Penalty for undeclared labor can add up to 26.000 EUR

Penalty for undeclared work is a reality also in these holiday months. The inspectors of the Financial administration are doing inspections on-site, which a Slovenian transportation company was also unfortunate to realize. What can happen, if an inspector discovers a person, who is does not work in that company?

Penalty for undeclared labor – an example from practice

An officer of the Financial administration of the Republic of Slovenia (FURS) did an inspection of a truck driver on a Slovenian highway rest stop. He discovered that the truck driver does not have a valid employment contract. Pleading that the offence would not happen again was in vain. The conclusion of the officer was that the person was doing undeclared labor. Hence, a penalty for undeclared labor was issued.

Penalty for undeclared labor – the definition

In accordance with the Law on prevention of illegal employment and labor, undeclared work is considered if the employer enables an individual to conduct work, even if he did not conclude an employment contract with him or has not enrolled him into social security funds or has terminated his enrollment to social security funds during the duration of his employment.

The example which we mentioned above is awaiting an epilogue. The employer has the possibility to submit evidence (like a valid employment contract). Therefore, it is not possible to predict, what kind of penalty for undeclared labor they would issue. The law predicts a penalty for the employer ranging from 5.000€ to 26.000€. It also predicts a penalty for the responsible person in the company ranging from 500€ to 2.500€. There is also a prescribed penalty for the individual, who does did not conclude a civil law contract, or has a contract of providing occasional labor, under which he provides his services for the whole duration of the labor on-site. The penalty for the individual ranges from 100 to 2.500€.

Penalty for undeclared labor – how to avoid it?

The legal department of Data company, who have vast experience from the field of labor legislation, suggest that when handling labor relationships within your company, always request consultation from an experienced legal advisor. Whether it is regarding contract of employment, service contracts or contract of cooperation. Inquire, in which cases you can conclude the mentioned contracts to avoid a penalty.

When offering legal consultation, we encounter many actual cases, when companies find themselves in trouble due to high penalties and other serious sanctions. Many also have to decide to close the company for those reasons. In most cases, they could avoid the complication, if they were informed about all the responsibilities, that the employer has to consider from the moment of opening the company.

To conclude – if an employer employs a worker and does not declare his labor with an appropriate contract or if an individual does the work without appropriately registering his business activity, it is considered undeclared labor.

In accordance with the Law on prevention of illegal employment and labor, it is not allowed to:

• Provide undeclared work or business activity
• Enabling undeclared work
• Employing workers without declaring their work
• Advertising undeclared work or business activity.

Not abiding by the legislation may result in issuing penalty to the company or individual.

What falls under undeclared work according to the law?

• If a legal entity carries out a business activity, which it did not register the act of establishment or if it does not have the appropriate documentation about fulfilling the conditions to carry out this business activity.
• If a self-employed person carries out a business activity, which he does not have included in the appropriate registry or he does not have documentation about fulfilling the conditions to carry out this business activity.
• Should a legal entity or self-employed person carries out a business activity despite the prohibition to carry it out.
• If an individual carries out a business activity or labor that is not registerd in accordance to the legislation
• If a foreign legal entity carries out a business activity in Slovenia without registering a branch office or having appropriate permits
• Should a foreign legal entity with a business seat in an EU country, country of the European Economic Area or the Swiss confederation, does not conduct the service business activity in accordance with the law, which regulates the services on the internal market.

Inspectors can issue a penalty to the legal entity if it enables undeclared work as mentioned above.

What falls under employing undeclared labor?

• If the employer, which fulfills the conditions to conduct a business activity, does not conclude a contract of employment with an individual and then does not enroll him into the mandatory social insurance or has terminated his enrollment to social security funds during the duration of his employment.
• If the employer does not conclude any other civil law contract with the individual, on the basis of which the individual could carry out his work.
• Should the employer not conclude a contract of temporary employment of a pensioner
• If the employer does not arrange the work of a student in accordance to the legislation
• If he employs a foreigner against legislation which regulates the employment of foreign citizens
• Should a legal entity or entrepreneur illegally employ a non-EU citizen
• When an individual in his name and on his behalf employs a worker, who does undeclared work for him.

Inspectors can issue a penalty to the legal entity or individual in such cases.

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