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European Commission


Brussels, 9 April 2014

Undeclared work: Commission proposes a new Platform to improve prevention and deterrence – frequently asked questions

(see also IP/14/387 and MEMO/14/272)

How would the Platform work?

The proposed Platform would be composed of Member States' national enforcement authorities, such as labour inspectorates, tax and social security authorities, plus the European Commission. The Platform would, for the first time, bring together the relevant authorities of all Member States. EU level social partners (employers and employees organisations), representatives of the European Foundation for the Improvement of Living and Working Conditions (Eurofound), the European Agency for Safety and Health at Work (EU-OSHA) and the International Labour Organisation (ILO) would be invited to participate as observers.

Each Member State would be invited to nominate one single point of contact. It would have to liaise with all other enforcement authorities, whose work has a link with undeclared work, within a Member State. Different authorities could be invited to participate in the meetings or contribute to the different tasks if it involves their fields of competence.

The Platform would work in cooperation with other relevant EU level expert groups and committees, whose work has a link with undeclared work. These are, in particular, the Senior Labour Inspectors Committee (SLIC), the Expert Committee on Posting of Workers, the Administrative Commission for Social Security Coordination, the Employment Committee (EMCO), the Social Protection Committee (SPC) and the Working Group on Administrative Cooperation in the Field of Taxation.

The Platform would work on the basis of two-year work programmes, which would set out its detailed tasks. The Platform would also regularly inform the European Parliament and the EU's Council of Ministers about its activities.

What would the Platform do?

The Platform would tackle matters related to undeclared work in a holistic way, covering all aspects (labour law, labour inspections, health and safety, social security, tax, migration etc.) related to the phenomenon. This means that it would not be limited, for example, to health and safety issues, but would look at the whole range of measures designed to tackle its different aspects.

Exchange of best practices would be the first practical step of the cooperation. It would improve the knowledge and help to develop a better understanding about how undeclared work is tackled and who the main actors are in Member States. To make best use of this exchange, a Eurofound database could be developed further, by adding and updating different enforcement measures taken by Member States.

These exchanges of best practice could lead to the development of common guidelines and principles to help inspection authorities to tackle undeclared work more effectively.

In addition, the Platform could adopt regional and EU wide strategies and organise campaigns. This kind of activities would help to increase awareness of the problem, draw people's attention to the negative consequences and advise how to avoid working undeclared.

The Platform would develop more elaborate forms of cooperation as mutual trust and experience build up. The Platform could undertake joint training and exchange of staff, and coordinate cross-border operational actions, including joint inspections. These activities would have real practical value to Member States as personal contacts would be established, cooperation between different authorities would be strengthened and experiences would be shared. This would lead to a more effective fight against undeclared work, especially regarding its cross-border aspects.

To help Member States' enforcement authorities to tackle cross-border aspects of undeclared work, the Platform could also identify solutions for data sharing as well as develop other tools that could help liaise better with other Member States.

Why is bogus self-employment covered by the proposal?

The abuse of the status of self-employed, either at national level or in cross-border situations, is frequently associated with undeclared work. Bogus self-employment occurs when a person, whose work fulfils all the criteria that are used by national law and practice to characterise an employment relationship, is registered as self-employed instead of employed. This is done in order to avoid certain obligations arising from laws and practices applicable to employees, such as labour regulations and the payment of taxes or social security contributions.

The negative consequences to health and safety and social security coverage of the workers concerned, as well as on tax revenue, can be quite similar to those of undeclared work. In addition, as a means to avoid social security contributions and labour regulations, bogus self-employment creates unfair competition between companies. These self-employed persons can provide cheaper services due to the fact that they pay less tax and do not have to comply, for instance, with obligations arising from working conditions regulations.

Bogus self-employment is therefore falsely declared work and the Platform should explore the links between undeclared work and bogus self-employment and help Member States in their efforts to tackle such abuse.

Why does the Commission propose to establish a new body?

When preparing the proposal the Commission carried out a thorough impact assessment. It analysed several options for improving cooperation at EU level in the prevention and deterrence of undeclared work. The establishment of a European Platform as a new body including all Member States was considered to be the best choice. It would allow for the topic of undeclared work to be discussed for the first time in a holistic way, by covering all its aspects (labour law, labour inspections, health and safety, social security, tax, migration etc.) and by inviting all relevant enforcement authorities to participate in the discussions. An option of creating a new EU decentralised agency was considered, but was discarded given the administration costs entailed in establishing a new agency.

Has the EU any competence to deal with undeclared work? What is the legal basis?

