New proposals to punish employers who fail to declare their workforce

Employing people on a cash-in-hand basis is already illegal in 17 of the European Union's 27 member states. Now, the Labour Minister, Petr Necas, wants to clamp down on the practice here in the Czech Republic too. He plans to punish employers who fail to declare members of their workforce. How? By levying them with heavy fines or even sending them to prison.

Petr Necas, photo: CTK
On Wednesday, the Labour Minister told journalists that he plans to crack down on employers who don't declare their workforce.

Stepan Cernousek is a spokesperson for the Ministry of Labour and Social Affairs, I asked him why Minister Necas had decided to do something about the problem now:

"For a long time, this problem has not been dealt with. And this means that employers aren't scared of taking on people illegally. And this in turn means that the state loses billions of crowns, because these employees are claiming benefits, but they aren't paying tax."

But just how widespread a problem is undeclared labour in the Czech Republic? Again, Stepan Cernousek:

"It is a relatively large problem, because it encompasses, according to really very rough estimates, somewhere in the region of 150 to 250 thousand people. Tens of thousands of these people are foreigners."

Karel Petrzelka is from the Confederation of Industry in the Czech Republic. He agrees with the ministry's statistics, but not with its approach to the problem:

"It's a huge number, and really it can create, and it does create, huge losses for the fiscal authorities etc. But, to be frank, it should be punished in less harsh a manner."

Those who are caught repeatedly employing workers illegally could face a spell in prison. But, as Mr. Cernousek from the ministry explains, in the majority of cases, the punishment will be less severe:

"At the moment, we are only proposing to hand out suspended sentences to those who offend. That means that they wouldn't go to prison for their first offence. But at the same time, they would have to pay a big fine. This fine could be so large that it could force offending firms into bankruptcy."

This fine could be anything up to 50% of a firm's yearly turnover, which, according to Mr. Petrzelka is far too much. He thinks that the government should invest less energy into catching out employers and more energy into revamping its own employment bureaus, as a means of solving the problem:

"We think it would be much more flexible if labour offices worked effectively and fulfilled their duties. They could work preventatively if they had more power. If labour offices themselves could hand out bigger penalties, then this would be, I think, more effective."

Minister Necas' proposals have won the support of Prime Minister Mirek Topolanek, and unions seem to back the scheme as well. But it is still early days for the proposals, no legislation is expected before the end of the year.