Trends in undeclared work

Between 2010 and 2012, the Slovakian authorities carried out checks to detect and combat undeclared work in the country. The checks were made in the first half of each of the three years. The results appear to show a decline in the number of people and businesses involved in work not declared through the normal official channels. However, while the numbers of undeclared workers dropped, the penalties imposed for breaches of the rules increased.

Background

The Slovakian government has been working for a number of years to combat the number of people involved in undeclared work.

A special law (Act No. 82/2005) was adopted to tackle the problem of undeclared work in 2005. Subsequent amendments made the law tougher and the European Parliament and Council Directive No. 2009/52/EC (761Kb PDF) was also included in Slovakian regulations. The directive expanded the prohibition of undeclared work to cover third-country nationals working illegally.

An important factor in this fight against undeclared work has been the checks performed by state authorities under Act No. 125/2006 on Labour Inspection (257Kb PDF) and Act No.5/2004 on Employment Services (496Kb PDF).

What the checks revealed

In the first half of 2010, 2011 and 2012, the authorities of the National Labour Inspectorate (NIP) and the Ministry of Labour, Social Affairs and Family (MPSVR), helped by police and tax officials, carried out checks to detect and combat all forms of undeclared work. The authorities targeted:

• the employment of workers without an employment contract;
• workers employed without the Social Insurance Agency (SP) being informed;
• employment of third-country nationals with no temporary residency permit or employment permit.

The table shows a detailed breakdown of the results of the inspections.

Summary of the findings

The data show that about 60% of checks were carried out by the National Labour Inspection bodies, and they detected about 77% of all discovered cases of undeclared work. The offices of the Ministry of Labour, Social Affairs and Family carried out targeted checks and examined written complaints submitted by both employees and employers.

Tax offices investigated the amount of tax being paid, and at the same time took account of the possible existence of undeclared work. The tax office authorities, however, did not find any infringements in this area.

Organisations with between one and nine employees appeared to be the worst offenders. The findings show that 62% of all detected undeclared workers came from these small businesses.

The construction industry was the sector with the highest proportion of undeclared workers (24%), followed by retail and wholesale (19%), accommodation and catering services (14%) and transportation and storage services (12%).

According to the Labour Inspectorate and the Ministry for Labour, Social Affairs and Family, employers failing to report the employment of workers to the Social Insurance Agency brought the highest proportion of infringements of the rules. This amounted to 61% of the total number of detected cases. Employment without a labour contract was found in 37% of all cases.

The remaining 2% of detected cases concerned employment of nationals from ‘third’ countries (Vietnam, Ukraine, Somalia, Korea and Canada) who were working without residence permits.

Sanctions applied

The labour inspection bodies imposed 142 financial penalties totalling €315,000 in 2012. Most were in the wholesale and retail sector (33 fines totalling €70,300), accommodation and catering services (30 fines totalling €66,900), and the construction industry (23 fines totalling €50,100). In 2011, 120 fines were imposed totalling €291,000; in 2010, 37 fines were imposed totalling €71,000.

The Labour, Social Affairs and Family offices imposed 33 fines totalling €67,830 in 2012; in 2011, 56 fines totalled €119,000; in 2010, 72 penalties totalled €83,000.

The police handed out 20 fines totalling €1,600 in 2012; in 2011, 60 sanctions totalled €17,000; in 2010, 230 fines totalled €14,000.

Trends in undeclared work

The results of the inspections showed significant trends related to undeclared work.

• A 10% increase in the total number of checks on employers;
• An 8% decline in the total number of cases detected at businesses;
• A 7% increase in the number of workers checked;
• A significant decline in the number of cases involving the undeclared employment of individual workers – down by 51%;
• A significant increase in the amounts collected through fines for undeclared work in 2011 and 2012, partly due to amendments to the Act on Employment Services which increased the upper level of fines for undeclared work.

Teodor Hatina, Institute for Labour and Family Research