The challenges faced, such as the negative impact of undeclared work on the economy and the society, the difficulties in tackling cross-border forms of undeclared work, the trade-off between appropriate levels of taxation/regulation and the need to avoid encouraging employers to resort to undeclared work, and the lack of cooperation between different enforcement authorities, are common to all Member States.

The EU has the competence to complement national action in the field of undeclared work based on Social Policy articles in the Treaty on the Functioning of the European Union (TFEU). In particular, Article 151 TFEU stipulates that the Union and the Member States "shall have as their objectives the promotion of employment, improved living and working conditions, […] proper social protection, […] with the view to lasting high employment and the combating of social exclusion." Article 153 TFEU lists the fields where the Union shall support and complement the activities of the Member States, which include working conditions, integration of persons excluded from the labour market and combating social exclusion. The proposal on enhanced EU cooperation in deterrence and prevention of undeclared work is based on Article 153 (2) (a) TFEU, which allows for the European Parliament and the Council to adopt measures designed to encourage cooperation between Member States through initiatives aimed at improving knowledge, developing exchanges of information and best practices, promoting innovative approaches and evaluating experiences, excluding any harmonisation of the laws and regulations of the Member States.

The EU action enhancing cooperation at EU level would support the efforts of Member States in the deterrence and prevention of undeclared work by making it more effective and efficient. It thereby adds value to Member States' actions. The proposal thereby complies with the principle of subsidiarity. The proposal complies with the proportionality principle since it is a measure designed to encourage cooperation between Member States without any harmonisation of the laws and regulations of the Member States and without preventing the application of bilateral agreements or arrangements concerning administrative cooperation.

Why should all Member States participate?

Participation of all Member States is a crucial element of the Platform. If some Member States failed to participate, this would greatly diminish the value of the EU level action. In particular, the participation of all Member States is necessary because:

  • undeclared work is a challenge for all Member States

  • despite their best efforts, undeclared work still persists

  • better enforcement of national and EU law in fields linked to undeclared work (such as working conditions, health and safety and social security coordination) is in the interests of all Member States

  • undeclared work often has a cross-border dimension, which could have a negative impact also on the functioning of the Single Market, as employers providing services in other Member States using undeclared workers would cause unfair competition. These employers can provide cheaper services due to the fact that they do not pay taxes or comply, for instance, with obligations arising from health and safety and working conditions regulations.

Why is the Commission not establishing an Agency?

The Commission decided that it would be premature at this moment to propose to establish an Agency. What needs to be done first is to set up cooperation between Member States' relevant enforcement authorities in order to establish a common understanding of the phenomenon and build up mutual trust.

In addition, the establishment of an Agency was considered to be unsuitable as it would take quite a long time to set up and it would require considerably higher financing than the Platform. As the problems caused by undeclared work are urgent, there is the need to act now.

Furthermore, the Platform would cooperate with two existing European Agencies whose work has links with undeclared work: Eurofound and European Agency for Safety and Health at Work (EU-OSHA). Eurofound is an agency which provides knowledge to assist the EU in the development of social and work-related policies. It has also carried out studies on undeclared work. EU-OSHA works in the field of health and safety. It raises awareness, designs practical tools to assess workplace risks and identifies and assesses new and emerging risks at work. It covers the health and safety aspects of undeclared work.

What would it cost? Would Member States receive financial support?

The legislative proposal is budget-neutral and does not require additional staff resources. Funding would come from the PROGRESS strand of the EU Programme for Employment and Social Innovation ("EaSI"). An indicative amount of €2.1 million per year is foreseen for carrying out the tasks, such as the establishment of practical tools, support by service providers, publishing of common guidelines and principles, and handbooks, developing a permanent training capacity and a common framework for carrying out joint trainings, organising peer reviews and European Campaigns. In addition, grants to finance projects supporting the achievement of the objectives of the Platform would be covered. Up to €224 000 per year would be used to reimburse the costs related to participation in the Platform meetings. In addition, the European Social Fund (ESF) supports Member States' efforts to improve the quality of public administration and governance and, by doing so, promote their structural reforms. Member States are encouraged to use the ESF to reinforce the capacity of their national authorities in tackling undeclared work.

What is the link between the proposed Platform on Undeclared Work and the Proposal for an Enforcement Directive on Posting of Workers?

The Platform aims to contribute to the fight against undeclared work also in the context of posting.It therefore complements the activities that are taken in the framework of the original Posting of Workers Directive 96/71/EC and the Proposal for an Enforcement Directive. In particular, in cases where workers are falsely declared as posted from one country to another, the activities of the Platform would contribute to detecting fraud and guaranteeing the enforcement of workers' rights.

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