Thematic feature - industrial relations and undeclared work

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This article gives a brief overview of the industrial relations aspects of undeclared work in Belgium, as of June 2004. It looks at: the nature and extent of undeclared work; the regulatory framework; the role, activities and views of the social partners; and partnerships between social partners and public authorities to tackle undeclared work.

The phenomenon of undeclared work - defined as 'any paid activities that are lawful as regards their nature but not declared to the public authorities'- is an issue which has been preoccupying the EU institutions for a number of years. In 1998, the European Commission issued a Communication on undeclared work, which was designed to launch a debate on the causes of such work and the policy options for combating it (EU9804197F). It suggested that there was a need to clarify the causes and extent, and concluded that combating undeclared work should be part of the overall European employment strategy.

According to the Communication on undeclared work, the main motivation for employers, employees and self-employed people to participate in the undeclared economy is economic. Working in the informal economy offers the opportunity to increase earnings and to evade taxation on income and social contributions. For employers, the incentive is to reduce costs. The same document mentions three factors contributing to undeclared work: i) demand for 'personalised services' to households; ii) reorganisation/restructuring of industry and firms; and iii) the impact of new technologies. Undeclared work has impacts on the social security systems, public finances, competition and industrial relations. At that time, studies estimated the average size of the informal economy at between 7% and 16% of the GDP of the then 15 EU Member States. The Commission has launched a number of studies on the topic, covering issues such as 'Measuring undeclared work' (the latter in collaboration with Eurostat). In July 2004, the Commission issued a new report on Undeclared work in an enlarged Union (EU0407204F). It looks at the incidence in each Member State, including the 10 new Member States that joined in May 2004, and examines the reasons behind the growth in undeclared work.

Since 2001, the issue of undeclared work has been included in the EU employment guidelines. The current version includes a specific guideline entitled 'transform undeclared work into regular employment'. This provides that Member States should develop and implement broad actions and measures to eliminate undeclared work, which combine simplification of the business environment, removing disincentives and providing appropriate incentives in the tax and benefits system, improved law enforcement and the application of sanctions. They should undertake the necessary efforts at national and EU level to measure the extent of the problem and progress achieved at national level.

Finally, in October 2003, the Council of the European Union adopted a Resolution on undeclared work (EU0311206F), calling on Member States to address this issue and to work together to improve the situation. Suggested actions include preventative measures and sanctions aimed at eliminating undeclared work. The Resolution also invites the social partners at European level to address this issue within the context of their current multiannual work programme (EU0212206F) - indeed, the partners plan a seminar on the issue in 2005, with the aim of reaching a joint opinion - and to deal with it in the context of the sectoral social dialogue committees. The Council calls on the social partners at national level to promote the declaration of economic activity, to engage in awareness-raising and to promote the simplification of the business environment, particularly in relation to small and medium-sized enterprises.

Given this high level of interest in the subject, in June 2004 the EIRO national centres in 23 European countries were asked, in response to a questionnaire, to give a brief overview of the industrial relations aspects of undeclared work, looking at: the nature and extent of undeclared work; the regulatory framework; the role, activities and views of the social partners; and partnerships between social partners and public authorities to tackle undeclared work. The Belgian responses are set out below (along with the questions asked).

Nature and extent

Please describe briefly the nature and extent of undeclared work (ie 'any paid activities that are lawful as regards their nature but not declared to the public authorities') in your country. The aim here is not to provide very detailed statistical information or go into concrete calculation methods, but only to give what overall figures are available, plus broad estimates and indications where such figures are lacking. This should cover matters such as: the overall amount of undeclared work; gender aspects (ie are women more or less affected, and why?); the relationship between undeclared work and migration (please distinguish between legal and illegal migration); and sectoral aspects (ie which sectors are most involved).

In March 2004, Frank Vandenbroucke, the Minister of Employment and Pensions, told parliament: 'In view of the fact that there is hardly any scientific research in Belgium on the subject under discussion, it is not possible to identify how much undeclared work and social fraud there is in our country. However, I can tell you that … Belgium is one of a number of countries, including Italy, Greece and Spain where it stands at over 20% [of GDP].' Moreover, according to the labour inspection authorities, 42% of enterprises make use of undeclared work. Although these figures for Belgium seem high, some experts (such as Pierre Pestieau, professor at the University of Liège) take the view that all countries have an 'underground' economy, and that if there is less reference to it in some cases, this is because it is more hidden, while in others undeclared work is almost a quasi-institution. Moreover, discrepancies observed in calculating the volume of undeclared work depend on whether it is deemed to be a result of 'social fraud' and tax evasion, or whether it derives more generally from growth in various sectors of the informal economy.

