There is not only the taxman, there is also the social security to look at.
As a self employed, you usually do not contribute to the countries public sickness insurance, accident insurance, pension scheme and unemployment system or you pay less into these systems.
Speaking for the situation in Germany, the regulations are written down in the "
Sozialgesetzbuch" (link in German).
In case of a self employement being fake, the invoice sent to the employer will be regarded as
Net Salary and the employer has to pay all duties and fees
on top of that to the taxman or whoever gets the money in the state.
The company, the fake self employed works for, and a possible agency between the company and the self employed, are both together responsible to pay these fees to the state. Even in case the fees are shared usually between employer and employee, the employer alone is responsible for the payments to the state.
Regarding the employment, if the self employed does not work directly for the airline but through an agency, the agency will become the employer.
There have been cases, where a company has terminated contracts with agencies and courts have decided that before the agency is allowed to terminate the employment with the worker, the agency must try to find other jobs for the worker because it is the nature of an agency that contracts with other companies are temporary.
Nevertheless, a pilot will in most cases fall under the rules for employment and will enjoy the benefits of employment protections given by law.
Is paying a little less tax enough reason to loose all other benefits?
Are you gaining more in total if you choose to pay your pension insurance, loss of licence, social security, unemployment insurance by yourself instead of sharing it with your employer? Did you draw the line under your addition just on a short view below your monthly paycheck or invoice or did you draw the line at the end of your working life when you retire and want to relax with your pension?
Some other problems may rise for companies that operate on an international basis in different countries, like ie. said Ryanair. Even though Europe tries to provide a common framework, there are still different layouts in each countries applicable laws and regulations. Just alone double tax agreements between countries, some say that the tax has to be paid in the country where the company is, som say the tax must be paid in the country where your place of residency is.
Anyhow, there are more problems to discuss if it comes to different currencies. Will you be paid in Euros or USD, Pounds or Norwegian, Swedish or Danish Krones? What will happen if the exchange rate changes? Who will carry the currency risk?
Simple questions but a fairly difficult matter, not only in the airline industry.