What is the distinction between “employee of own business” and “employer/self-employed”?

The HILDA Survey generally adopts the standard labour market variables defined by the Australian Bureau of Statistics (ABS).

However, we are not comfortable with the ABS’ definition of the self-employed.

The ABS defines an employee as

a person who works for a public or private employer and receives remuneration in wages, salary, a retainer fee from their employer while working on a commission basis, tips, piece-rates, or payment in kind; or a person who operates his or her own incorporated enterprise with or without hiring employees.

In other words, their definition of employee includes owner managers who operate their own incorporated businesses (i.e., they are treated as “employees of their own business”).

In contrast, a person who operates their own unincorporated business is treated as an “own account worker” (i.e., they are self-employed).

We believe this distinction is misleading for many research purposes, so in our data releases we provide all of the necessary information for researchers to construct their own definition of employees and self-employed.

If you wish to adopt the ABS definition of “employee”, you should take the variable _esempst and combine the two groups “employee” (1) and “employee of own business” (2).

Alternatively, you can use the variable _es , which is a derived variable that reproduces the ABS definition of employment status.

Whether you combine “employee of own business” and “employer/self-employed” into one group depends on your research question.

If you wish to conform to ABS definitions, you should combine “employee” and “employee of own business”.

In Mark Wooden’s own research of labour market behaviour, for example, he almost always discards the ABS definition and combines “employee of own business” with the “employer/self-employed” group.