From the TUC

European unions take a stand on the platform against undeclared work

17 Jun 2016, by Guest in Labour market

Undeclared work, if not properly confronted, threatens to undermine employment, wages and conditions for workers across Europe. The launch of the European Commission’s ‘Undeclared Work Platform’ was a long overdue initiative to tackle the exploitation of workers and unfair competition for law-abiding employers. And unions are playing a key role in the Platform.

Undeclared work takes many forms. Sometimes it involves cash-in-hand and off-the-books payments sometimes referred to as ‘envelope wages’, even in formal enterprises. At other times it involves providing goods and services directly to the customer. Importantly it also involves bogus self-employment. False self-employment is a way for bad employers to avoid making contributions to social insurance and tax, and shifting the burden of the risk to the worker. It’s all undeclared work.

For the EU Platform, undeclared work is defined as “any paid activities that are lawful as regards their nature but not declared to public authorities, taking account differences in the regulatory systems of the Member States.”

Far from being a minor issue, undeclared work amounts to 18.4% of the EU’s GDP. But there are big differences between Member States. According to Eurofound figures, the size of the undeclared economy ranges from below 8% of GDP (Austria) to over 30% (Bulgaria). Undeclared work is most prevalent in the building industry, but is also widespread in household services, private security, industrial cleaning, agriculture, and the hotel, restaurant and catering industry. 11% of Europeans say they purchased goods or services involving undeclared work last year.

Research from the European Foundation for Living and Working Conditions in 2013 demonstrates a strong correlation between the wider austerity measures pursued by governments and the size and growth of the undeclared economy.

“Evaluating the implications for undeclared economies of pursuing the neoliberal austerity measures of reducing taxes, pursuing deregulation and minimising state intervention and the social democratic austerity measures of bolstering state expenditure on the labour market and welfare provision, this report reveals that neo-liberal measures are strongly correlated with larger undeclared economies and social democratic measures with smaller undeclared economies.”

Undeclared work creates cut-throat competition between firms on the basis of low wages and the non-payment of social security benefits. Above all, it leads to working situations that violate the rights and dignity of workers. Any attempt to counter undeclared work requires a sophisticated and balanced approach between prevention, law enforcement and the protection of the worker.

An effective and independent labour inspectorate is one precondition for tackling undeclared work. The cuts in national budgets for labour inspection, and with it the reduction in the number of labour inspectors, makes inspection much less effective. Governments need to ensure and increase the financial measures for the controlling authorities.

The Platform is currently developing its programme of work and trade unions have called for a mix of measures,  better enforcement  and controls to focus on deterrence, detection and sanctions. Better cooperation is another key way to tackle undeclared work. There is considerable scope for improvement in cooperation between the various authorities within Member States, whether labour inspectorates, social security or revenue inspectors, and among Member States. Sharing good examples of practices that have worked will be of benefit. What’s needed are more joint activities, for example staff exchanges, joint inspections at cross-border level or campaigns focussed on sectors cross border.

Measures to change attitudes and raise awareness, particularly among companies and households purchasing undeclared work, must be included.

Involving trade unions is key. Experience in many Member States shows the benefit of trade unions having access to workplaces and relevant documents to protect undeclared workers and to alert the relevant authorities. Involving trade unions should be a common principle for effective inspection. Trade unions have put bogus self-employment on the top of the agenda, and we will be working for the Platform to come up with concrete measures to stamp it out.

Finally it is crucial to remember that workers in undeclared employment are being exploited and need protection and help to regularise their employment into decent jobs. Negotiation and cooperation between trade unions, employers and Government authorities is the key to fixing the problem of undeclared work and this Platform can and should promote the involvement of trade unions. False self-employment is a way for bad employers to avoid making contributions to social insurance and protection, and shifting the burden of the risk to the worker. It’s unfair on workers and decent employers.