Government proposes household service chequeto combat undeclared work

In December 2004, the Austrian government proposed tackling undeclared work in the household services sector by introducing a 'household service cheque', which also aims to improve the social protection of the (mostly female) workers concerned. Under the plans, people using household services (eg cleaning or childcare) may opt to pay for them with a 'cheque' that includes social insurance contributions, instead of in cash. The proposal has received a mixed response.

On 22 December 2004, the coalition government of the conservative People’s Party (Österreichische Volkspartei, ÖVP) and the populist Freedom Party (Freiheitliche Partei Österreichs, FPÖ) presented draft legislation on a 'household service cheque' (Dienstleistungsscheck), which it plans to introduce in autumn 2005. This scheme seeks to facilitate and promote legal 'quasi-employment' in household services, in particular with respect to childcare, care of elderly people, domestic cleaning and home maintenance. According to Martin Bartenstein, the Minister of Economy and Labour Affairs (Bundesminister für Wirtschaft und Arbeit, BMWA), the planned measure aims to increase legal activity rates in a problematic segment of the labour market marked by a high degree of illicit employment practices, and to help reconcile the work and family life of the - mostly female - workers concerned. Mr Bartenstein stated that the introduction of the cheque will enable both (quasi-)employers and paid workers to create legal 'employment' relationships and to pay social insurance contributions on a regular basis. The use of the cheque will be voluntary and its handling will be easy and unbureaucratic, the Minister announced.

According to the draft, the cheques will be available for sale at post offices and tobacconists’ shops. The value of one cheque will be EUR 10, a price which includes all social insurance charges. Thus, the employer will have fulfilled all social insurance obligations on behalf of the worker by paying with the cheques. The workers will have to submit all the cheques received for their work at the end of each month to the Labour Market Service (Arbeitsmarktservice, AMS). If the monthly pay represented by the cheques submitted does not exceed a certain monthly pay limit - EUR 323.46 in 2005 (a figure that corresponds to the pay limit for 'minimally employed' people laid down by law and upgraded annually - AT0308201N) - the worker will be insured only against accidents and will receive the full value of each cheque (EUR 10) from the AMS. If monthly pay exceeds this threshold, the worker will also be covered by health and pensions insurance, and a flat-rate social insurance contribution of EUR 2 will be deducted from each cheque, so that only EUR 8 per cheque will be paid out to the worker. Those domestic workers that do not fall within the compulsory social insurance scheme due to low pay will, however, be entitled to opt for voluntary health and pensions insurance.

Any existing income tax obligations will not be affected by the new cheque scheme. Moreover, the Minister emphasised that the new regulation will cover people with a valid work permit only. Hence, many immigrants with a problematic residential and employment status in Austria will not have the opportunity of being included.

The government’s proposal has received a mixed response. The opposition Greens (Die Grünen, GRÜNE) party expressed its fear that the introduction of the 'household service cheque' will put further pressure on workers’ pay, since the social insurance contributions deducted from the cheque will most probably not be compensated by additional pay from the employers. Moreover, it argues that this measure will promote the engagement of low-skilled, poorly-paid workers who will tend further to substitute for higher-qualified personnel, instead of providing incentives to create good quality jobs in household services. Representatives of the women’s organisation of the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB) have taken a more differentiated position. They consider the government’s draft as a first step towards improving working conditions in household services, in particular in terms of social protection. However, they do not agree with Mr Bartenstein’s view that the introduction of the cheque will be an appropriate measure to tackle undeclared work effectively in this precarious labour market segment.

The government’s draft will be examined in consultations with experts until the end of January 2005.

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