Employment Relationship or Entrepreneurship

Musicians’ jobs are arranged both through employment contracts and commission contracts. Based on an employment contract, an employment relationship is established, where you work as an employee. Based on a commission contract, a contract is established between companies or between a company and a sole trader, whereby you work as an independent professional or entrepreneur. These factors affect, among other things, accident insurance, taxation, unemployment security, pension accrual, and the applicable legislation. The determination of whether the characteristics of employment or entrepreneurship are met is decided on a case-by-case basis. Details matter, but the overall picture and practical facts determine the assessment. Therefore, it is important that the parties to the contract have the same understanding of the content of the contract made. For example, simply providing a tax card to the payer of the fee does not make the work an employment relationship, and merely naming the contract a commission contract does not preclude it from still being an employment relationship. Below are listed differences that it is good to take into account and be aware of when choosing the nature of the contract and entering into a contractual relationship.

Employment relationshipEntrepreneurship
Contract: Employment contract
Parties: Employer and employee
Contract: Employment contract
Parties: Employer and employee
Work is agreed upon with an employment contract. The contract can be written, verbal, or digital.Work is agreed upon with an employment contract. The contract can be written, verbal, or digital.
Work in an employment relationship requires personal commitment, meaning you are personally committed to completing the work.

The employer arranges a substitute for you if you are unable to work due to, for example, illness.
For assigned work, you can do the agreed-upon work yourself, but you can appoint another person as a substitute, for example, a stand-in, if you are unable to do it yourself.

The parties to a commission contract may include, for example, individuals, private practitioners, limited liability companies, or other legal entities.
For assigned work, you can do the agreed-upon work yourself, but you can appoint another person as a substitute, for example, a stand-in, if you are unable to do it yourself.

The parties to a commission contract may include, for example, individuals, private practitioners, limited liability companies, or other legal entities.
You work independently. The other party to the contract does not direct or supervise your activities. You can choose the workplace, time, and method of work, as long as the work is done according to the contract.

This may, of course, require performing work at a specific location at a certain time.
The compensation paid is wages.

The employer pays the wages on the agreed-upon payday.

The employer withholds income tax from the wages according to your tax card.

The employer pays the employee’s pension insurance and unemployment insurance premiums at the time of wage payment.
The compensation paid is a fee for service.

The client pays the fee for service against an invoice.

If you are not registered in the prepayment register, the payer of the fee withholds income tax from the fee according to your tax card. If you are registered in the prepayment register, you are responsible for withholding tax yourself.

You are responsible for your own pension insurance and social security.

Additionally, you may be liable for value-added tax if your turnover exceeds the threshold for value-added tax liability.
The employer insures you against accidents.You are responsible for your own accident insurance.
The employer arranges occupational health care.You are responsible for your own healthcare.
Work accrues earnings-related unemployment benefits if you are a member of an employees’ unemployment fund.Work accrues earnings-related unemployment benefits if you have insured yourself in the entrepreneurs’ unemployment fund.
Work accrues pension.Work accrues pension if you have insured yourself for working hours.
If you fall ill after the start of the employment relationship, you have the opportunity to go on sick leave based on a doctor’s order and receive sick pay.If you fall ill, you generally have to ensure the fulfillment of the contract yourself. You may receive sickness allowance for the duration of the illness.

The right to terminate a commission contract due to illness must be separately agreed upon when negotiating the work.
An employment contract can be terminated in accordance with the Employment Contracts Act either by giving notice or by termination.A contract can be terminated according to the agreed terms, by mutual agreement, or according to general principles of contract law.
The employer is obligated to compensate a third party for damages caused by your error or neglect in your work as an employee.

As an employee, you are liable for compensation to the employer if the act is intentional or negligent. If it is only slight negligence, you are not liable for compensation.

The employee is obligated to compensate an amount considered reasonable.
You are primarily responsible for the damage you cause. If the other party to the commission relationship fails to fulfill their contractual obligation, they are obligated to compensate for the damage caused to the other party. The limitation of liability clause in the contract may limit the liability for damages in different situations.
The background of an employment relationship is influenced by labor legislation (e.g., the Employment Contracts Act, the Working Hours Act, the Annual Holidays Act, and numerous other laws) as well as any applicable collective agreements suitable for the work.

The employee is protected as the weaker party in the contractual relationship.
The background of a contractual relationship is influenced by general contractual provisions. Collective agreements do not extend to commissions.

No employee protection. The parties are seen as equal contracting parties.

When selling gigs to consumers (individuals) as an entrepreneur, consumer protection legislation applies.
For work classified as employment, you are classified as an employee.For assignments, you are classified as an entrepreneur, even if you are not registered as an entrepreneur and do not have a business ID.

On the Collective Agreements and Arrangement of Gigs for Performers

Common collective agreements:

Orchestral work

Studio work

Orchestral work

Studio work