In Belgium, according to the European Commission, undeclared work is mainly carried out by young, semi- or low-skilled males. Construction, hotels/restaurants/cafés, cleaning, agriculture/horticulture and domestic services are the sectors most affected by the illegal economy. Undeclared work is becoming increasingly widespread among illegal immigrants (people 'without papers') and unemployed people.

Law

What is the legislative framework in your country concerning undeclared work? Please include here: definition; incentives for transformation of undeclared work into regular work; sanctions and penalties; connection with the tax system and benefits; any attempts at administrative or fiscal simplifications; and any recent legislative changes.

There is no legal definition of undeclared work in Belgium. The term 'clandestine work' (travail au noir) appears in several laws and regulations and is generally used to describe any work carried out in breach of social or fiscal legislation, and particularly undeclared work - that is to say any paid work (with or without a subordinate employment relationship) that is legal in itself but not declared to the public authorities. The absence of a usable definition is one of the reasons why so few statistical data have been collected.

Belgian policy on combating undeclared work comes under four headings:

• simplification of the legislation and rules relating to employment;

• reductions in fiscal and para-fiscal charges;

• monitoring compliance with the law; and

• other, more targeted measures, particularly concerning such aspects as work carried out by students, household services and temporary agency work.

A number of new policies were put into effect during 2003, including: extension to all sectors of the 'Dimona' system whereby all new employment must be declared immediately to the authorities (BE0309302F), the aim of which is administrative simplicity; standardisation and computerisation of employment-related data; and the speedier identification of undeclared or illegal work. Other newly implemented policies include the introduction of a permanent unit to coordinate actions combating undeclared work, and a strengthening of the system of 'service vouchers'. The service vouchers (titres-services/dienstencheques) scheme allows households to purchase special subsidised vouchers, which they use to pay for 'local community services'- eg childcare or household tasks such such as cleaning. The services may be provided by people employed by non-governmental organisations or by companies. The scheme aims to create 'proper' jobs in this area of services, while combating undeclared work, which is common in this sector (BE0401304F).

The approach of present policy in this area is to simplify the relatively complicated current legislation and to anticipate developments by informing people and making them aware. In future, according to commentators, the sanctions against undeclared work will need to be enhanced by the development of new measures, including the introduction of closer collaboration between inspectorate services, an increase in the number of inspectors, and the statutory implementation of a genuine policy of systematically prosecuting in cases of undeclared work.

Various forms of cooperation between public institutions with monitoring responsibilities have been introduced. These include cooperation between the Social Inspectorate of the Federal Public Service for Social Security (SPF Sécurité Sociale/FOD Sociale Zekerheid) and the Labour Legislation Inspectorate of the Federal Public Service for Employment (SPF Emploi, Travail et Concertation sociale/FOD Werkgelegenheid, Arbeid en Sociaal Overleg).

As far as legal sanctions are concerned, in April 2004 the government outlined, for the first time, a plan to prosecute cases of social/employment fraud. First, it drew up a list of social/employment law offences that will be prosecuted as a matter of priority before the criminal courts. Second, in order to help stamp out such behaviour, the government has approved a bill to set up sections specialising in social/employment criminal law within courts of first instance, and has extended the powers of the Labour Prosecutor (auditeur du travail/arbeidsauditeur) in alleged cases of social/employment fraud. Only cases involving allegations of serious fraud will be referred to the new sections specialising in social/employment criminal law. Third, existing legislation related to social/employment criminal law will be standardised. Some cases will therefore lead to criminal prosecutions, while others will trigger civil or administrative responses.

Social dialogue

Please provide an overview of any collective agreements dealing with the issue of undeclared work (at any level - eg intersectoral, sectoral, company, regional). If there are any such agreements, please outline their content and, if possible, their impact, giving examples. Where possible, please provide details on collective agreements in sectors particularly affected by undeclared work, such as hotels/restaurants/catering, agriculture, domestic/personal services, retail or construction.

Please give details of any joint or unilateral initiatives on undeclared work taken by trade unions and employers’ organisations (such as information campaigns, providing training for their members responsible for negotiations, or adopting codes of conduct/ethics).

There are several sectoral collective agreements that deal with issues of relevance to undeclared work. Examples are those covering the food industry (and particularly the meat-processing sector), security and construction.

At national intersectoral level, the social partners on the National Labour Council (Conseil National du Travail/Nationale Arbeidsraad, CNT/NAR) have discussed the issue of bogus self-employment, which is related to aspects of undeclared work, though without reaching any substantive outcomes. There have been a number of awareness-raising, information and training activities relating to undeclared work, aimed at employees.

Are there cases in your country where workforce representatives have mobilised employees on the issue of undeclared work? If so, what form did this take (demonstrations, strikes etc)? Are there cases where social partners have made appeals on this issue to the public authorities (the government, elected representatives etc)? What were the results?

