Slovakia: Combating undeclared work – views and experiences of the actors involved

Two nationwide surveys on the issue of undeclared work aimed to map the views of officials from the different agencies involved in combating undeclared work. Respondents gave their opinions on the extent and causes of undeclared work and also provided suggestions on how to improve the system.

Background and methodology

Undeclared work, as a part of both the informal economy and illegal work, hampers the healthy development of a country’s economy and society. It leads to significant losses in several areas:·       

  • tax authorities obtain less income from taxes, including value added tax (VAT);
  • welfare institutions lose contributions;
  • the activities themselves can prevent the creation of regular employment with full social protection.

Illegal work is risky and it undermines the financing of sectors such as health and education. It is also contradictory to the European ideals of solidarity and social justice. Undeclared work affects all EU Member States and therefore its transformation into regular work is a significant topic in Europe.

Slovakia has taken a stand on combating undeclared work and has devised various policies on this topic. Undeclared work was the subject of two national surveys conducted in 2003 and 2014.

The 2014 survey (PDF) was based on data collections conducted throughout Slovakia in September and October 2014 via emailed questionnaires. The respondents were workers in local, public and state authorities who were involved in regulating the informal economy and monitoring its impact on the labour market. These included trade licensing offices (at district offices), tax offices, labour offices, labour inspectorates, customs offices, subsidiaries of the Social Insurance Agency and the municipal authorities. One expert in the issues associated with combating undeclared work was selected from each relevant organisation in each region. A total of 247 questionnaires were completed by respondents from the State administration and 37 questionnaires from respondents from regional self-government.

The 2003 survey (PDF) was also conducted through emailed questionnaires. The respondents, who were from the state administration (labour offices, trade licensing offices and tax offices), completed a total of 166 questionnaires.

Views on the extent of the informal economy

In 2003, experts working in government offices estimated that the size of the informal economy in Slovakia accounted, on average, for 18.3% of gross domestic product (GDP). However, in 2014, this estimate had increased to 21.6% of GDP. This is surprising because legislation had been tightened in the intervening years and therefore it was expected that the experts’ estimate of the informal economy would fall.

In 2003, undeclared work was regulated by Act no. 95/2000 Coll. on labour inspection but, by 2014, stricter and better targeted legislation had been implemented – in particular Act no. 125/2006 Coll. on labour inspection and Act no. 82/2005 on illegal work and illegal employment.

In 2003, Eurostat agreed with Slovakia’s experts on the size of the informal economy, putting it at 18.4% of GDP. In 2014, however, Eurostat put the size of Slovakia’s informal economy at a much lower level (14.6 %) than the Slovak experts. The civil servants’ higher estimates (and, in 2014, also those of regional self-governments) indicate that the informal economy remains a serious problem in Slovakia. While some positive trends can be identified, it is clear that further measures to reduce its scope are necessary.

Sectors and players in undeclared work

Both surveys highlighted the high incidence of undeclared work in the construction sector: more than 90% of the respondents in both surveys considered the sector a high risk for undeclared work. However, their views suggested that the incidence of undeclared work in other likely sectors was decreasing. For example, the perception of undeclared work in the retail sector fell from 54.2% of respondents in 2003 to 32.4% in 2014, and in the tourism, restaurant and hotel sector from 48.2% in 2003 to 43.7% in 2014. In the agricultural sector, awareness of undeclared work decreased more significantly from 41% in 2003 to 28% in 2014. However, the 2014 survey showed a significant share of respondents (41.3%) identifying undeclared work in the service sector.

Few experts saw undeclared work as being widespread in long-term jobs (3% in 2003 and 5.3% in 2014). They were more likely to see undeclared work as a problem in casual work (57.2% in 2003 and 58.7% in 2014) or seasonal work (38.6% in 2003 and 34.8% in 2014).

The 2014 survey showed that, as in 2003, the most likely candidates for undeclared work are sole traders and small enterprises, particularly work performed by unemployed people with lower levels of educational attainment, mostly aged 25–50 years.

