ETC alerts Contracts Department over undeclared work affecting competition
The Employment and Training Corporation has alerted the Contracts Department to be on the lookout for undeclared work that may be affecting fair competition in the award of public tenders."The ETC has alerted the Contracts Department to be on the...
The Employment and Training Corporation has alerted the Contracts Department to be on the lookout for undeclared work that may be affecting fair competition in the award of public tenders.
"The ETC has alerted the Contracts Department to be on the lookout for abuse. Even though no breakdown of the labour costs is given in the bid, it may be evident that the quoted prices are unrealistically low. These low prices could be an indication that employers are giving less than the minimum working conditions laid down by law. This is very unfair on other tenderers who play fairly," ETC general manager Felix Borg said.
Of course, abuse is even more serious when undeclared workers are registered unemployed claiming social benefits. Mr Borg said investigations are being carried out by the Investigations and Fraud Directorate at the Social Security Department. In its enforcement duties, the ETC works with various other entities such as the police, the Tax Compliance Unit, Malta Transport Authority among others.
"Let us be very clear: Such instances constitute fraud and the employer is an accomplice. In such cases, the ETC takes measures against the employer, removes the employee from the register and takes them to court, where the employer can be fined already mentioned before while the employee could be sued by the Department of Social Security to recover all the benefits he has received and for which he was not eligible" he said.
Abuse in employing foreigners illegally is also a serious offence. Employers found doing so are arraigned in court and can be fined up to Lm1,500 per person employed illegally if found guilty. The word illegally in this case means either without a valid work permit or without an engagement form - both documents make the employment legal. However, things could get much worse for abusers. The EU has issued a draft directive aimed at combating illegal employment among illegally staying third country nationals. Employers would be liable to financial penalties as well as to pay any tax and NI due on the presumed employment. The employee would be repatriated at the employer's expense.
The employer may be excluded from entitlement to public benefits, aid or subsidies and from public tenders. If the employer was a beneficiary of public aid or subsidies or EU funding, he will have to repay back any assistance received.
Tackling undeclared work has worked its way to the top of the national agenda but the ETC is not waving a big stick - at least for now.
Mr Borg said the ETC and the Inland Revenue Department have reached an agreement that will enable employers to fill in only one form to notify both entities of the engagement and termination of employees.
It is another step in a series being taken by the ETC (and IRD) to reduce bureaucracy, underlying its message: Both employers and employees have legal commitments that they should not ignore.
"Through regular press releases, we are reminding employers of their obligations and of the benefits of abiding by them," Mr Borg said.
"If they do not, they will face the consequences. Hundreds of employers are to be taken to court this year for employing workers - both local and foreign - illegally".
"If employers recruit someone they must send us the engagement form on the day of engagement (on the day of commencement for the self-employed). For terminations, they have four days.
The ETC makes it as easy as possible and one can now send the forms electronically. We also advise employers to ensure that the forms are correctly and completely filled.
"Employers must remember that the forms are not filled in for statistical purposes but to verify the employment and social security status of the employee; whether they are working or not has an impact on their rights. For example, if an employee loses his or her job, voluntarily or through redundancy, they cannot claim unemployment benefits until the termination form has been received by the ETC.
Employers' failure to abide by the law is very unfair on those who do as it means that they have lower labour costs, which means unfair competition. It is also unfair on employees who have no job protection and who get no protection if they are sick, injured or die. Their pension rights may also be negatively effected.
"At a social level, illegally employed persons are not paying tax or social security - which is unfair on those who do. They are not stealing from the state; they are stealing from those who are paying!
"There is a problem and it is clear that we have to address it," he said.
On a macroeconomic level, illegal employment distorts the employment contribution of the GDP, reduces the revenue due to the government for taxes and contributions, and suppresses the activity and employment rates.
The ETC carries out regular inspections and found 2,265 infringements last year, an increase of nine per cent over the previous year (see table). If the employee in question is Maltese, the employer is given 15 days in which to regularise his position and pays a Lm25 fine. If the ETC is ignored, the employer faces court and fines up to Lm500 - for each undeclared employee. Mr Borg is fully aware of the complexity of the situation.
"Employers complain to us that it is the employees themselves who do not want their employment to be regularised. We suggest that they explain to employees why it is important for their own sake - and also point out that the employer will bear responsibility for breaking the law.
