Rules for Business Centre, Bulgaria
Undeclared work remains a serious concern for employer organisations and trade unions in Bulgaria, particularly in terms of the risks it poses both for businesses and workers. Thus, in the last few years, the social partners have increased their joint efforts to combat undeclared work through different initiatives, the most recent being the establishment of the National ‘Rules for Business’ Centre. The activities of the centre aim to change the attitudes of employers and employees towards the informal economy and to increase public awareness regarding its damaging impact and consequences.
The social partners have been discussing undeclared work in Bulgaria for more than a decade. However, the debate has accelerated during the last few years, triggered by the country’s EU accession in January 2007. Employer organisations are concerned about the increase of unfair competition and risks for the competitiveness of Bulgarian businesses in the EU common market, while trade unions are concerned about the risks of social dumping, decreasing social protection and labour standards associated with undeclared work.
Given this background, it is not surprising that trade union confederations and employer organisations are joining efforts against informal practices, which have been increasing during the crisis. Despite their different interests and motivations, they realise that there is a need for a common understanding of the phenomenon in order to achieve results.
The activities of the National Rules for Business Centre aim at restricting and preventing the informal economy at national level and in the 10 pilot sectors as well as changing attitudes and raising awareness amongst employers and employees towards the informal economy through surveys, training, consultations, public campaigns, and an elaboration of the composite index of the formal economy.
The National Rules for Business Centre started its work in April 2010. It was established under the framework of the ‘Restriction and Prevention of Informal Economy’ project, which is implemented by the Bulgarian Industrial Capital Association (representative employer organisation) in partnership with the Confederation of the Independent Trade Unions in Bulgaria in the period 2009–2013. The project is funded by the Operative Human Resources Development Programme through the ESF. The total project budget is about BGN 8,900,000.
The target groups are employers and employees and also state employees in the control bodies engaged in the detection and prevention of undeclared work.
The pilot sectors include mechanical engineering, electrical engineering, information technology, infrastructure construction, light industry, perfumery and cosmetics, dairying, tourism, non-bank financial services and services of general interest
The National Centre and its nine regional offices are designed to implement different activities during the project period. The Centre provides services for the social partners, civil society organisations, state administration and governmental bodies in an attempt to coordinate and integrate their actions to combat the informal economy.
After the project’s completion in 2013, the National Rules for Business Centre is expected to become a proactive, sustainable and distinct structure associated with strong intolerance towards the informal economy.
Bulgarian Industrial Capital Association (BICA) in cooperation with the Confederation of Independent Trade Unions in Bulgaria.
Outcome of evaluations: lessons and conclusions
It is perhaps too early to draw any meaningful conclusions about the real impact of the described measure, as the project continues until the end of 2013. Nonetheless, the National Centre has already achieved many of its specific goals and planed activities. Regular progress reports are issued every six months to present the outcomes of the project. In this respect, it is important to mention the following:
- The National Rules for Business Centre was established, based on the comprehensive concept for its structure and operation and nine regional centres.
- A public council for the restriction and prevention of the informal economy was created in 2009, comprising representatives of the government control institutions, ministries, social partners and other stakeholders. The aim is to achieve better coordination and cooperation at national level in tackling the issues of the informal economy.
- A ‘Rules for Business’ composite index was created to evaluate the formal economy share (the ‘light’ share of the economy). It includes both statistical and sociological indicators. The index for 2010 was calculated at 63.17%; one year later it increased to 67.4%.
- Analytical and information materials have been published and disseminated to the target groups.
- National representative surveys, branch and company audits have been conducted.
- Round tables and national and regional awareness-raising campaigns have been organised.
- An information system, including a distance learning platform, a forum on the web, a hotline for reporting informal economy practices and e-alerts, was established.
- A draft strategic plan for the restriction and prevention of the informal economy was elaborated.
BICA stressed that there is evidence that knowledge of this complex phenomenon has improved and employees are now more critical of different informal practices. The e-alerts and signals through the hotline increased.
Obstacles and problems
There is a wide public acceptance of different practices of undeclared work, as it is considered as a means for survival for some individuals and small businesses and for many people is the only way to receive income. Thus, it is difficult to convince the majority of employers and workers to stop using informal practices, as they are beneficial for both of them in terms of increased income or profit.
