Reports and Studies

Concrete proposals to tackle illicit employment in construction


I. Background

On various occasions, the European parliament called for increased Community legislative actions to tackle  “undeclared labour and the parallel economy”[1] which, to a different extent from one Member state to another, “damage the economy, leave workers unprotected, are detrimental to consumers, reduce tax revenue and lead to unfair competition between undertakings”. In adopting the report, the EP expressed its “deep concern” at the extent of undeclared work “which accounts for as much as 20% or more of GDP in some Member states”. The European parliament wants Community action to combat undeclared labour to be “more pro-active and incisive” in order to ensure that the modernisation of labour law in the EU is not confined to the purely theoretical level, but is transformed into effective, high-quality policies.

Undeclared labour leads to serious social, economic and political distortions:

  1. Within the overall EU, billions of euro of social and fiscal  revenues are evaded by illicit activities This either leads to an increase of taxes and social contributions (in order to keep the system sustainable) or a decrease of the necessary public services;
  2. The rise of undeclared work gradually undermines the stable system of industrial relations, collective agreements and the role of the social partners to manage their sectors;
  3. Undeclared labour is a product of “egoism” and the ability of individuals to do things as they like/please. This individual approach of doing things as “I like” undermines every common sense of political consciousness.   

The Lisbon Treaty offers new possibilities to the European legislators to deal with the problem of illicit employment. The EU legislators have been neglecting this serious economic, social and political problem for years, by using soft policies, recommendations and benchmarks instead of issuing real legislation.

Tolerating “illicit employment” has severe structural disrupting consequences on a macro and micro social-economic level. It undermines stable industrial relations, stimulates unfair competition, jeopardizes social security and protection for all, hampers R&D and innovation and so on. The achievement of the Commission’s 2020 strategy of “growth and jobs” with an innovative economy, smart jobs and new skills for the workforce will never be achieved if Europe continues its ostrich policy towards illicit employment.

Despite various urgent calls from the European parliament, the Commission remained reluctant to the strong signals[2] that the European legislator should take up its responsibilities and deal with the problem of enforcement and compliance of existing legislation.

The problem of “illicit employment” is not purely a national issue. The steep increase of the free movement of persons and services, have lead to a steep increase of “transnational illicit employment”. The lack of convincing EU-instruments is a safe haven for criminals, which has lead to huge frustration of labour and fiscal inspectors who are confronted by transnational fraudulent operators.

Various elements of this paper (setting up a permanent EU co-ordination structure for labour inspection, a legislative initiative to deal with subcontracting in the construction industry, EU-criteria to distinguish genuine self-employment from false self-employment, …) have already been endorsed repeatedly by a broad majority the EP on several occasions

II. General objective of the proposed measures

The primary objectives of the proposed measures are to (1) prevent and (2) improve the detection of illicit employment and (3) to impose sanctions on the use of illicit employment. In this respect, the proposals clearly meet the stated requirement for combating illicit employment by means of preventive and repressive measures. 

The proposed measures focus on compliance and enforcement of existing legislation in a transnational context.

In order to maximise the effectiveness of the proposed measures, the EU-instruments should include an obligation to achieve results in terms of prevention, detection and imposition of sanctions.

A key feature of the proposed measures is that they form a coherent whole which should not  be viewed in isolation from one another.

The prevention, detection and imposition of sanctions concerning illicit employment relate solely to labour, work, pay, terms and conditions of employment and social security. The aim is to promote fair competition among firms, to collect social security contributions more efficiently and to create a coherent package of measures which is effective and transparent.

The proposals aim at a minimum level of harmonisation and coordination. Therefore the principle of subsidiarity should apply insofar as the proposals do not fall under the exclusive competence of the Community.

The EFBWW considers that some measures should take the form of a Directive, others should be dealt with by a Regulation.

III. Precise elements to be included in future EU-legislation

  1. Scope of the measures.
  2. EU-Definitions
  3. Specific rules to tackle illicit labour providers (gang masters) and labour users
  4. Specific rules to tackle “letter box” companies
  5. Introducing a European Social Identity Card (SIC)
  6. Joint and several liability of the main contractor
  7. Specific Preventive measures
  8. Strengthened checks, investigation and control
  9. Facilitation of complaints
  10. Obligation to improve domestic administrative co-operation
  11. Specific enforcement and compliance
  12. Creating a new EU Social Intelligence and Investigation Agency (EU-SIIA)  body to prevent and detect illicit employment 

[1] One key report is  “Stepping up the fight against undeclared work”, INI/2008/2035
[2] According the Special Eurobarometer report “undeclared Work in the European Union” (October 2007) “undeclared work is a widespread phenomenon  in the European Union. On average, almost a quarter of the population is thought to be involved.”