanket presumption that would classify externals as permanent employees for the time being, also contradict current national case law and lead to many administrative law issues.

In short, there is a danger that national legal systems will be dealt with here using a sledgehammer. Against this backdrop, we are engaged in intensive exchange with various stakeholders, contributing our view from the field and trying to communicate the potential impact of such regulations to policymakers.”

Skilled Workforce Strategy

According to the Cologne Institute for Economic Research (IW), the German labor market had a shortage of approximately 537,923 skilled workers across all occupations between July 2021 and July 2022.

How do you assess the shortage of skilled workers and what is the legislator doing about it?

“The workforce will decline sharply in the next few years as baby boomers retire. According to the German Federal Statistical Office, approximately 12.9 million working people will have exceeded retirement age in the next 15 years. That’s about 30 percent of the workforce in 2021. Some of the 60-64 year olds are already on the verge of retirement or have already left.

This makes it clear that, in addition to a shortage of skilled workers, we are also heading for an increasingly severe labor shortage, because the low-birth-rate successor cohorts will not be able to fill this emerging gap.

The German government has attempted to provide an answer with its skilled labor strategy adopted in October 2022. The strategy defines five central fields of action. The dual training system is to be strengthened and a training guarantee introduced. Another key point is the national continuing education strategy already mentioned in the coalition agreement. In addition, an increase in the number of women in gainful employment, for example, is intended to make more use of domestic labor force potential. Another important component is the influx of qualified workers from abroad. Here, the federal government intends to present a modern skilled labor immigration law in the near future. The last point mentioned is an improvement in the quality of work and an employee-oriented work culture. The strategy was drawn up jointly with the social partners.

These approaches by the federal government are designed for a longer-term horizon. But in many areas of our economy, there are already acute problems that need solutions that can be implemented more quickly. That’s why it’s important that policymakers also look at solutions that provide short-term relief in the labor market.”

To what extent does this influence the project market for IT-freelancer?

“Of course, the issue only indirectly affects the project market. However, it can be said that the “big allocation question” in the market – i.e., how are know-how and capacity bottlenecks matched from organizations to people – remains very much under pressure. If, as a shrinking society with too little immigration, we have increasingly less expert knowledge and capacity available in the market, this creates further pressure on the so-called make or buy decisions in organizations.

So, what can organizations still manage with their own staff and which issues need to be “externalized” in projects? I believe that the Call for automation thus becomes even larger, so everything that can be digitized will be digitized. And at the same time, everything that can be legally accompanied, advised and handled in projects with external specialists is done. Following this thesis, we will see a growth of the project market in Germany. Good times for freelancers of all stripes, not just IT experts. At the same time, I believe the project market will turn even faster. What do I mean by that?

For years, one would actually have to assume that in the course of more mature project planning methods, not so many short-term project inquiries would come into the market, in other words, there would be a lower dynamic of project inquiries, so to speak. But we have been seeing a contrary development for years. Perhaps this is essentially due to the higher proportion of agile projects, that may certainly be the case. However, I also believe that the limited planning horizons, complexity and dependencies on technologies and, of course, the fundamental drive in companies have a much greater effect. In short, the so-called “VUCA” world (Volatility, Uncertainty, Complexity and Ambiguity) is taking full effect, dear freelancers, you’re in for a treat: a lot of work!”

Obligation to provide for old age for the self-employed

A concrete draft law for a compulsory old-age provision for freelancers and self-employed persons is still a long time coming.

Will the coalition of the political parties bring pension provision for the self-employed?

“That’s sort of the question of the questions. It is in the coalition agreement and on the BMAS project planning. In discussions, I have continued to receive confirmation that it is in the interest of the federal government that pension provision for the self-employed be clearly regulated. Of course, there are different views on the subject. An FDP, for example, sees the precautionary obligation completely differently than its partners from SPD and Bündnis 90/ Die Grünen. The latter pursue a much more restrictive design.

So for now, it’s a case of waiting and continuing to make private provision, as the vast majority of IT-freelancer are already doing. To this end, we already presented a study in 2018 on: “Income Situation and Retirement Provision” together with the Allensbach Institute for Demography. In the survey, 97 percent of respondents said they had made provisions for their old age. I assume that even in 2023, this truly impressive figure will not have changed significantly.

The fact is: self-employed IT experts generally have a very good income. Independent knowledge workers will be needed more than ever in the future. Which means that the market situation will not change significantly. Instead of continuing to burden these people with bureaucratic hurdles and rampant regulation, we should rather talk about how we can promote self-employment in Germany. That’s what I work on every day with my team in the political department at Hays and, of course, as a board member in the German Association for Self-Employed Knowledge Work.”

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