‘Work legally’ campaign, Bulgaria

About

Country: 
Bulgaria
Target Groups: 
employers/purchaserssectoral organisationsworkers/suppliers

 

The ‘work legally’ campaign was initiated in 2008 by the government. Prior to this, the fight against the informal economy and undeclared work was supported by all central employer organisations and trade unions at a number of seminars and workshops. The initiative has been implemented in two main ways: through an information campaign and through the monitoring of specific companies. Special attention has been paid to informing workers about the negative effects of undeclared work and to highlighting the sanctions for offending employers.

 

Background

In the transition period after 1990, Bulgaria’s informal economy increased to such an extent that it began to threaten the stability of the country’s social security and taxation systems. Moreover, it became a serious problem for legal companies, creating unfair competition and also a problem for the state, as it distorted the real economic picture and statistics in this respect. According to a number of evaluations, including a European Commission barometer survey, 35% of the country’s gross domestic product (GDP) is made up of the informal economy. After gradually decreasing pension social security contributions, the government introduced a 10% flat tax on people’s incomes from the beginning of 2008. One of the aims of this measure was to highlight the considerable extent of business and labour incomes. While it is too early to clearly evaluate the success of this initiative, in parallel with these revenue stimulating tools, the government sought to combat undeclared work through an extensive information campaign and the implementation of controls and sanctions.

The so-called ‘work legally’ campaign is led by the Ministry of Labour and Social Policy (Министерство на труда и социалната политика, MLSP), although the controls are implemented by the country’s General Labour Inspectorate; if necessary, the tax and financial authorities may also play a role.

Objectives

The main objective of the ‘work legally’ campaign is to eliminate the informal economy in the long term. This objective is only possible with the strong support of all players – that is, unless the employers, as well as the workers, are willing to declare their incomes. In this respect, it is necessary to create a culture of intolerance across society with respect to the informal economy and undeclared work phenomena. The central objectives of the campaign are as follows:

  • increasing awareness among employees of the negative effects of undeclared work both to individuals and to society as a whole;
  • stimulating fair practices in the business community and sanctioning employers that violate the regulations, in order to ensure fair competition;
  • increasing the collection of taxes and social security insurance contributions in order to guarantee the stability of the public finance system.

Specific measures

The changes in the legislative arena seek to increase the penalties and sanctions imposed on those who violate the regulations. More specifically, employers that hire workers without an employment contract are liable to a penalty of BGN 15,000 (about €7,670 as at 26 January 2009) per worker. This penalty has increased substantially from the previous amount of BGN 1,000 (€511). Moreover, labour inspectors have the right to temporarily stop the activity of the offending companies. The Labour Inspectorate and its territorial departments have the right, on their own initiative or following a complaint made by workers, trade unions or members of the public, to inspect the companies at any time of the day or night.

In addition, companies are provided with information through the media and through a special internet blog website. The latter facility provides information and online consultations, as well as enabling people to make complaints regarding violations. Specific information concerning the controls undertaken by the public authorities and of the sanctions applied is emailed to all of users who complained through the website.

Evaluation and outcome

Achievement of objectives

In July and August 2008, within the framework of the ‘Work legally’ campaign, the General Labour Inspectorate (изпълнителна агенция ‘главна инспекция по труда’, GLIEA) carried out a total of 5,100 inspections in about 4,800 companies. About 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.

The General Labour Inspectorate pays special attention to the sectors in which labour legislation violations occur frequently, such as:

  • hotels and restaurants – where 1,279 inspections were conducted;
  • tailoring, textile and shoe industry (876 inspections);
  • retail industry (582 inspections);
  • construction sector (538 inspections).

These sectors have the largest number of under-age workers – many of whom are employed during the summer months – for which Bulgarian legislation provides special protection.

Obstacles and problems

During the inspections, the workers do not always cooperate in terms of uncovering violations. Moreover, the worker who made the initial complaint may be afraid to testify against the employer because they are concerned that they will lose their job. In addition, it is difficult to find proof of the actual incomes paid in cash to workers and to determine the difference between the officially declared wage on which the taxes and social security insurance contributions are paid.

Lessons learnt

The information given by workers is insufficient by itself. Instead, the success of the campaign against undeclared work relies on a tacit agreement between employer and worker, based on ‘mutual interest’. Moreover, it is important to limit as much as possible the number of cash payments paid by companies to workers and, instead, to pay wages only through bank transfers into the worker’s account. There is also a need for more labour inspectors and to increase their motivation to do the job more effectively.

Impact indicators

During the inspections, an overall 24,972 violations of the labour legislation were uncovered, some 65% of which concerned the safety of working conditions and 35% of which were related to the country’s labour legislation. In 90% of the companies monitored, the workers are insured, on average, for wages of BGN 260.

The inspections also found 222 violations of the regulations protecting under-age persons. These cases mainly concerned the violation of the Labour Code requirement for obtaining a preliminary licence from the Labour Inspectorate for work of under-age persons. In 109 of these violations, complaints were issued to the prosecutor’s office.

In all cases where a violation is found during the inspection, special recommendations with a specific timeframe for their implementation are given. A total 186 operations were halted. Administrative sanctions were imposed on some 1,630 persons.

Transferability

This campaign is not that unique and is implemented in practice in most European countries. In order to be more effective, it should be transformed into a more long-term policy and be combined with other mechanisms seeking to combat undeclared work.

Commentary

Full success will only be achieved if workers regain their trust in the country’s social security system and recognise the importance of being insured for all amounts of remuneration. The current problems facing Bulgaria’s pension system and the low size of pensions received act as disincentives in this context.

Contacts

Main organisations responsible:

Ministry of Labour and Social Policy, Website: www.mlsp.government.bg/

Executive Agency, General Labour Inspectorate, Website: http://git-bg.info/en

Bibliography

EIRO, ‘Government to clamp down on breaches of employment rights’, 2008, available online at: /ef/observatories/eurwork/articles/government-to-clamp-down-on-breaches-of-employment-rights.

Telegraph newspaper, 9 May 2008

Trud newspaper, 2 April 2008

Website blog: www.sozialni.bg

Lyuben Tomev, Institute for Social and Trade Union Research (ISTUR)

 

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