Government takes action against "growing" undeclared work

Undeclared work is a growing phenomenon in Finland, as evidenced by increasingly frequent contacts with occupational safety and health authorities and the observations made by the authorities during workplace inspections. "In times of crises, there is a higher risk of undeclared work and abuse," the Ministry of Economic Affairs and Employment says in a press release.

There are a number of factors contributing to an increase in undeclared work, including the free movement of foreign labour, freedom to provide services within the EU, global markets, and long subcontracting chains. The European Labour Authority (ELA), established in summer 2019, will intensify efforts to combat undeclared work and abuse in cross-border situations.

In its most serious forms, undeclared work may involve gross underpayment, extortionate work discrimination, or trafficking in human beings. An employer using undeclared labour may simultaneously commit several different offences related to taxation, social insurance, occupational health and safety, and labour law.

“In addition to having a negative economic impact on society, the shadow economy may, at its worst, involve serious employee mistreatment. We must take determined action in multiple sectors to eradicate this phenomenon, including measures to improve occupational safety and health supervision,” says Minister of Social Affairs and Health Aino-Kaisa Pekonen.

Restaurant and cleaning sectors

In undeclared work, payment is usually made in cash and not reported to the Incomes Register. The employer does not pay social security contributions such as the employment pension, unemployment insurance and accident insurance premiums. Undeclared work is particularly common in labour-intensive industries, such as the construction, restaurant and cleaning sectors and in temporary agency work, according to the government's assessment.

In the Eurobarometer survey in autumn 2019, almost 25% of the Finnish respondents said they personally knew someone who works without reporting their income to the authorities.

In June 2020, the government adopted a new strategy and action plan for tackling the grey economy and economic crime. The Government is investing approximately 15 million euros to enhance these actions during this parliamentary term. Actions to tackle the grey economy will focus on prevention, more effective access to information and cooperation between authorities.

“The Government has expanded its range of actions to combat the shadow economy. Among other things, we are taking stringent measures to tackle the exploitation of foreign labour. We must be able to ensure a fair labour market for all,” Minister of Employment Tuula Haatainen emphasises.

Higher risk of abuse

According to the Finnish government, crises affecting the economy and employment, such as the coronavirus epidemic, may result in an increase in undeclared work.

"Companies’ weakening operating conditions and employment situation may lead to unfair competition and employee mistreatment with regard to terms of employment and pay," says the release.

During the coronavirus crisis, special attention has been paid to the status of seasonal workers and safe working and living conditions.

For the government, "the best way to combat undeclared work is to encourage cooperation between various actors, and to share information."