Motives for undeclared work

According to the experts, employers’ motives for using undeclared work are the high costs of social insurance for employees, and labour costs being too high in relation to productivity. As can be seen in Table 1, in 2003, these reasons were reported by 91% and 39.8%, respectively, of the respondents while in 2014 they were cited by 85.8% and 47.4%, respectively, of the respondents. In 2014, 33.6% of respondents reported that employers also saw the high tax burden as a motive for using undeclared work.

Table 1: Why employers use undeclared work (answers in %)
Motive 2003 2004
Labour costs too high in relation to productivity 39.8 47.4
Strong competition 5.4 7.3
High contribution burden (social insurance payments for employees) 91.0 85.8
High taxes  n.a. 33.6
Dependence on one main operator 3.6 4.0
High supply of labour willing to work in the 'shadow economy' 58.4 40.5
Low level of labour skills needed 7.8 8.9
Limitation of local activitied 10.8 7.3
Barriers to business start-ups 4.8 3.6
Administrative constraints, burden of legislation 35.5 25.5
Other n.a. 2.8


















Note: n.a. = not applicable

According to the respondents, other motives for businesses to use undeclared work were:

  • a high supply of people willing to work in the shadow economy (58% in 2003 and 40.5% in 2014);
  • administrative constraints or burden of legislation (36% in 2003 and 25.5% in 2014).
  • a high supply of people willing to work in the shadow economy (58% in 2003 and 40.5% in 2014);
  • administrative constraints or burden of legislation (36% in 2003 and 25.5% in 2014).

More generally, respondents stated that employers using undeclared work are motivated primarily by costs and then by having to adapt to the economic environment (though they pointed out that employers do not hesitate to misuse this situation). 

According to state administration officials, there are two very strong pressures driving employees into undeclared work. One is a concern for survival and the need for higher income to achieve this. The other, the need to pay debts, has strengthened significantly in the past few years. Although a weaker motive to take part in undeclared work, the pressure to pay taxes has, according to the experts, also strengthened in the past 10 years. Remaining independent from an employer is not as strong a motive and indeed weakened in the past 10 years. More detailed data on employees’ motives for undeclared work are shown in Tables 2 and 3.

Table 2: Employees’ motives for undeclared work in 2003 (answers in %)
Motive Main reason One of the reasons Rarely No answer
Increased income 69.9 24.1 1.8 4.2
Payment of debts 6.0 60.2 25.3 8.5
Tax pressures 6.0 23.5 59.0 11.5
Concern about survival 69.9 22.3 3.0 4.8
To be independent and able to live freely 2.4 36.1 52.4 9.1





Table 3: Employees’ motives for undeclared work in 2014 (answers in %)
Motive Main reason One of the reasons Rarely No answer
Increased income 68.0 25.1 5.3 1.6
Payment of debts 18.6 57.5 20.2 3.6
Tax pressures 11.3 38.5 44.5 5.7
Concern about survival 72.5 21.9 4.5 1.2
To be independent and able to live freely 5.7 23.5 63.6 7.3








Obstacles to the effectiveness of rules on undeclared work

The experts declare that the main problem in trying to make rules more effective in reducing undeclared work is that national legislation is still imperfect. In 2003, 85% of respondents considered this problem to be a serious one. After significant changes to the legislation, the number of respondents holding this view decreased in 2014, but a majority (58.2%) still reported it.

The second obstacle in combating undeclared work is a lack of coordination of effort between institutions (such as tax offices, trade offices, labour offices, municipalities and the Slovak Chamber of Commerce and Industry). Some 49.4% of respondents felt this to be the case in 2003, while this figure increased to almost 65.5% in 2014.

The third most important obstacle, according to the respondents, is the small number of checks/inspection activities (this reason was not surveyed in 2003).

The respondents from the state administration also cited the low involvement of self-governments in municipalities and cities as a major obstacle in combating undeclared work; it was considered the second most important obstacle in the 2003 survey, being reported by 59.7% of respondents.

