Poland's informal economy: a false self-employment scandal

ICFTU Online…, 003/120104, 12 January 2004

Brussels, 12 January 2004 (ICFTU online. In this month's spotlight interview, Janusz Sniadek, President of NSZZ Solidarnosc, speaks out against false self-employment in Poland. In the construction and transport sectors, salaried employees are being fired and forced to become self-employed if they want to get their jobs back. They continue to work for the same employer but no longer enjoy the same benefits.

What are the main features of the informal economy in Poland?

It is difficult to obtain any reliable figures. According to official figures, the informal economy represents 15% of GDP. But the percentage is in fact much higher than that. And it is not migrants but Polish citizens themselves who form the majority of the informal workforce. Some 2 million Poles and 150,000 migrants work in the informal economy. It is a fast-growing trend that is set to provoke serious problems. It mainly involves atypical jobs done by self-employed workers who are not covered by any kind of employment contract or collective agreement. There is only a contract between two companies who are in fact two individuals.

Nowadays, owing to the high unemployment rate (almost 20%), most of those working in the informal economy are officially registered unemployed. In the past, workers often combined two jobs, formal and informal. But it is still difficult to obtain any precise figures in this area.

These employers often pay the lowest possible official wages, so as to pay a minimum level of tax, and then pay their employees the remaining amount cash-in-hand. The informal economy has developed in sectors where unions are least present. There are 3.5 million companies in Poland, of which 2.5 million only have one salaried employee, only 100,000 have over 9 salaried workers, and 10,000 employ a large number of salaried staff.

Workers in the transport and construction sectors are being dismissed and forced to register as self-employed workers. The government is also pushing people towards the self-employment option, by offering them tax breaks. And if these “self-employed” workers want social protection, they can take out minimum insurance, which they have to pay for themselves.

It's a form of dumping, a kind of unfair competition against companies that continue to employ salaried staff in the traditional way. It is resulting in the closure of the traditional companies whose former salaried employees naturally go on to work in the informal economy.

Do Polish unions help these workers?

The easiest way would be to denounce those companies using informal work practices; we can always report them to the Labour Inspectorate. But the problem is that employees of these companies, often paid an official minimum rate supplemented by cash-in-hand, will do nothing to support such reports as they are afraid of losing their jobs or their wages.

Joining a union would also mean losing their jobs, because according to Polish law only workers with a legal employment contract are allowed to join a union. That's why our number-one task is to prevent job losses in the formal economy. There is still a lot to be done. First of all, we have to protect our members from dismissal. The challenge facing trade unionists today is that of ensuring the survival of our companies, and the survival of our unions.

We cannot put an end to the informal economy through regulation, by police force, or using persuasion. It will disappear the day when the divide between Eastern and Western Europe is no longer so deep. The only way to achieve this is by developing our economy to reach a degree of equality between Eastern and Western Europe.

What are you doing to save jobs in the formal economy?

For the moment, we are not pushing for wage rises. Our priority is to save the jobs of the companies threatened with closure. We are like doctors looking after an unhealthy patient.

Our second concern is the payment of salaries. Around 10% of Polish workers do not receive their salaries on a regular basis.

Finally, during 2002, we fought to obtain improvements in the Employment Code for the sectors undergoing restructuring. For example, we filed a petition of 650,000 signatures in support of a law to obtain a special pension for the youngest and oldest workers.