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SBE Lect 2 Part 5: Ch2 & Ch3.1-3.4-SB- The big picture (Arguments of…
SBE Lect 2 Part 5: Ch2 & Ch3.1-3.4-SB- The big picture
Arguments of Mr Bessel
Mr B was unable to work for a time, and received no payment during this period
Mr B had a designated office at home, with full equipment
Mr B provided his own special chair to assist him with a back problem. This was at his own company’s expense, and was used on the contactor’s premise
During the term of the contract Mr B followed a training course that his own company paid
Mr B had a pass into the work site with “C” on it, to differentiate between him, as a contractor, from employees
Mr B did not take holidays at times that were significantly inconvenient for the projects; but neither did he bill for time during which he was on holiday, nor did he receive any payment
Mr B did undertake another contract during the period, but this formed a small parts of his overall income
Considerations
Integration:
Functioned very much as employee (for example attending of weekly meetings and social activities), but chair/equipment paid by himself
Economic reality
: Most income from AA projects in 2000-2003, but not paid during sickness or holiday
Control
: (Monitored) tasks allocated by supervisor, but nothing about “how to do the work”
Mutuality of obligation
: Team leader allocated tasks, no holidays in busy periods
Solution case 2
Special Commissioner judged that Mr Bessell was a de facto employee of the AA, not an independent worker
◦ Mr B could simply be substituted by an employee
Decision by the Special Commissioner seems unjust, e.g. no pay for when he was not working for the AA
◦ Appeal, but judge agreed that Bessell was not an employee
Implications
“Rules of the game”
(Baumol) are important
“Unproductive entrepreneurship”: Maximizing own benefit but not society’s
benefit (tax income)
It makes a difference whether you are treated as employee or as self-employed individual
Distinguishing entrepreneurs from their small business is difficult
Some empirics 20-21/28
European Union's definition
Headcount and Turnover/Balance sheet total
Headcount = 40 & Turnover = €12 million → Medium-sized
See appendix Slide 22/28
International differences, e.g.
US and Canada define small businesses as less than 500 employees
Sectoral differentiation
Economic reasons to focus on small businesses
Contribute a great deal to employment and income of any economy: in the EU, two-thirds of employment is provided by SMEs
Proxy how ‘enterprising’ or ‘entrepreneurial’ an economy is relative to other regions or countries
Small businesses are the most common size of businesses wherever you are in the world: in all countries large businesses represent less than 5 per cent of the enterprise population
graphs 23-24/28
SMEs are numerically dominant globally
SMEs are the dominant providers of employment
Business density varies markedly