International cooperation

EU platform provides new tools and good practices for the prevention of undeclared work

Source: The Ministry of Economic Affairs and Employment

The Commission supports the prevention of undeclared work with the help of a EU-level platform. In March 2016, the Commission set up a European platform against undeclared work, given how challenging it is for the authorities of Member States to address undeclared work in cross-border situations. The platform’s work focuses on: 

  • the promotion of cross-border cooperation of authorities,
  • increasing knowledge bases and competence, and
  • learning from the best practices of other countries

The prevention of undeclared work is the task of several authorities. Key operators include tax, industrial safety and social security authorities as well as the Police, border guards and employers’ organisations and trade unions.

The measures to prevent undeclared work aim to improve the working conditions and equal treatment of employees, engagement in working life and the equal competitive conditions of companies.  These can only be ensured by complying with a common set of ground rules.  Undeclared work also has a negative impact on the entire society in the form of a lower amount of collected taxes. 

What does undeclared work mean and how is it apparent?

On the level of the EU, undeclared work is defined as legal, paid activity undeclared to the authorities. It allows employers, companies and employees to avoid obligations related to social security, taxes or the employment relationship. The proportion of undeclared work between Member States varies and industry-specific differences are considerable. Reliable statistics are not available. According to latest estimates, undeclared work’s share of the GDP is approximately 1.5–7.5 per cent in Finland, 15.7 per cent in Estonia, 10.8 per cent in France, 12.2 per cent in Germany, 8 per cent in Austria and 13 per cent in Latvia.  In some Member States, undeclared work is more common due to cultural reasons alone. The manifestations of undeclared work and the operating methods of the authorities of the EU’s Member States aiming to prevent and investigate undeclared work vary. European Platform tackling undeclared work Member State Factsheets and Synthesis Report

Key manifestations of undeclared work include

  • working without a formally binding employment contract,
  • “envelope wages”, i.e. under-reporting work to the authorities,
  • a failure to report company income to tax authorities, and
  • missing trader/entrepreneurship

The underlying reasons for undeclared work include high unemployment rates and taxes, cultural factors and the general attitude. The traditionally problematic sectors include the construction, restaurant, accommodation and transportation sectors as well as agriculture.

How does the platform support Member States in the prevention of undeclared work?

The Commission has held some 30 events within the framework of the platform aiming to increase awareness and learning to prevent undeclared work. The Commission has had research, tools and learning materials (missing trader/entrepreneurship, construction industry, data mining) done for authorities and collected 40 examples of good practices from various Member States. These measures and reports provided through the platform support the learning of the authorities of Member States and their work against undeclared work.  Learning from the best practices of other countries requires action on a national level and the willingness of each authority to assess the practices of other countries and the practices’ applicability to the authority’s own prevention measures.

National cooperation network supports the work of the EU platform

In August 2016, the Ministry of Economic Affairs and Employment established a national cooperation network comprising authorities to support the efforts of the EU platform. The network strengthens the government’s internal coordination and collaboration, and supports national strategies and programmes. One of the key tasks of the network is to distribute information on the cooperation against undeclared work, monitoring methods, new phenomena and best practices to various operators. Finland is committed to the prevention of undeclared work. The matter has been included in the programme for the prevention of the grey economy and economic crime for 2016–2020. In Finland, the work for the prevention of the grey economy and undeclared work is supported by a political commitment to the cause as well as the good cooperation and exchange of information between the authorities.

 

Further information on the work of the EU platform:

Finland’s representatives:
Päivi Kantanen, the Ministry of Economic Affairs and Employment: paivi.kantanen@tem.fi
Kirsi Kyrkkö, the Ministry of Social Affairs and Health: kirsi.kyrkko@stm.fi

European Platform tackling undeclared work