Self-employed or disguised employee? – The EU trap of platform work and algorithmic control

Self-employed or disguised employee? – The EU trap of platform work and algorithmic control

The rise of the digital economy and platform-based services over the past decade has brought with it one of the most attractive promises for the labour market: total flexibility. For companies, this meant low fixed costs and scalability; for workers, it meant freedom. This business model became truly dominant during the Covid-19 pandemic, when platform-based work gained new momentum and reached new heights on a global scale.

However, regulation in this area has long left much to be desired. Directive 2024/2831 (the Platform Directive), adopted by the European Parliament and the Council in October 2024, puts an end to the ‘grey area’ with the aim of eliminating precarious employment statuses on digital platforms and guaranteeing social protection for workers. What has so far been a convenient form of cost optimisation could, in future, become a ticking financial time bomb posing a serious balance sheet risk for companies.

The price of invisible control: Who is actually affected by the new regulations on platform work?

Although in public discourse the concept of platform work has become almost synonymous with food delivery riders and taxi drivers, the scope of the regulation is much broader. We are talking about a regulatory framework that affects virtually every company employing digital intermediaries.

According to the directive’s precise definition, this includes any natural or legal person who provides their services, at least in part, remotely and electronically (for example, via a website or app) at the customer’s request. A key criterion of the model is that, as an essential element of the service, it organises work carried out by individuals in return for remuneration, using automated monitoring or decision-making systems. Under this new framework, platform-based work is no longer merely a technical aid, but a form of contract-based employment organised via a digital infrastructure. One of the most important insights of the regulation is that technological control has effectively become the modern equivalent of the right to issue instructions. This paradigm shift means that the regulation directly affects ‘last-mile’ logistics deliveries, but also extends to those areas of IT and creative outsourcing where software-based time tracking or fixed remuneration keeps freelancers under close supervision.

It is therefore advisable for every business leader to review their processes from a strategic perspective if their business model uses automated systems to assign tasks, monitor performance or rank partners based on algorithms. Under the directive, digital control is no longer merely a tool for efficiency, but a legal factor that fundamentally defines the legal relationship between the company and the workers. 

Are you managing the workflow, or are you just running an app? – The presumption of an employment relationship as a business risk

For business decision-makers, the most critical change brought about by the directive is the introduction of the so-called presumption of an employment relationship. This legal construct fundamentally reverses the previous logic of proof. Whereas previously the authority had to prove abuse, under the new regulations, if facts indicating direction and control arise, the law automatically presumes an employment relationship. This is particularly risky for platforms, as the burden of proof in rebutting this presumption falls on the digital work platform. The company must therefore credibly demonstrate that the partner is not an employee.

What are the potential financial consequences of non-compliance with the regulations?
This is not merely a matter of principle; in the event of a retrospective reclassification, the company must settle unpaid taxes and contributions retroactively. Although the Directive states that the presumption is generally to apply from 2 December 2026, it also applies to legal relationships still in progress at that date. Given that Hungary has not yet transposed the Directive into national law, this task now falls to the new Hungarian government. However, it is not worth delaying preparations, as the deadline for legal harmonisation is fast approaching, and domestic regulations will also have to comply with EU requirements. In the case of an extensive network of partners, outstanding social security contributions and employee entitlements, such as the cash settlement of paid leave, could also jeopardise the company’s solvency.

The next level of risk management is the audit of algorithmic management. In the eyes of the legislator, automated monitoring and decision-making systems that assign or price tasks, as mentioned, constitute a modern form of the right to issue instructions. The tighter the technological control, the greater the likelihood of a hidden employment relationship being established.

Furthermore, platforms must also ensure human oversight. Significant decisions, such as the suspension of a user account or the refusal of payments, must be made or reviewed by a human. Failure to do so poses not only labour law risks but also serious data protection risks, as breaches of the directive may result in the highest category of administrative fines under the GDPR (up to €20 million or 4% of annual turnover).

To maintain financial stability, management would do well to shift away from direct control towards genuine partnership incentives. It is important to recognise that responsibility cannot simply be shifted onto subcontractors. Under the Directive, workers employed through intermediaries must enjoy the same level of protection, and Member States may even establish joint and several liability schemes.

Summary

The most important task in transposing the Directive will be a thorough review of contractual structures. In future, it will not be the name of the document, such as ‘contract for services’, but the actual process of performing the work that will be decisive. If the platform determines working hours, pricing or appearance, there is a good chance it will be classified as an employment relationship. Furthermore, the transparency of algorithmic management will play a key role. Internal protocols must be established to ensure human oversight of automated decisions (e.g. account suspension, task allocation) and to keep workers informed. Data protection regulations must be strictly adhered to throughout the process, as the use of sensitive digital data, such as information regarding employees’ emotional state or private conversations, is prohibited. The risk of a ‘hidden employment relationship’ no longer merely entails a potential tax penalty, but has become a direct labour law risk and a risk of substantial compensation claims, which could fundamentally jeopardise inadequately prepared business models.

In an environment driven by constantly changing technology, proactive legal support is essential. High-quality legal advice not only helps in developing a secure business model, but by providing the appropriate professional expertise, it enables the avoidance of ‘reclassification shocks’, the minimisation of legal and financial risks, and the highest level of regulatory compliance.