Proposals to improve measures for combating the undeclared work

Proposals in 2003

Respondents’ main proposals were:

  • tightening up inspections by strengthening the competencies and powers of the relevant bodies, and improving the pay of inspectors (38% of respondents);
  • increasing sanctions, improving law enforcement and imposing greater penalties on those found guilty (25.9% of respondents);
  • cutting health and social insurance contributions and the tax burden (21.7% of respondents);
  • facilitating the support of business and expansion of job opportunities, in particular in economically underdeveloped regions (13.9% of respondents);
  • raising awareness and improving cooperation in the combating of illegal work by institutions (11.4% of respondents).

However, only 5.4% of respondents proposed creating a specific labour policy and only 4.2% recommended greater involvement of municipal self-governments and business associations in checks and inspections.

Proposals in 2014

Most proposals (29%) were for ways of improving the detection of undeclared work, especially improving and increasing checks and inspections. A further 13% of respondents recommended tightening sanctions and increasing punishments, with 10.2% of respondents recommending better cooperation of the relevant bodies. The respondents also recommended publicising the issue better to highlight the problems such work causes and its consequences (2.5% of respondents) and speeding up court proceedings (0.3% of respondents). Several respondents proposed measures such as revoking the business licences of repeat offenders (4.2% of respondents), or banning such companies from tendering for public sector work (0.3%). There were also proposals to remove social or family benefits from employees working illegally (0.7% of respondents).

Some 4.9% of respondents recommended strengthening counselling and raising awareness about combating illegal work.

In addition, there were several proposals on now to improve labour inspectors’ activities:

  • 8.8% of respondents proposed improving the competencies of inspectors;
  • 2.1% proposed increasing the number of inspectors;
  • 1.8% proposed improving the conditions for the execution of checks and inspections (including increasing inspectors’ pay).

There were several proposals dealing with the area of economy-wide labour conditions. These included:

  • supporting employment and job creation (12.7% of respondents);
  • improving the business environment (4.6% of respondents);
  • decreasing social and health insurance contributions (18.7% of respondents);
  • decreasing the level of tax from employment (8.5% of respondents).

There were also proposals for an overall increase in wages, or an increase in the difference between the minimum wage and the amount of benefits paid to the very poorest in society (3.2% of respondents).

Respondents also had some proposals concerned with legislation. These included:

  • favouring employers who respect the employment rules (1.8% of respondents);
  • clarifying the law in terms of evidence, moving the burden of proof to the employer or decreasing the lower limit of a fine (4.9% of respondents);
  • a better legal definition of dependent work so that the illegal work can be better checked (1.4% of respondents);
  • cancelling or substantially reducing work on agreements or restricting the forced work of self-employed people (4.2% of respondents).

There were also proposals on administration, with recommendations for improving workers’ registration. This included electronic-only registering of new employees with the Social Insurance Agency, linking databases to facilitate the reporting of illegal work and introducing work clearance cards (6.0% of respondents).

Other proposals (by a total of 4.9% of respondents) included:

  • developing a long-term strategy for combating illegal work;
  • introducing a new way of assessing late registration and the non-registration of a new employee for social insurance;
  • reducing corruption among civil servants;
  • preventing the transfer of shares in the case of suspected illegal work;
  • decreasing the level of property for declaration of bankruptcy;
  • improving tax collection;
  • stopping the payment of wages in cash;
  • introducing a flat-rate tax for self-employed;
  • rewarding the reporting of offers of illegal work;
  • giving more powers to self-governments.

There was also a proposal that Members of Parliament should set an example in the prevention of undeclared work.


The various proposals formulated in the two surveys aimed at combating undeclared work cover the organisation of the economy, activities of several institutions and the behaviour of those involved. The proposals indicate primarily the need for improved control – to conduct physical checks and to implement administrative measures. However, there has been criticism of some measures, notably those increasing employers’ obligations. For example, employer organisations protested against the introduction of the Labour Code in March 2015, which brought in new obligations, notably regarding the registration and remuneration of companies using temporary agency workers.


Bednárik, R. (2015), Potieranie nedeklarovanej práce (PDF) [Combating undeclared work], Institute for Labour and Family Research, Bratislava.

Ministry of Labour, Social Affairs and Family (2014), Návrh na zmenu zákona č. 311/2001 Z.z. Zákonník práce [Draft law amending and supplementing Law no. 311/2001 Coll. Labour Code], Bratislava.

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