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Fraudulent work

Fraudulent practices in the field of work have significant consequences for labour markets, economies and social cohesion. The misuse of employment relations to sidestep regulations is a concern for employers, trade unions and governments. It affects competition, labour market integration, social protection and working conditions.

Topic

Recent updates

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This report examines the issues in relation to ‘work on demand’, a topic that has received considerable attention in the media recently, mainly due to its links with the platform...

14 detsember 2018
Publication
Research report

Policy pointers

  • Favouring a holistic approach: National and sectoral measures prove to be more efficient when they cover both prevention and deterrence. This helps to stem ‘translation effects’, in which the employment relationship is better regulated and protected from abuses.  
  • Fostering compliance with regulation: Advice could be developed to support companies on their path to compliance, especially small and medium-sized enterprises. Expertise and adequate resources in the bodies tasked with monitoring compliance needs to be ensured. 
  • Developing workers’ information and voice: Raising awareness of rights, providing workers with practical, easy-to-understand information and encouraging them to negotiate for their rights are important. This would mean supporting employee representation at all levels, helping to denounce fraudulent situations. 
  • Supporting joint actions by all stakeholders – social partners and public authorities firstly but not exclusively – is crucial within and across countries.
  • Addressing the consequences of precarious work and raising awareness of its impacts on workers and on business models is necessary to ensure job quality and a level playing field for all.

Eurofound research

Eurofound has carried out research on regular employment, undeclared work and the fraudulent contracting of work in the EU and Norway.

Research aims to better understand the fraudulent forms of contracting work and the impacts on workers and working conditions, as well as on business competition and collective bargaining. It seeks to explore policy measures initiated by national authorities and social partners to identify, prevent and combat such practices. While the policy debate at European level has focused mostly on cross-border fraudulent practices, evidence of domestic fraud also challenges the implementation of national labour laws and the regulation of taxes.

An initial mapping exercise across the EU Member States and Norway reported on seven prevalent fraudulent contracting of work practices. Fraudulent practices can occur through employment relationships, such as fixed-term contracts, posting of workers and traineeship status, or through other commercial forms, such as self-employment and the creation of companies. The abuse of self-employment and freelance work, the abuse of fixed-term employment and the posting of workers were reported most by countries.

The analysis then explored the impact of five of these fraudulent contracting practices on the rights of workers and businesses (omitting temporary agency work and on call/casual work):

The research focused on eight countries: Austria, Belgium, Czech Republic, Estonia, Finland, Italy, Spain and the UK.

Employment practices were examined in three sectors (construction, industrial cleaning and road haulage) across at least three of the following countries: Austria, Finland, France, Poland and Spain.

This work builds on previous Eurofound research on posted workersnon-standard employment and undeclared work in Europe. Eurofound also occasionally reports on fraudulent and undeclared work practices at national level.

Key outputs

EU context

Policymakers are seeking to address violations of basic protections resulting from the fraudulent use of employment or commercial contracts in cross border and domestic practices. Several important steps have taken place at EU level. The 2014 Enforcement Directive on the posting of workers aims to address issues related to fraud, circumvention of rules and exchange of information between Member States. Ongoing discussions on undeclared work are facilitated by the European Platform tackling undeclared work, which became a permanent working group at the European Labour Authority (ELA) on 26 May 2021.

 

Definitions
Fraudulent contracting of work: It is possible to identify the fraudulent use of an employment/contractual relationship when two conditions are simultaneously met.
1. A specific employment/contractual arrangement is used to hire workers or to subcontract certain activities that involve the performance of work.
2. The factual circumstances of the specific employment/contractual relationship do not correspond to the (legal/formal) requirement that qualify that specific form of contracting work, directly via an employment relationship or indirectly through a subcontracting relationship.

 

Publications results (21)

This report examines the issues in relation to ‘work on demand’, a topic that has received considerable attention in the media recently, mainly due to its links with the platform economy. Work on demand is often presented as a ‘win–win situation’: workers get to tailor their work according to their

14 December 2018

Across European countries, the ‘employment contract’ has been, and still is, the point of reference for determining the rights and obligations of both workers and employers. When direct subordinated employment is disguised as self-employment, it is termed ‘bogus’. Work can be contracted in several

27 July 2017

Employment relations remain defined vis-à-vis the standard employment relationship (permanent, full-time, direct). Fixed-term contracts are therefore understood as non-standard employment contracts by which an employer hires an employee for a fixed duration. The main difference between permanent and

27 July 2017

Regulated at European level, the posting of workers is a practice used between companies located in different countries A worker is posted when their original employer sends them to work, for a temporary period, in another company. Posting has been defined as a specific form of labour mobility