No examples of such mobilisation or appeals have been reported in Belgium.

Partnerships

Please outline any initiatives taken jointly by public authorities and social partners in order to address undeclared work, and their results. What types of partnerships exist in your country (eg involving local authorities or NGOs) and what tools or measures have been used to address the problem? Please refer to good and bad practices, indicating which policies have proved to be successful in the national context and why (such as a good mix of actors, cultural traditions or flexible tools).

Has a comprehensive partnership on undeclared work developed in the context of your country’s National Action Plans (NAPs) on employment (in response to the EU employment guidelines)? Have there been significant tripartite arrangements on undeclared work as a result or in the context of the NAPs? How have the social partners at various levels implemented the aspects of EU employment guidelines on the issue of undeclared work that are under their responsibility?

In the context of Belgium’s NAPs on employment, various cooperative arrangements have been put in place. Cooperation between public institutions and the social partners - for instance, agreements between the Federal Public Service for Employment and representatives of sectors such as construction, cleaning and security - have taken a mainly preventive approach in certain industries. A recent example is a cooperation agreement on undeclared work signed for the public transport sector in February 2004 between the Belgian Bus and Coach Operators’ Federation (Fédération belge des exploitants d’autobus et d’autocars/Federatie van Belgische Autobus- en Autocarondernemers, FBAA) and the federal administrations covering mobility and transport, employment, social security and public social security institutions.

The social partners have participated in a number of relevant government initiatives, such as the regulation (under a law that came into force in 2000) of illegal immigrants, some of whom are also undeclared workers. There has also been collaboration between the social partners and the Minister of Foreign Affairs on combating the trade in human beings: people working in foreign embassies and consulates and workers from new EU Member States are particularly targeted.

Please give details of any cross-country collaborative plans involving your country with the aim of combating undeclared work? Are these inter-governmental activities (ie collaboration between two or more countries, neighbouring or otherwise) or initiatives taken by social partners, or both?

Possible collaboration between Belgium and certain other countries is addressed in discussions and broader plans organised generally within the International Labour Organisation (ILO). For example, some partnerships and bilateral agreements deal with the issue of immigration, and therefore indirectly with the issue of controlling undeclared work, particularly with the countries of central and eastern Europe.

Views

Please summarise the views of trade unions and employers’ organisations on the issue of undeclared work. Please include their positions on the role of the administrative, tax system and social welfare regime, and their view/assessment of government initiatives.

There is considerable consensus between the social partners and the public authorities over the issue of combating undeclared work.

All the main trade union confederations - the Confederation of Christian Trade Unions (Confédération des Syndicats Chrétiens/Algemeen Christelijk Vakverbond, CSC/ACV), the Belgian General Federation of Labour (Fédération Générale du Travail de Belgique/Algemeen Belgisch Vakverbond, FGTB/ABVV) and the Federation of Liberal Trade Unions of Belgium (Centrale Générale des Syndicats Libéraux de Belgique/Algemene Centrale der Liberale Vakbonden van België, CGSLB/ACLVB) - are clearly opposed to undeclared work, and support any initiative aimed at tackling it. CSC/ACV deplores the perceived absence of a real policy for abolishing undeclared work, and inadequate coordination between the various participants in the fight against this type of work. CSC/ACV also believes that the negative image of taxation should be improved. CSC/ACV does not want to mount a specific campaign against undeclared workers as it does not wish to stigmatise this category of worker. Instead, it is developing teaching tools dealing with the importance of tax, and how the system works. For its parts, FGTB/ABW highlights the need to give concrete form to, and monitor, political declarations on the fight against undeclared work. Lastly, CGSLB/ACLVB argues for an increase in the human and material resources of the Labour Legislation Inspectorate.

For the employers, the Federation of Belgian Enterprises (Fédération des Entreprises de Belgique/Verbond van Belgische Ondernemingen, FEB/VBO) condemns undeclared work, on ethical grounds and for economic reasons, and argues for a 'multidirectional' policy to overcome the problem of undeclared work in Belgian enterprises. It proposes several solutions, such as a further reduction in social security charges on labour, administrative simplification, collaboration agreements with the sectors concerned, and an end to the 'stigmatisation' of employers, but is opposed to a repressive policy in this field.

Commentary

Please give your own comments on the issue of industrial relations and undeclared work.

As seen above, most of the legislative measures implemented to combat undeclared work are relatively recent, and it it is clearly too early to assess their impact and the significance of their introduction. It is worth noting, however, that an assessment process covering, for example, service vouchers is planned for 2005. The social partners are all opposed to undeclared work, and are involved in reducing and even suppressing, it. The measures employed are only mildly restrictive, and focus on prevention. (Isabelle Vandenbussche, Institut des sciences du travail)