Letter to the ILO on formalisation and small employers

From: Nikola Jurić, Chair, Team Council, Leipzig, Germany; and the Rapporteur, Team Council

Dear colleagues,

1.We write on behalf of the Team Council of Reseated’s Founders Assembly. We are a council of small-business owners examining a practical question: what makes it possible, or difficult, for a small employer to hire people formally and sustain those jobs? We offer our evidence in the spirit of dialogue with the International Labour Organization and with respect for the breadth of its work on employment and formalisation.

2.Reseated is a global assembly of small-business owners, organized in seven councils. It was launched on 10 February 2026 and is a nonprofit. The Founders Assembly gives members a process for turning recurring business problems into proposals: reports are reviewed against five tests—volume, frequency, consistency, spread and corroboration—before a draft is consulted on and put to an Assembly ballot. The Team Council’s agenda item, TM-001, concerns the cost and administration of hiring a business’s first ten employees.

3.Our policy objective is modest and specific. We seek conditions under which a small employer can add a first or early employee without facing avoidable complexity or a cost structure that makes formal hiring unviable. The proposed direction is phased social contributions, one-stop payroll registration and rules that are predictable enough for a small employer to budget against. This is not a request to weaken workers’ rights, protections or access to social insurance. It is a request to examine whether systems can preserve those aims while making formal employment more attainable for very small firms.

Why we are writing

4.The scale of small and medium-sized enterprises makes this question important beyond any one country. The United Nations reports that MSMEs represent about 90 per cent of businesses, 60–70 per cent of employment and around 50 per cent of GDP worldwide.¹ The ILO’s published overview estimates that MSMEs account for around 70 per cent of employment worldwide and that about 80 per cent operate in the informal economy.² These are global estimates, not estimates produced by Reseated. They make clear why the transition between self-employment, informal work and a first formal hire deserves practical attention.

5.A first hire changes the nature of a small business. The owner may have to understand registration, payroll, recurring contributions, reporting and payment dates while continuing to serve customers and manage cash flow. A cost that appears manageable in a mature employer’s annual budget can be difficult for a business whose income is irregular or whose first employee is also its first step beyond owner-only work. These observations are not a claim that every small employer faces the same rules, or that every cost is unjustified. They are a reason to hear directly from employers before designing procedures for them.

6.The Team Council’s evidence is small in absolute terms and should be read accordingly. It is not a representative survey of all small employers, nor does it establish causation or compare the effectiveness of national systems. It does, however, provide a record of reported situations across countries, with a consistent focus on hiring costs. We believe that such evidence can usefully complement administrative data, employer and worker research, and the ILO’s comparative work.

Evidence in the Team Council’s records as of 8 June 2026

7.Reseated had 850 members in 49 countries and had received 2,258 reports from 50 countries. The difference between the two country counts reflects the separate scopes of the member and report records; they should not be treated as interchangeable measures. Team Council evidence comprised 58 members in 26

countries and 39 reports from 16 countries. All 39 Team Council reports concerned hiring costs.

8.The median amount at stake is approximately US$2,452. It describes the reported amount members identified as being at stake in their situations; it is not a measured average cost of hiring, a statutory contribution rate, or an estimate of the total burden on employers. We do not use it to rank countries. Differences in currency, business size, employment arrangements and the circumstances behind individual reports limit what can responsibly be inferred from a single pooled median.

9.The countries with the most Team Council reports were Canada, with 9; Germany, with 5; Brazil, with 4; Italy, with 3; Mexico, with 3; and the United Arab Emirates, with 3. Argentina and the United States each had 2. The remaining reports came from other countries represented in the 16-country total. These counts indicate where reports were received, not the prevalence of a problem in those countries. They also do not establish that national systems or employer experiences are alike.

10.The recorded team-size distribution was: “Just me,” 41 per cent; 2–9 workers, 38 per cent; 10–49 workers, 15 per cent; and 50–249 workers, 5 per cent. The figures total 99 per cent because of rounding. The presence of owner-only businesses is relevant to the question of a first hire, while the reports also include businesses that have already grown beyond that stage. The Team Council does not assume that the needs of an owner-only business and those of an employer with dozens of workers are identical.

11.The Team Council’s records do not include a dependable breakdown by economic sector. We therefore do not present sector counts or claim that one sector is more affected than another. We would welcome advice on how to collect sector information in a way that is useful for analysis without making a member or business identifiable. Until such information has been gathered and reviewed, sector-specific conclusions would go beyond the evidence.

12.Members are anonymous unless they choose a public seat. Their reports do not identify their businesses, and our public descriptions do not connect a member’s experience to a named business. We treat the material as evidence of reported circumstances, not as verified findings about an employer, agency or country. Any fuller data-sharing would need to preserve confidentiality and make clear the limits of the underlying records.

Policy context

13.The ILO’s own published estimate—that approximately 80 per cent of MSMEs operate in the informal economy—underscores the importance of understanding the practical route into formal employment.² We do not infer from that figure that hiring costs alone cause informality. Nor do we suggest that formalisation can be reduced to a single registration step. Our concern is narrower: where a small employer is considering an initial or early hire, the total cost and the steps required to comply may influence whether that job is created formally.