"On the other hand, workers complain that employers will only take them on irregularly. They should avoid this because it is illegal and because it leaves them vulnerable to abuse."
The ETC has expressed concern over the wages and working conditions being offered by employers in some sectors, which are discouraging Maltese from filling those vacancies and may be creating artificial labour shortages. There are currently 6,500 foreigners holding work permits in Malta.
"We are aware that most foreigners are paid the minimum wage" ETC general manager Felix Borg said. "This is by no means a problem exclusive to Malta but one that is prevalent across the EU, especially in the construction, retailing and hospitality sectors. "Employers complain that they cannot compete with cheaper countries unless they pay cheap wages. The solution is not to suppress the working conditions but to be entrepreneurial and go upmarket. For example, if a hotel negotiates a bad rate from an operator and compensates for this by hiring low-wage workers, then the service standards go down - and tourism will suffer."
There are different procedures for the issue of work permits to foreigners depending on their circumstances.
• A foreigner married to a Maltese who has freedom of movement can work without any procedures.
• Non-EU nationals as well as those from Bulgaria and Romania need a work permit. (Even though Bulgaria and Romania are in the EU, Malta invoked the right not to give automatic approval). Employers must apply to the ETC for a permit and submit the appropriate documentation. Permits are granted when there is a labour shortage or lack of expertise for that particular vacancy. The ETC will first verify that there are no Maltese or EU nationals who could fill the vacancy, posting details of it at the Job Centre and on the ETC website for two weeks.
• The permit is valid for one-year and unless issued conditionally, is renewable. It is issued to the employer to employ the foreign worker for that specific vacancy and the foreigner is not allowed to do any other job.
• EU nationals (except for those from Bulgaria and Romania) have an automatic right to work in Malta but must first get a permit from the ETC. This is issued with minimum delay and the engagement form must be submitted by the employer when he is picking up the permit.
• Refugees as well as those who have been granted temporary humanitarian protection get a work permit automatically - in their names, meaning that they can take up any job. The employer must fill in engagement and termination forms.
• Foreign workers posted to Malta by their firms no longer need permits or engagement forms, following a recent administrative decision on this category, as they are considered to be in the employment of the overseas company and not the local branch. The Department of Industrial and Employment Relations needs to be notified, however.
• Abuse can be reported anonymously to the ETC on freephone 800 76501 or by e-mail etc@gov.mt
"The ETC has alerted the Contracts Department to be on the lookout for abuse. Even though no breakdown of the labour costs is given in the bid, it may be evident that the quoted prices are unrealistically low. These low prices could be an indication that employers are giving less than the minimum working conditions laid down by law. This is very unfair on other tenderers who play fairly," ETC general manager Felix Borg said.
Of course, abuse is even more serious when undeclared workers are registered unemployed claiming social benefits. Mr Borg said investigations are being carried out by the Investigations and Fraud Directorate at the Social Security Department. In its enforcement duties, the ETC works with various other entities such as the police, the Tax Compliance Unit, Malta Transport Authority among others.
"Let us be very clear: Such instances constitute fraud and the employer is an accomplice. In such cases, the ETC takes measures against the employer, removes the employee from the register and takes them to court, where the employer can be fined already mentioned before while the employee could be sued by the Department of Social Security to recover all the benefits he has received and for which he was not eligible" he said.
Abuse in employing foreigners illegally is also a serious offence. Employers found doing so are arraigned in court and can be fined up to Lm1,500 per person employed illegally if found guilty. The word illegally in this case means either without a valid work permit or without an engagement form - both documents make the employment legal. However, things could get much worse for abusers. The EU has issued a draft directive aimed at combating illegal employment among illegally staying third country nationals. Employers would be liable to financial penalties as well as to pay any tax and NI due on the presumed employment. The employee would be repatriated at the employer's expense.
The employer may be excluded from entitlement to public benefits, aid or subsidies and from public tenders. If the employer was a beneficiary of public aid or subsidies or EU funding, he will have to repay back any assistance received.
Tackling undeclared work has worked its way to the top of the national agenda but the ETC is not waving a big stick - at least for now.
Mr Borg said the ETC and the Inland Revenue Department have reached an agreement that will enable employers to fill in only one form to notify both entities of the engagement and termination of employees.
It is another step in a series being taken by the ETC (and IRD) to reduce bureaucracy, underlying its message: Both employers and employees have legal commitments that they should not ignore.
