An overview of the various approaches and their results to tackle undeclared work in Member States across the EU.
The COVID-19 pandemic has highlighted that no safety net exists for many in the undeclared economy. It has also shown that the benefits of declared work prove far greater than any short-term benefits associated with undeclared work. Since 2016, members and observers of the European Platform tackling undeclared work have exchanged and leant from successful approaches to tackle undeclared work in the EU. These are set out below in order to showcase good practice and to provide inspiration to those involved in tackling undeclared work.
Finding common solutions to tackle undeclared work across the EU is a complex issue, not least due to the differences in contexts and attitudes around the EU and across different sectors.
There are considerable national variations in the structure of the undeclared labour market across the EU, which in turn have significant implications for tackling undeclared work. For example, policy initiatives that help legitimate business start-ups will be useful in particular in countries with a high prevalence of undeclared work conducted as self-employment, such as Denmark. Conversely, in countries with a high share of undeclared work conducted in the context of an employment relationship (such as Poland), policy initiatives to address unregistered or under-declared waged employment, will be especially relevant.
According to a recent Eurobarometer survey, the sector most frequently mentioned by those who have carried out undeclared work is personal services (including childcare, care for the elderly and cleaning services), followed by construction and hospitality (which includes food, drink, hotels, bars and restaurants). The results suggest that undeclared work in personal services is more prevalent in Western Europe, while undeclared work in the construction sector is more common in Eastern Europe. Perceptions of undeclared work also vary across EU Member States. For example, the perceived risk of being caught by the authorities is relatively high in Austria, Greece and Lithuania.
Studies on the scale of undeclared work in the EU have also revealed that undeclared work is higher in Member States with lower levels of GDP per capita and fewer modern institutions, displayed by higher levels of public sector corruption and low trust in authorities. Moreover, countries with lower levels of expenditure on active labour market policies, less effective social transfer systems and higher levels of inequality have higher levels of undeclared work.
Across the EU, much effort is being invested in developing and testing policy measures aimed at tackling undeclared work and transforming it into declared work. The Platform has identified four effective approaches to successfully tackle undeclared work, which can be easily transferred and implemented across all Member States.
Responsibility for tackling undeclared work usually lies with multiple ministries or departments. This can result in a silo mentality and a lack of any coordinated strategic approach. A strategic, cross-agency approach provides better access to data and information. This type of collaborative approach also helps to develop mutual understanding and agreements, which in turn underpin the formulation of joint strategies and concrete actions (both nationally and across borders). It also enhances cooperation with social partners such as trade unions and employers' associations, and increases workforce and organisational knowledge of undeclared work.
Successful examples of collaboration in this context include joint operations in Norway, whereby the labour inspectorate, tax and welfare administrations, police and social partners joined forces, resulting in a more effective fight against work related crime. In France, improved institutional cooperation brings together the key services that tackle social fraud, tax and customs fraud, and illegal work.
Risk assessment models enable enforcement authorities (such as labour inspectorates) to highlight the riskiest cases of undeclared work with impartiality. This ensures resources are focused on the sectors and areas that are most likely to have a higher degree of undeclared work, improving cost-effectiveness and the success rates of inspections. Risk assessments provide policymakers with key data to support strategic decision-making and can therefore help countries to effectively design their strategy for fighting undeclared work.
In Belgium the analytical tool Mining Watch helped inspectors to choose inspection targets, improving the success rate of inspections improved by 100% . Notification letters were sent to companies in Spain based on results of risk assessment systems, as a cost-effective way to encourage businesses to be compliant and prevent breaches of labour law. The Platform toolkit on how to develop this type of risk-based approach provides many more examples of successful practices.
In contrast to deterrence measures (e.g. inspections and sanctions), prevention helps to deal with the causes of undeclared work and to facilitate the shift from the undeclared to the declared economy. Complementing the focus on penalisation with preventive measures is beginning to have a real impact in terms of reducing the levels of undeclared work. A number of preventive approaches are being used across the EU, including incentives (e.g. vouchers and tax rebates), reforms of relevant institutions, better information and awareness-raising campaigns (e.g. infolines)
An infoline in Ireland provides information on employment rights, employment equality, equal status and related legislation. More than 50,000 calls, of which more than two thirds were made by employees, have been received. The #FraudOff! campaign in Latvia has promoted public awareness, particularly among young people, of the shadow economy and its negative consequences More examples can be found in the Platform toolkit on information campaigns aimed at workers and companies.
The holistic approach, which employs a range of measures in parallel, uses a combination of direct and indirect approaches to transform undeclared work into declared work. Direct approaches include workplace inspections and actions such as anonymous hotlines and reporting tools, while indirect approaches consist of activities that align the attitudes and behaviour of citizens and businesses with laws and regulations (e.g. awareness-raising campaigns and educational initiatives).
A successful example of this is the Chain Approach (the Netherlands) to tackle labour exploitation in the cleaning sector. It involves a two-fold strategy, including awareness-raising among businesses who hire cleaning companies and a prevention strategy focused on changing attitudes to undeclared work in the sector. It has resulted in a decline of cleaning companies working undeclared in the Netherlands.
This article is part of the #EU4FairWork campaign launched by the European Platform tackling undeclared work, together with the European Labour Authority.