14.For context on the range of employment-cost measures in different systems, the OECD’s Taxing Wages 2026 country notes report an OECD-average tax wedge of 35.1 per cent for 2025. The cited country notes report 49.3 per cent for Germany, 47.2 per cent for France, 45.8 per cent for Italy, 41.4 per cent for Spain, 41.1 per cent for Sweden, 35.9 per cent for the Netherlands and 20.8 per cent for New Zealand.³ These figures are not a direct measure of the hiring cost faced by every small business, and they should not be read as a ranking of the ease or fairness of employing someone. They do show why policy discussion needs to distinguish among measures, country settings and the particular cost an employer must meet.

15.Our evidence does not identify which part of an employment-cost system is decisive in any particular report. A reported burden may relate to the amount payable, the timing of payment, the administrative steps, uncertainty about rules or a combination of factors. We therefore ask the ILO to consider both the level and the design of obligations: whether a small employer can find the applicable rules, complete registration without unnecessary duplication, know what will be payable, and plan for the date on which it is due.

Requests to the ILO

16.We respectfully invite the ILO to consider the following practical steps:

1. Include small employers’ experience of the first ten hires in relevant work on formalisation and employment. In particular, distinguish the circumstances of owner-only businesses and very small employers from those of larger, established employers, while retaining attention to workers’ rights and social protection.

2. Examine the combined experience of employment cost and compliance. Comparative work could ask not only what contributions or other costs apply, but also how registration, payroll reporting, payment schedules and changes in rules are experienced by a small employer making an early hire.

3. Consider policy approaches that make the transition into formal hiring easier to understand and plan for. The options we are examining include phased social contributions for a business’s first ten hires, one-stop payroll registration and more predictable rules. We offer these as questions for assessment, not as prescriptions that should be applied uniformly or without country-specific analysis.

4. Support the development of comparable evidence on small-employer hiring costs. Clear definitions of “first hire,” “small employer,” “cost at stake” and the relevant period would help researchers and policymakers compare findings without conflating wages, statutory costs, administrative burdens and wider business expenses.

5. Make room for direct, confidential input from small employers and workers when considering reform. The design of a process can look simple from an institutional perspective and still be difficult to complete in the working conditions of a very small business. Consultation should test both administrative clarity and the practical effects of proposed changes.

6. Where the ILO considers it useful, convene a technical exchange with Reseated and other relevant participants on the limits and uses of anonymized member-reported evidence. Such an exchange could help identify what further detail would be useful, what safeguards are necessary, and where our current data are not adequate for policy conclusions.

17.These requests are intended to contribute to careful work, not to predetermine its findings. Phasing contributions, simplifying registration or making rules more predictable may have different consequences in different national settings. Each option should be assessed for its effects on workers, public revenues, social protection, compliance and the viability of small employers. We would not advocate a change that achieves lower immediate cost by shifting risk to workers or removing essential protections.

Offer of further evidence

18.Reseated can offer an anonymized summary of the Team Council reports and a discussion of the way those reports are categorized. The material can be shared in a form that does not name members or their businesses. Before any transfer, we would agree with the receiving team on purpose, access, retention, attribution and safeguards against re-identification. The 39 reports should not be treated as an open dataset or as a substitute for a representative study.

19.We are also willing to discuss a more structured evidence template for future reporting. It could record, where members consent and where safe, the stage of hiring, the kind of cost or administrative step involved, the time and amount reported, business size, country and sector. We would want the template to make clear when information is unavailable, avoid collecting unnecessary personal data, and permit members to describe a situation without naming their business or another party.

20.We would welcome guidance on whether the proposed categories align with questions the ILO is already examining. If they do not, we would value advice on how to make our evidence more useful without overstating what a voluntary member-reporting process can establish. Our aim is to contribute a grounded account of small employers’ experience and to learn from institutions with broader comparative reach.

21.We recognize that formalisation is shaped by many factors and that the experiences represented in our records are not universal. The evidence is one starting point: 39 reports, from 16 countries, all recorded under a hiring-costs agenda, alongside members whose businesses range from owner-only operations to employers with larger teams. We hope these figures can prompt further inquiry into what makes a first formal hire possible, rather than being mistaken for a global estimate.

Annex: sources and evidence notes

23.The Team Council figures in paragraphs 7–12 are Reseated internal data as of 8 June 2026. The Assembly-wide totals in paragraph 7 are the same dated internal record. They are reported here as counts, not as estimates of the global population of small businesses or employers. Country counts refer to the location recorded for members or reports, respectively.

24.The team-size percentages are reproduced from the dated Team Council record and total 99 per cent after rounding. The median amount at stake is approximately US$2,452. No sector breakdown is available in the Team Council’s records. No individual member or business is identified.

25.The external facts are footnoted in the text. The relevant source list is set out below. The OECD figures are included as context only and are not used to calculate or infer the Team Council’s median.

1. United Nations, “Micro-, Small and Medium-sized Enterprises Day,” global MSME estimates and observance information.

2. International Labour Organization, “Micro, Small and Medium Enterprises,” published global estimates on employment and informality.

3. OECD, Taxing Wages 2026, country note for Germany, including OECD-average and selected-country tax-wedge figures for 2025.

Notes and sources

Sources

1. United Nations, Micro-, Small and Medium-sized Enterprises Day
2. International Labour Organization, Micro, Small and Medium Enterprises
3. OECD, Taxing Wages 2026, Germany country note