Statutory staff registers in restaurants and hairdressers, Sweden
In January 2007, the Swedish government implemented a law on obligatory staff registration for those working in restaurants and hairdressers. The law allows the National Tax Agency to conduct unannounced inspections at workplaces to determine if employers are registering their staff in the correct manner. The National Tax Agency estimates that about 4,200 previously undeclared instances of employment have become legal through the implementation of staff registers. In 2009, plans are underway to implement the successful law in other sectors also.
In 2005, the government proposed the introduction of legislation stipulating that all businesses in the restaurant and hairdressing industries are obliged to keep a daily staff register. The National Tax Agency (Skatteverket) would be able to conduct unannounced inspections as well as limited revisions in connection with the visits. If the employer fails to put in place a staff register, they are charged a fine. The parliament approved the proposal in June 2006, and in January 2007 the legislation came into effect.
The system of obligatory staff registration is an example of a preventive approach. The likelihood of being inspected increases with the existence of a staff register, especially since the National Tax Agency is likely to conduct an inspection to determine if all employees are actually registered.
The aim of this measure is to reduce the incidence of and prevent tax evasion and undeclared work within the restaurant and hairdressing industries. The specific aim on the government’s part was that the National Tax Agency would conduct inspections in a minimum of 80% of the workplaces in the two industries during 2007.
The law allows the National Tax Agency to conduct unannounced inspections at workplaces to determine if employers are registering their staff in the correct manner. If not, the employer may be charged a fine. The agency is also permitted to perform a revision of the employer’s economic situation as part of the visit. If the workplace does not have a staff register, a fine of SEK 10,000 (about €935 as at 4 February 2009) can be imposed, along with an additional fine of SEK 2,000 (€187) for each employee who is not registered. The staff register has to include the name of the business, the employees’ names and birthdates and their working hours.
Evaluation and outcome
Achievement of objectives
The National Tax Agency estimates that about 4,200 previously undeclared instances of employment have become legal through the implementation of staff registers. In 2007, the agency conducted 30,000 visits, reaching the government’s goal of inspections in 80% of workplaces in the restaurant and hairdressing industries. Just three months after the implementation, the state received SEK 116 million SEK (€10.8 million) in additional tax revenue.
Obstacles and problems
According to the Project Leader at the National Tax Agency, Conny Svensson, the initiative has been successfully implemented without any serious problems. One area where problems have arisen is in relation to the inspections at workplaces, although the problems have been few. In 2007, there were 19 incidents out of 30,000 visits. Such difficulties could be due to the fact that the National Tax Agency inspectors are not educated in performing inspections of this kind, but had to learn by doing the actual inspections.
The Hotel and Restaurant Workers’ Union (Hotell- och restaurangfacket, HRF) has reacted positively to the new law, as it seeks to reduce undeclared work. However, it claims that the law has increased the administrative burden on employers, particularly on smaller businesses in the restaurant industry. As a result, it believes that the law needs to be simplified to make it easier for restaurants to fill in staff registers.
According to Mr Svensson, the initiative has been highly successful, and the methods have proven to be effective for detecting undeclared work and unpaid taxes. Even though the inspections will no longer be performed to the same extent in these two industries, Mr Svensson still believes that the initiative has made a great difference and that the same methods will probably be applied to other sectors in the future.
So far, the inspections have resulted in an additional 4,200 full-time employment declarations to the National Tax Agency. Moreover, SEK 1 billion (€93.5 million) in tax revenue has been declared, mostly payroll taxes. The project engaged 120 employees at the National Tax Agency in 2007. In 2008 and 2009, the inspections have been fewer and the National Tax Agency has placed a greater emphasis instead on preventive work, follow-up inspections of workplaces that have breached the regulations, and visits to workplaces that seem to have declared relatively low payroll taxes relative to the declared turnover of the business. In 2007, some 30,000 workplaces were visited, while half this number were inspected in 2008. In 2009, the National Tax Agency plans to visit 15,000 businesses.
In 2009, the government will be issuing a proposal to implement the staff registration system in other sectors. The construction sector is to be prioritised, along with wholesale dealers in the food industry. This move has followed suggestions from actors in the sectors themselves. The ID06 project in the construction sector – a voluntary system of identity (ID) cards and employee registration established in 2007 – is an effective way to limit undeclared work. However, it needs to be complemented by legislative efforts in order to be properly effective, as Mr Svensson has outlined.
Mr Svensson points out that other European countries are already conducting inspections at suspected workplaces to detect undeclared work. Therefore, he believes that the system of obligatory staff registration could easily be implemented in other countries.
Main organisation responsible:
National Tax Agency, Website: www.skatteverket.se
Goverment Proposition 2005/06:169, Effektivare skattekontroll: www.regeringen.se/content/1/c6/06/04/02/81030194.pdf (in Swedish, 1.56Mb PDF)
Hotel and Restaurant Workers’ Union (Press release, in Swedish): www.hrf.net/index.php?p=24&te_id=928
National Tax Agency (Information on staff register, in Swedish): www.skatteverket.se/fordigsomar/arbetsgivare/peronalliggareforrestaurangerochfrisorer.4.4f3d00a710cc9ae1c9c80007271.html
Restauratören (a trade magazine for Swedish hotel and restaurant owners and managers), Website: www.restauratoren.se/zino.aspx
Thomas Brunk, Oxford Research