Prevention in labour market organisations
16 October 2023 The Finnish Construction Trade Union | Nina Kreutzman
From the perspective of construction sites, the harm caused by the shadow economy is significant both for the workers and the development of the entire industry. Neglecting statutory payments and obligations for financial gain is short-sighted and only leads to the problems stacking up in the long term. At construction sites, the shadow economy is seen as undeclared work and labour abuse, especially of foreign employees. Foreign employees are often in a vulnerable position and work over-long days without receiving appropriate compensation. The more the employee must depend on the party that provides the work, the more severe the abuse is, because protection against dismissal is inadequate. It is often difficult to intervene in undeclared work, and sometimes it can even be dangerous due to the threat of crime.
However, for the benefit of everyone, it is vital to promote a fair and equal job market. Misconduct and labour abuse must not be a part of the workplaces of the future that will need more directly employed skilled professionals – including young adults and women.
Prevention is key
The Finnish Construction Trade Union significantly contributes to the prevention of the shadow economy and combatting it. Throughout the years, we have come up with ideas in great collaboration between the employers and authorities. One example of this is the Finnish legislation on tax numbers. The tax number required to be included on ID cards has garnered EU-level interest specifically for being a preventative measure. We must look at the whole – it is not enough to merely correct bad situations after they occur. Only a limited amount of resources is available for supervision both for the parties of the labour market and the authorities.
Representatives of the Finnish Construction Trade Union regularly visit construction sites to see the practical results of the new measures introduced. We also discover rather quickly all the means developed to circumvent rules. The latest phenomenon is disguising regular employment as entrepreneurship, which is called ‘bogus self-employment’. This has resulted in rather unusual and ambiguous situations where several views on who precisely pays the wages exist simultaneous on one construction site.
The free mobility of workers within the EU extends the scope of combatting the shadow economy. Luckily, the official labour market parties of the European construction industry have harmonious and uniform views on the matter. Presently, the ID card systems in the construction industries of Member States are being surveyed and compared. In this context, the Finnish system requiring an ID card with a photograph for all construction site employees is very progressive. The new EU project Social Identity Cards in Construction (SIDE-CIC) will be particularly interesting. Its aim is to improve the transfer of employee and company data within the Single Market. The goal is to ensure a fair job market for the construction industry.
17 October 2023 Confederation of Finnish Construction Industries RT | Ville Wartiovaara
The shadow economy does not only cause a loss of income for society, it also distorts competition and causes losses for law-abiding companies through lost bids for contracts, for example. For individuals, it results in less pension accrued, uncertain employment, and dependence on an abusive employer.
A cheaper price may entice professional procurers and consumers to look the other way and not acknowledge the issues that would be easy to anticipate arising. Safety, quality and the shadow economy can rarely be found on the same construction site. As the saying goes, ‘you get what you pay for’ – not what you hope to get by buying something offered at a suspiciously low price.
The Confederation of Finnish Construction Industries RT has a long history of actively combatting the shadow economy on a voluntary basis by developing new tools for the prevention of financial crime and making proposals for new legislation to legislators. One good example is the tax number in use in the construction industry and the obligation to report monthly the number of people working on a shared construction site and the amounts paid based on contracts. This legislation originated from a joint proposal and request of the Confederation of Finnish Construction Industries RT and the Finnish Construction Trade Union.
A more recent example of the industry’s work to reduce the shadow economy is the reformed Aliens Act. We proposed that a more extensive monitoring obligation for verifying the right to work of non-Finnish workers would be laid down for the construction and shipyard industries, and this proposal was included in the Act.
We consider our continuous collaboration with the labour market organisations in the construction industry and the authorities – both inside and outside Finland – to be very important. The shadow economy does not respect national borders, and often the practices and negative phenomena spread between countries sooner or later.
The mobility of workers and long chains of contracts also create opportunities for the phenomena of the shadow economy, which is why it is important to openly share information and learn from each other’s experiences. By sharing information about these phenomena and our experiences, we can better identify the issues that the industry operators and authorities should prepare for in the future and better. Therefore, it is vital that this valuable information exchange is regular.
The Confederation of Finnish Construction Industries RT has actively contributed to several projects of the EU and the Baltic countries related to the shadow economy and combatting it. In addition to the regular meetings of the European Construction Industry Federation FIEC, the EU-level social dialogue on the matter between employer and employee organisations is an effective way to share information and best practices on the matters discussed above. National practices for combatting the shadow economy vary, and the best practices of one country may inspire the development of practices in another country.
The Eurodetachement projects in the field of posting workers, funded by the European Commission, have proved valuable in increasing understanding. Similarly, the European Labour Authority ELA’s platform for undeclared work has enabled regular meetings between representatives from different countries after the pandemic. Our colleagues and authorities from other EU Member States are interested in the photo ID card Valtti widely used in the Finnish construction industry and the legislation enacted to combat the shadow economy. We have been provided opportunities to introduce the Finnish practices with the Finnish Construction Trade Union in the context of the ELA’s platform for undeclared work and its associated projects.
The work never ends
Our operating environment is increasingly digital, and the systems of authorities should enable sharing information electronically better than currently – and not only between authorities. The free movement of information should also be enabled on a practical level, because it also enables the development and use of more effective methods for combatting the shadow economy.
Unfortunately, the current largest barrier to information transfer is old information systems, not data protection legislation. We therefore hope that serious action is taken to dismantle the barriers to information transfer to ensure that the playing field of shadow economy operators is as uneven as possible. Authorities must have up-to-date powers and tools for information exchange, which supports this work.