27 July 2017

Among the fraudulent contracting of work practices, one of the most difficult to identify is the creation of sham companies (usually, in another country). Sham companies are essentially new entities created to disguise the real employer. Creating a company, even abroad, is – of course – legal and

27 July 2017

A traineeship is generally defined as an education and training programme combined with work experience, devised for certain groups – usually unemployed young people. Various types of traineeship are found across EU Member States. Traineeships have recently been actively promoted by the European

27 July 2017

This EurWORK topical update summarises the views of European and national-level stakeholders on recent debates on implementing the principle of ‘equal pay’ for posted workers. Directive 96/71/EC foresees that posted workers must be granted the minimum standards of employment conditions applicable in

18 July 2017

This report examines developments in non-standard employment over the last decade. It looks at trends in the main categories of non-standard employment – temporary, temporary agency and part-time work and self-employment – based mainly on data from the European Union Labour Force Survey.

13 July 2017

The fraudulent contracting of work is an important issue in many European countries today. EU and national policymakers have turned their attention to violations of the basic protection provided by employment law and collective bargaining that are linked to the fraudulent use of certain employment

21 November 2016

The right to free movement for workers within the European Union was enshrined in Article 48 of the EEC Treaty in 1957. Nowadays, private labour market intermediaries – such as temporary work agencies and employment placement agencies – contribute to facilitating this labour mobility in their role

27 April 2016

Online resources results (34)

France: latest working life developments Q2 2018

The adoption of labour market reforms, strikes in the transport sector and new leadership among the social partners are the main topics of interest in this article. This country update reports on the latest developments in working life in France in the second quarter of 2018.

Greece: Latest working life developments – Q4 2017

The fall in the unemployment rate, combating undeclared work, one-off social benefit payments, initiatives to strengthen social dialogue, and a general strike over the 2018 budget are the main topics of interest in this article. This country update reports on the latest developments in working life

Norway: Strategies to tackle work-related crime

Work-related crime and ‘social dumping’ are growing problems that are seriously affecting vulnerable workers. Two reports investigating the issue were published in the first half of 2017, shortly after the Norwegian government introduced a revised strategy for combating work-related crime.

Article

Romania: Efforts to fight undeclared work continue

New laws have defined undeclared work, introduced new obligations on employers, and increased the sanctions for employers who employ workers without the correct contracts. The Labour Inspectorate is continuing its fight against undeclared work, which has fallen significantly since 2011.

Article

Bulgaria: Fall in share of informal economy

The share of the informal or grey economy fell below 30% in 2016 according to an innovative composite index called 'Towards the economy of light’ created by the Bulgarian Industrial Capital Association in partnership with two high-level social partners. Reasons for the decline include the country’s

Article

Greece: Parties commit to national social dialogue following 2017 National General Collective Employment Agreement

The 2017 National General Collective Employment Agreement covers important institutional issues, such as the fight against undeclared work and discrimination, and health and safety at work, in an attempt to revive national social dialogue following the financial crisis of 2008 and in the context of

Cyprus: Latest working life developments – Q2 2017

Amendments to social security legislation to combat undeclared and illegal work, and legislation to establish a new labour inspection body are the main topics of interest in this article. This country update reports on the latest developments in working life in Cyprus in the second quarter of 2017.

Romania: Latest working life developments – Q2 2017

Strikes on the railways and in manufacturing, protests over public sector pay, and consultations on changes to social dialogue and labour legislation are the main topics of interest in this article. This country update reports on the latest developments in working life in Romania in the second

Greece: Latest working life developments – Q1 2017

Continuing negotiations with the Troika on the Greek labour market and pensions system, the conclusion of a national collective employment agreement and a judgment on human trafficking are the main topics of interest in this article. This country update reports on the latest developments in working

France: Latest working life developments – Q1 2017

Preparations for the presidential election and a revival of national social dialogue with the signing of a new collective agreement on the unemployment insurance scheme are the main topics of interest in this article. This country update reports on the latest developments in working life in France


Blogs results (3)
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The European Platform Tackling Undeclared Work last year documented the case of a Dutch temporary work agency that hired workers of various nationalities to work for a construction company in Belgium. The wages were suspiciously low, and the Belgian Labour Inspectorate believed that EU law

17 juuli 2019
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Research Manager Isabella Biletta looks at fraudulent practices in the contracting of work. Such practices involve the abuse of legitimate employment relationships with the aim of sidestepping labour and social regulations and with the effect of undermining workers’ rights and fair competition in

1 juuni 2018
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The European Union (EU) has strong legislation in place that protects workers from being exploited and also enables businesses to engage in fair competition. Workers are mobile and can move freely within the EU single market across borders – without being dependent upon traffickers. Yet, the latest

3 Mai 2016

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