In July 2006, the Slovenian government adopted draft amendments to the law on the prevention of undeclared work and employment. Under the amendments, the work of a student without an appropriate referral is considered as undeclared work. Furthermore, undeclared workers are now regarded as having concluded an employment contract for an indefinite period. Conversely, work of a short duration and small jobs are no longer considered to be undeclared work.
Context
In the 1980s, the illegal economy was at its peak in Slovenia; some experts estimated that it amounted to as much as 38% of gross domestic product (GDP). Later calculations by the Ministry of Labour, Family and Social Affairs (Ministrstvo za delo, družino in socialne zadeve, MDDSZ) put the percentage between 16.8% and 21.3% of GDP.
The European Commission’s report on Undeclared work in an enlarged Union (1.27Mb PDF) estimated that the level of undeclared work in Slovenia stood at 17% of GDP in 2003. In the same year, MDDSZ stated that the share of the illegal economy, according to various estimates, ranged between 17% and 25% of GDP (SI0401102F). Slovenia – along with Poland, Hungary, Lithuania, and Latvia – experienced a medium level of undeclared work, which ranged between 14% and 23% of GDP, but which was declining.
However, in the National Action Plan for Employment 2004 (296Kb PDF) (SI0406205T), MDDSZ stated that the illegal economy was relatively small and amounted to 6.9% of GDP in 2000, according to data from the Statistical Office of the Republic of Slovenia (Statisticni urad Republike Slovenije, SURS) using the revised GDP estimate. Recently, MDDSZ has explained that different estimates depend on the methods used.
New amendments
On 27 July 2006, the government adopted the draft amendments to the Act on the prevention of illegal work and employment (109Kb PDF) of April 2000 and submitted them to the parliamentary procedure; by September 2006, the draft amendments were in the second reading. The proposed amendments contain the following provisions:
- general provisions – definitions of activities and work considered to be undeclared work, of cases where the employment of workers is considered to be undeclared employment, of co-participants in undeclared work, and of illicit advertising;
- exceptions which are not defined as undeclared work or employment, for example: mutual neighbourly help, work exclusively for personal needs, emergency work, humanitarian, charity and voluntary work, personal supplementary work, work of short duration and ‘small work’;
- control provisions;
- penalty provisions;
- transitional and final provisions.
Innovative features of new provisions
In Slovenia, secondary school and university students may obtain temporary and periodic work through a student or youth organisation, such as a dedicated student service or job intermediation agency, on the basis of a referral from the particular organisation and without concluding a work contract. However, in many cases, a company or an entrepreneur employs a student who does not have the proper referral. Moreover, in other cases, a student referral is used by another person, for example where a student passes their referral on to another student or a person who is not a student. Under the new amendments, all such cases are also considered to be undeclared employment.
Another provision relates to situations where a company or an entrepreneur does not conclude an employment or other contract with an unemployed person who carries out work for them, in other words undeclared employment. Under the new provisions, such a person is now considered to have concluded an employment contract for an indefinite term. Accordingly, the company must provide the person with a written employment contract for an indefinite period within three days after the labour inspector discovers the undeclared employment. If the company does not provide the person with a contract, the worker can demand judicial protection at the Labour and Social Court (Delovno in socialno sodišce).
Work of short duration, defined as work without pay lasting a maximum of 40 hours a month, is no longer considered to be undeclared employment. It can be carried out in a micro-company, in an institution – that is, a non-profit educational, cultural, scientific or similar organisation – or where an entrepreneur is employing a maximum of 10 employees. It can be carried out by a spouse of the entrepreneur, by the owner or co-owner, or by a first-degree relative. This work can be legally performed on the basis of a previous registration at the local administrative unit.
Small jobs, defined as work lasting a maximum of 20 hours a week and not more than 40 hours a month, are also no longer considered to be undeclared employment, where payment for this work does not exceed 50% of the minimum wage (SI0608019I, SI0405102F). Small work can be performed by a person who has not concluded a full-time employment contract, who is not self-employed and who is not receiving a pension. An employer and a person performing small work must conclude a contract referred to as a ‘contract on small work’.
Control and penalty provisions
Implementation of the amended act’s provisions is to be controlled by the inspectorates, along with other bodies. The relevant inspectorates include the:
- Market Inspectorate of the Republic of Slovenia (Tržni inšpektorat Republike Slovenije, TIRS), which controls, for example, whether a legal entity performs an activity that it has not entered into the register of companies, or whether it fulfils the requirements to perform the registered activity;
- Labour Inspectorate of the Republic of Slovenia (Inšpektorat Republike Slovenije za delo, IRSD), which controls, for example, whether a legal entity or an entrepreneur concluded an employment contract with a worker and registered them for health, pension and disability insurance;
- Transport Inspectorate of the Republic of Slovenia (Prometni inšpektorat Republike Slovenije, PIRS), which controls the implementation of some provisions that the TIRS also controls.
The powers of the abovementioned inspectorates are determined by the act on undeclared work and other laws. In addition, the Tax Administration of the Republic of Slovenia (Davcna uprava Republike Slovenije, DURS) keeps several records. The DURS, the customs administration and the agriculture, forestry, building and other inspectorates indirectly control the implementation of the act’s provisions.
Penalty provisions determine various fines, the seizure of production items, the prohibition of certain activities being performed and other sanctions.
Response of the social partners
On 30 June 2006, the new draft amendments were discussed at the 147th session of the Economic and Social Council of Slovenia (Ekonomsko socialni svet Slovenije, ESSS).
Trade unions were satisfied with the provision allowing for undeclared work to be regarded as concluding an employment contract for an indefinite term. However, they were against the provisions on work of a short duration and small work, arguing that these provisions allow for, or even legalise, undeclared work.
Meanwhile, employers were satisfied with the provisions enabling family-run enterprises to utilise the help of family members without remuneration.
Commentary
By introducing new provisions for ‘work of a short duration’ and ‘small work’, the government has added two new types of work or work patterns to the legislation. At the same time, it has increased the flexibility of the labour market and decreased the rigidity of the legislation, by adjusting it to take into account labour market developments and by reducing the constraints affecting the development of small family businesses.
These provisions can also be seen as measures aimed at preventing undeclared work and employment or at legalising the existing practice so that people will not be forced into undeclared work (Regioplan Research Advice and Information, Undeclared labour in Europe (552Kb PDF), Report for the European Commission, Amsterdam, 2001). It is not surprising that the representatives of the Chamber of Crafts of Slovenia (Obrtna zbornica Slovenije, OZS), representing independent craftworkers and small enterprises, along with representatives of the Slovenian Employers’ Association of Crafts (Združenje delodajalcev obrtnih dejavnosti Slovenije, ZDODS) (SI0211102F) were satisfied with this new policy measure.
Trade unions, on the other hand, were particularly satisfied with the new provisions concerning undeclared workers. It is hoped that, as a consequence, employers will refrain from the practice of undeclared employment.
Given the balance of measures, whereby some measures satisfy employers while others please the trade unions, it appears that the government has tried to secure the approval of both social partners in relation to these new amendments.
Štefan Skledar, Institute of Macroeconomic Analysis and Development