"Through regular press releases, we are reminding employers of their obligations and of the benefits of abiding by them," Mr Borg said.
"If they do not, they will face the consequences. Hundreds of employers are to be taken to court this year for employing workers - both local and foreign - illegally".
"If employers recruit someone they must send us the engagement form on the day of engagement (on the day of commencement for the self-employed). For terminations, they have four days.
The ETC makes it as easy as possible and one can now send the forms electronically. We also advise employers to ensure that the forms are correctly and completely filled.
"Employers must remember that the forms are not filled in for statistical purposes but to verify the employment and social security status of the employee; whether they are working or not has an impact on their rights. For example, if an employee loses his or her job, voluntarily or through redundancy, they cannot claim unemployment benefits until the termination form has been received by the ETC.
Employers' failure to abide by the law is very unfair on those who do as it means that they have lower labour costs, which means unfair competition. It is also unfair on employees who have no job protection and who get no protection if they are sick, injured or die. Their pension rights may also be negatively effected.
"At a social level, illegally employed persons are not paying tax or social security - which is unfair on those who do. They are not stealing from the state; they are stealing from those who are paying!
"There is a problem and it is clear that we have to address it," he said.
On a macroeconomic level, illegal employment distorts the employment contribution of the GDP, reduces the revenue due to the government for taxes and contributions, and suppresses the activity and employment rates.
The ETC carries out regular inspections and found 2,265 infringements last year, an increase of nine per cent over the previous year (see table). If the employee in question is Maltese, the employer is given 15 days in which to regularise his position and pays a Lm25 fine. If the ETC is ignored, the employer faces court and fines up to Lm500 - for each undeclared employee. Mr Borg is fully aware of the complexity of the situation.
"Employers complain to us that it is the employees themselves who do not want their employment to be regularised. We suggest that they explain to employees why it is important for their own sake - and also point out that the employer will bear responsibility for breaking the law.
"On the other hand, workers complain that employers will only take them on irregularly. They should avoid this because it is illegal and because it leaves them vulnerable to abuse."
The ETC has expressed concern over the wages and working conditions being offered by employers in some sectors, which are discouraging Maltese from filling those vacancies and may be creating artificial labour shortages. There are currently 6,500 foreigners holding work permits in Malta.
"We are aware that most foreigners are paid the minimum wage" ETC general manager Felix Borg said. "This is by no means a problem exclusive to Malta but one that is prevalent across the EU, especially in the construction, retailing and hospitality sectors. "Employers complain that they cannot compete with cheaper countries unless they pay cheap wages. The solution is not to suppress the working conditions but to be entrepreneurial and go upmarket. For example, if a hotel negotiates a bad rate from an operator and compensates for this by hiring low-wage workers, then the service standards go down - and tourism will suffer."
There are different procedures for the issue of work permits to foreigners depending on their circumstances.
• A foreigner married to a Maltese who has freedom of movement can work without any procedures.
• Non-EU nationals as well as those from Bulgaria and Romania need a work permit. (Even though Bulgaria and Romania are in the EU, Malta invoked the right not to give automatic approval). Employers must apply to the ETC for a permit and submit the appropriate documentation. Permits are granted when there is a labour shortage or lack of expertise for that particular vacancy. The ETC will first verify that there are no Maltese or EU nationals who could fill the vacancy, posting details of it at the Job Centre and on the ETC website for two weeks.
• The permit is valid for one-year and unless issued conditionally, is renewable. It is issued to the employer to employ the foreign worker for that specific vacancy and the foreigner is not allowed to do any other job.
• EU nationals (except for those from Bulgaria and Romania) have an automatic right to work in Malta but must first get a permit from the ETC. This is issued with minimum delay and the engagement form must be submitted by the employer when he is picking up the permit.
• Refugees as well as those who have been granted temporary humanitarian protection get a work permit automatically - in their names, meaning that they can take up any job. The employer must fill in engagement and termination forms.
• Foreign workers posted to Malta by their firms no longer need permits or engagement forms, following a recent administrative decision on this category, as they are considered to be in the employment of the overseas company and not the local branch. The Department of Industrial and Employment Relations needs to be notified, however.
• Abuse can be reported anonymously to the ETC on freephone 800 76501 or by e-mail etc@gov.mt