Undeclared Work: A challenge for Labour Inspectors

1. Undeclared Work: A challengefor Labour Inspectors Karl Kuhn EU Twinning project „Support to the State Labour Inspectorate Service (SLIS) in Occupational Health and Safety (OHS) enhancement in the Republic of Azerbaijan” ( SUPSLIS) Final Twinning conference, Baku 20th/21 of November

2. Definition of undeclared work • The EU defines undeclared work as employment, which, according to the law, should be declared but is kept fully or partially outside the scope of taxation and social insurance. • Article 3 of ILO Convention No. 81 on Labour Inspection calls for the protection of working conditions of all type of workers, including vulnerable workers. • Article 7 of ILO Convention No. 150 on Labour Administration recommends to extend the functions of labour administration, which also includes labour inspection, to groups of workers who are not employed persons according to national laws, notably informal workers Final Twinning conference, Baku 20th/21 of November

3. The number of shadow economy in the new member states (in% from GDP) • Slovakia 17,4 • CS 18,2 • Hungary 24,4 • Slovakia 26,4 • PL 26,5 • Estonia 36,5 • Latvia 37,1 • Croatia 36,5 • Romania 37,4 • Bulgaria 39,4 • Sweden 5,0 and 11% of all workers • DK 3 • Spain 12,3 • NL 11,1 • Germany 15,3 • Greece 20 Final Twinning conference, Baku 20th/21 of November

4. The scope Regarding the scale and dynamics of undeclared work in the East European countries, three clear groups can be identified: • 1. A low level and decreasing share: Czech Republic, Estonia and Slovakia • 2. A medium level and decreasing share: Poland, Slovenia, Hungary, • Lithuania, Latvia • 3. A high level and increasing share: Bulgaria and Romania Final Twinning conference, Baku 20th/21 of November

5. Where to find Undeclared work is particularly prevalent in labour-intensive sectors: • the traditional sectors such as agriculture, construction, retail trade, catering and domestic services; • manufacturing and business services where competitiveness depends mainly on costs; • innovative sectors using electronic communications. Final Twinning conference, Baku 20th/21 of November

6. Policy Approaches Final Twinning conference, Baku 20th/21 of November

7. Evaluation of this Approaches Representatives of relevant organizations in the 31 European countries were asked to indicate the type of measures that are the most and the least effective in dealing with UDW. Of the responding organizations 64% indicated detection measures as most effective. A similar percentage assessed measure fostering commitment as least effective. Final Twinning conference, Baku 20th/21 of November

8. How to tackle undeclared work: Examples In a lot of countries of Europe in specific sectors the employee are obliged to have an ID card for his personal identification. Such system are used in Belgium, Germany and in Scandinavian states. • Norwegian government has made it compulsory for employers in the construction industry to supply their employees with identity (ID) cards. In order to obtain an ID card, both the employer and employees have to be registered in different mandatory registers, including the tax register. Final Twinning conference, Baku 20th/21 of November

9. Sweden • It is required that everyone who attends a construction site must carry valid ID06 identity card; • the subcontractor is obliged to register their employees in advance with the main contractor; • daily registration of authorized employees at the workplace; • daily registration must be kept for two years and be available at the site in the event of a control visit from the National Tax Agency; • the main contractor has the right to remove anyone from the construction site who is not authorized; • the main contractor has the right to demand a fine of SEK 500 (€47) a day and per person if an employee cannot show the required identification. Final Twinning conference, Baku 20th/21 of November

10. “ Come into the light” initiative in Bulgaria and “Work legally” campaign • In 2007 two of the largest representative employer organizations in Bulgaria with the help of eight national media outlets united their effort to bring to light the undeclared or “grey” economy. • A special website was set up and through joint initiatives, publications and information-the employers are trying to provoke a wide public debate in order to overcome the existing problems. The initiative is supported by the state institutions and trade unions. • In July and August 2008, within the framework of the “work legally” campaign the General Labour Inspectorate carried out a total of 5.100 inspection in about 4.800companies 12% of the companies were inspected during the night and a large proportion of the checks arose following complaints which were subsequently published on the aforementioned website. Final Twinning conference, Baku 20th/21 of November

11. Austria and France • Employers are obliged to register their employees with the relevant social insurance institutions before the commencement of work. • A strict penalty scheme for infringements of the registration law, increasing the ceiling of fines for repeated offenders from 3.630 Euro to 5000Euro for each case of illegal employment. • In France: The penalties are as follows: up to three years imprisonment (five years if minors under 18 are involved); up to 45,000 EUR in fines; or as much as a five year prohibition from operating as an employer in the same sector. Final Twinning conference, Baku 20th/21 of November

12. Criminal Sanctions • In most countries criminal sanctions include imprisonment for employers and the forced departure of undeclared migrant workers. • In Germany and France, undeclared workers can also face one to three years in prison or fines for unauthorized entry into the country. • In Switzerland and Norway, imprisonment can be as much as six months. • Other countries such as Portugal provide the possibility of banning undeclared workers from re-entering the country. Final Twinning conference, Baku 20th/21 of November

13. Undeclared Work, forced labour and contract liability • In a lot of EU Member States, regulations were introduced mainly against a background of employers evading their obligations and of employees’ rights being abused in subcontracting chains. • The main objectives of the regulations in this context have been to prevent abuse of employees’ rights and the evasion of the rules, as well as to combat undeclared work and illegal or unfair business competition. • The more indirect aim: securing social security schemes and tax payments • France, Germany, Italy and Spain have liability legislation in place regarding minimum wages, social security contributions and tax on wages. Final Twinning conference, Baku 20th/21 of November

14. Thank you for your attention! Final Twinning conference, Baku 20th/21 of November