The successful implementation of the project up to now is proving that the participation of social partners and their joint commitment to restricting and limiting the informal economy is essential, as there are two interrelated actors in the informal economy: employers and employees.
Changing attitudes is difficult and requires time for employees and employers to become aware of the real damage of undeclared work and the social and economic risks associated with it. In this respect, the sustainability of the National Centre and its activities and services is very important.
There are 16 impact indicators for assessing the project’s implementation. The latest progress evaluation report provides information on the impact indicators until May 2012. The main results are as follows:
- Three national studies with employers (1,000 respondents), employees (1,000) and the public (1,000) and 10 branch studies (500) were conducted and relevant primary information was collected and analysed.
- 281 intra-company audits, 440 in-depth interviews and seven focus groups were completed.
- There were 9,367 consultations (planned 1,000).
- 26 discussions and six workshops in the pilot branches have been organised.
- The hotline received 911 signals of informal practices.
- A website (www.ikonomikanasvetlo.bg) with a platform for distance training was established – 1,040 people have been trained and the forum attracted more than 830 requests, of which 37 participated in discussions.
- 505 companies from the target group, 1,160 employees and 151 stakeholders completed the questionnaire for the calculation of the composite index.
- Training materials were elaborated and 3,000 employees and 500 employers participated in training.
- A public council for the restriction and prevention of the informal economy was created on 13 November 2009.
This practice is transferable. Centres to reduce and prevent undeclared work could be established at national and/or sector/branch level in each Member State.
Bulgarian Industrial Capital Association (BICA)
Confederation of Independent Trade Unions in Bulgaria (CITUB)
National Rules for Business Centre
Up to now, different projects and initiatives aiming to detect and prevent informal economy practices have been implemented in Bulgaria. However, the informal economy continues to be a substantial problem. The National Rules for Business Centre has the potential to significantly improve the available knowledge on the manifestations and effects of the informal economy at company and employee level. It is expected to avoid the major causes of the unsuccessful actions to date in reducing the informal economy, such as the lack of sustainability, comprehensiveness and integrity of policies and actions, through a framework of measures and coordinated activities of all stakeholders. This measure also emphasises the role of social partners, whose joint efforts will contribute to changing attitudes and raising awareness of employees and employers.
Centre for the Study of Democracy (2011a), The hidden economy in Bulgaria after the economic crisis, Policy Brief No. 28, April, available at http://www.csd.bg/artShow.php?id=15578.
Centre for the Study of Democracy (2011b), The hidden economy in Bulgaria and the global economic crisis, available at http://www.csd.bg/artShow.php?id=15798.
Centre for the Study of Democracy (2011c), Policies to counter the effects of the economic crisis: Hidden economy dynamics 2009, CSD brief no 20, available at http://www.csd.bg/artShow.php?id=9941.
General Labour Inspectorate (2009), Report on activities, 2009 (in Bulgarian), available at
General Labour Inspectorate (2010), Report on activities, 2010 (in Bulgarian), available at
General Labour Inspectorate (2011), Report on activities, 2011 (in Bulgarian), available at
National Centre ‘Business to the Rules’ (2011), Concept for establishment and operation, BICA (in Bulgarian).
NSI (2010), ‘Informal economy – how it is measured by the official statistics’, presentation at the round table ‘The Informal Economy – New Dimensions and Latest Results’, 8 September (in Bulgarian), available at http://www.nsi.bg/NPDOCS/NSI_Non-Observed_Economy2010-09-08.pps.
Ordinance No18/2006 for registration and reporting on the turnover in the trade establishments (last amended June 2011), (in Bulgarian), available at http://www.tita.bg/page/44.
‘Raising the public intolerance towards the informal economy in labour and insurance relations and preventive actions to for its restriction’ (2009–2013), project implemented by the Bulgarian Chamber of Commerce and Industry in partnership with the Confederation of Labour Podkrepa under the OPHRD, available at http://www.vsa.bcci.bg/.
‘Restriction and prevention of informal economy’, project implemented by BICA and CITUB, summary (in Bulgarian), available at http://www.abird.info/webcontent/pdf/project_resume_final.pdf.
Stefanov, R. (2012), ‘The hidden economy in Bulgaria 2002–2011: Policy implications’, presentation, Sofia, available at http://www.csd.bg/artShow.php?id=15888.
Nadezhda Daskalova, ISTUR