Undeclared work in the EU refers to paid activities that are legal in nature but not reported to public authorities. This often occurs in areas like agriculture, construction, services to private households. However, it is not limited to these parts of the economy.
Work can be partially or fully undeclared. Typical forms of partly declared work include "envelope wages" or "cash-in-hand" payments on top of a (fairly small) declared wage.
Why is undeclared work a problem?
Undeclared work creates challenges for all parties:
WorkersIt often means no access to social benefits, job security, or legal protections. Workers may face exploitation and unsafe working conditions.
BusinessesCompanies that follow the rules face unfair competition from those that do not.
GovernmentsUndeclared work leads to lost tax revenue and social security contributions, which affects public services like healthcare and education.
ClientsProviders will not guarantee for services provided undeclared and might not be insured when an accident happens, thus liability for damages can fall on the client.
A 2019 survey revealed that one in ten Europeans had purchased services that might involve undeclared work. Additionally, one-third of Europeans said they knew someone working undeclared. Many people believe the risk of getting caught is low, which contributes to the problem.
How to address undeclared work?
Undeclared work should best be addressed with a holistic approach, including
- good policy design, which allows citizens and companies to operate declared,
- good governance, which assures that money given to ‘the State’ or social security, is used well,
- information about rules, including how to comply easily and campaigns to increase awareness how important compliance is
- sufficient and efficient checks that compliance with rules is safeguarded,
- effective sanctions in case undeclared work is discovered.
The fight against undeclared work is mainly the responsibility of national authorities, including labor inspectorates, social security inspectorates, and tax authorities, supported by social partners and other bodies in some Member States.
EU initiatives
European Platform tackling Undeclared work
To support national efforts, the EU has created the European Platform to tackle undeclared work.
Here experts from Member States and Social Partner organisations work together to exchange national and sectoral experiences on how to address or avoid undeclared work.
Quality jobs must be declared
The Quality Jobs Initiative, highlights the importance of compliance with labour laws to ensure a fair and safe working environment for everyone. Being declared is a first for a job to be a quality job.
Background publications
Beyond the documents and publications put together by the European Platform Tackling Undeclared Work , the European Commission published in 2023 a "Study on the Effectiveness of Policies to Tackle Undeclared Work" which analyses current strategies and their success in reducing undeclared work.