Undeclared work and wages usually mean an employee’s wages or their part that are not reported to the authorities, and from which no tax or social insurance contributions are withheld. Undeclared wages are usually paid in cash and are left unreported to the Incomes Register. Correctly reported work provides employees with rights to appropriate wages, working hours, occupational safety and health, and social security to guarantee sick pay and accumulate pensions. Statutory contributions paid for work are also used to finance societal activities and public services.
Undeclared work may also involve the misuse of social security. To explain their income in taxation, an individual who carries out undeclared work may need to seek various benefits. The question is also of misuse when an individual carries out undeclared work because they do not want to lose their right to simultaneous social benefits.
When agreeing upon work, employees must identify whether they are in an employment relationship or whether they work as an entrepreneur, in which case non-wage compensation for work is paid and the employee is responsible for the payment of taxes and social security contributions. New forms of working in the platform economy, for example, blur the concept of an employment relationship. Read more about changes in the operating environment.
Companies that use undeclared employees have smaller employee costs than properly operating companies, receiving an unfounded competitive advantage over other companies operating in the same sector. Undeclared income and groundless expenses and additional tax deductions are considered undeclared work for self-employed individuals. Funds withdrawn unfoundedly by entrepreneurs from their company are considered undeclared wages. A company may finance undeclared wages by not entering all sales in accounting, for example.
Read more about undeclared workforce as a phenomenon.
Read more in the EU4FairWork campaign’s material that is still current today. The campaign’s goal was to raise awareness of the benefits of declared work among employers and employees, as well as inform decision-makers about the importance of preventing undeclared work.
<div class="attention-block">
<ul>
<li class="attention-block__content">Identify the rights and obligations related to employment:
<ul>
<li class="attention-block__content">Always request a written employment contract.</li>
<li class="attention-block__content">Only work based on a tax card.</li>
<li class="attention-block__content">Request a payslip and ensure that your wages are paid in your bank account.</li>
</ul>
</li>
<li class="attention-block__content">Check that your wages are in accordance with the relevant collective agreement.</li>
<li class="attention-block__content">Check your payslips regularly and your tax returns and <a href="https://www.tyoelake.fi/en/pension-record/">pension records [.fi]›</a> annually.</li>
<li class="attention-block__content">Make sure whether you are in an employment relationship or in the position of an entrepreneur.</li>
<li class="attention-block__content">When buying household or renovation services, check that the service provider is in the prepayment register (<a href="https://www.ytj.fi/en/index.html">www.ytj.fi [.fi]›</a>).</li>
</ul>
</div>
<div class="attention-block">
<ul>
<li class="attention-block__content">As an entrepreneur, see to taxes, and pension and accident insurance, and report your employees’ earnings payment data to the Incomes Register.</li>
<li class="attention-block__content">Take care of your reputation. It attracts customers and the best employees.</li>
<li class="attention-block__content">Always offer receipts for the products or services you have sold.</li>
<li class="attention-block__content">Identify any situations where the fulfilment of obligations is supervised separately by law. These situations include the obligation to provide information in construction, the contractor’s liability, and tax number registrations.</li>
<li class="attention-block__content">Identify the backgrounds of your business partners. Indicators of the use of undeclared employees include:
<ul>
<li class="attention-block__content">Payments are made to a third party and/or third country.</li>
<li class="attention-block__content">Payments are requested to be made in several accounts.</li>
<li class="attention-block__content">Payment schedules or business conditions differ from normal industry practices or procedures.</li>
<li class="attention-block__content">Read more about the signs of fraudulent activities on the <a href="https://www.vero.fi/en/grey-economy-crime/how-to-act/prevent-vat-fraud/">prevent VAT fraud in your business activities</a> page.</li>
</ul>
</li>
</ul>
</div>
<p><img src="https://www.vero.fi/globalassets/harmaa-talous-ja-talousrikollisuus/toimi-oikein/kuvat-videot-ja-tiedostot/taben_pimea.png" alt="The most serious forms of undeclared work involve blatant underpayment or putting the employee in a significantly unfair position, such as by taking advantage of their financial distress or dependence on the employer. As the foreign workforce increases in Finland, the risk of employee abuse is also rising. Discrimination and the exploitation of a weaker position are not part of working life – appropriately agreed employment terms and proper working conditions belong to everyone." width="800" height="181" /></p>
<p>Read more about <a href="https://www.vero.fi/en/grey-economy-crime/phenomena/new-ways-of-working/the-shadow-economy-is-part-of-the-business-model-of-labour-exploitation-and-human-trafficking/">the signs of labour exploitation and human trafficking</a>.</p>
Act correctly to combat the shadow economy and financial crime
