The European Commission defined undeclared work in a 2007 communication as ‘any paid activities that are lawful as regards their nature but not declared to public authorities’.
This definition links undeclared work with tax and/or social security fraud and covers a range of activities, from informal household services to clandestine work by illegal residents. However, it excludes criminal activities. While recognising the need to take into account differences between Member States’ regulatory systems, it outlines three forms of undeclared work:
The communication also identified the main drivers for the informal economy, set out ways to reduce it and proposed a series of concrete follow-up actions at European and national levels.
Assessing the scale of undeclared work is inherently difficult. However, estimates can be made based on both direct methods (survey-based) and indirect methods (interpreting observable phenomena as a sign of the invisible economy). While direct methods are likely to underestimate the problem and indirect methods have been criticised for overestimating it, undeclared work clearly remains a widespread issue across Europe. Eurofound’s research from 2013, for example, found that undeclared work represented around 18% of collective gross domestic product (GDP) in 2012, with important differences across Member States. [1]
In 2018, the European Commission published estimates of the scale of undeclared work in the EU. [2]
As such, undeclared work remains a widespread phenomenon. European institutions underline that this is a concern for both policymakers and citizens, as decreased tax and social security revenues have serious budgetary implications and ultimately undermine the financial sustainability of social protection systems. Undeclared work also has negative impacts on employment and productivity, and distorts the EU principle of a level playing field. Hence, a range of initiatives at EU level have been initiated to reduce the incidence of undeclared work.
In its April 2012 Employment package, the Commission stated that transforming informal or undeclared work into regular employment could help to reduce unemployment in the European Union. The Employment package highlighted the need for improved cooperation between Member States and called for the creation of an EU-level platform for labour inspectorates and other enforcement bodies to combat undeclared work.
In July 2013, the Commission launched a formal consultation of the EU social partners under Article 154 of the Treaty on the Functioning of the European Union (TFEU) with a view to enhancing EU cooperation in the prevention and deterrence of undeclared work. In January 2014, however, after the second-stage consultation, the social partners decided to refrain from negotiating on this topic because the proposed initiative concerned cooperation between national enforcement authorities. As a result, they considered that the main responsibility lies with national public authorities. In response, the Commission released a proposal on the creation of an EU platform against undeclared work. The decision to establish a European Platform was adopted in March 2016.
· European Commission (2014), Undeclared work: Commission proposes new Platform to improve prevention and deterrence .
The European Platform tackling undeclared work brings together relevant bodies – including the social partners and enforcement agencies such as labour inspectorates, social security inspectorates and tax authorities – to tackle this issue more effectively and efficiently, while fully respecting national competences and procedures. The aim is to improve cooperation between Member States by facilitating innovative approaches to cross-border cooperation and enforcement, sharing best practices and and identifying common principles for inspections. Evaluating Member States’ experiences of such cooperation and exchanging information are also part of the drive to reduce undeclared work.
The Platform was launched in Brussels by the Commission on 27 May 2016 and became one of the components of the European Labour Authority (ELA) set up by Regulation (EU) 2019/1149 of 20 June 2019. The general aim of the ELA is to ensure that ‘EU rules on labour mobility and social security coordination are enforced in a fair and effective way and [to make] it easier for citizens and businesses to reap the benefits of the internal market’.
According to Article 2 of the regulation, the ELA’s objective involves facilitating access to information, mediating and facilitating the solution of disputes in cross-border cases, and supporting cooperation between Member States in tackling undeclared work. As mentioned in Recital 22, ‘for the purposes of this regulation, “tackling” undeclared work means preventing, deterring and combating undeclared work’. To this end, the ELA receives the support of the Platform, a permanent working group set up with the involvement of the social partners ‘building on the knowledge and the working methods of the European Platform tackling undeclared work’.
The EU Platform Work Programme 2019–2020 includes a campaign to raise awareness about the benefits of declared work, featuring an EU-wide social media campaign underpinned by a week of joint actions at national level. Four sectors that are heavily affected by undeclared work have been identified for specific action: agriculture, aviation, tourism, and the hotel, restaurant and catering sector.
Contract of employment ; employment relationship ; European Labour Authority ; proof of employment ; social security ; Treaty on the Functioning of the European Union
Eurofound (2020), Undeclared work, European Industrial Relations Dictionary, Dublin
https://www.eurofound.europa.eu/en/european-industrial-relations-dictionary/undeclared-work