For the first time in Ukraine, the Legal Development Network studied the legal problems of informal laborers

Publication date: August 6, 2021

What are the legal problems of informal laborers? What new challenges did they face during the Covid-19 pandemic? What are the reasons that motivate employers to work in the shadows? These and many other questions are answered in the study “The Impact of the Covid-19 Pandemic on the Legal Needs of Informal Employees in Ukraine.” The Legal Development Network recently presented it with the participation of Ukrainian and international experts and representatives of public authorities, civil society, and trade unions.

The study was preceded by the Legal Development Network’s participation in a thematic group that worked on labor rights issues during a series of national consultations on people-centered justice. As it turned out then, in Ukraine and the world in general, there is a lack of thorough research on informal employees’ legal needs and problems. Therefore, it is an obstacle to creating a practical roadmap for developing strategies and policies to reduce undeclared work and its negative consequences.

The Covid-19 pandemic has exacerbated labor issues in general. In 2020, appeals regarding labor rights to Ukrainian legal aid providers had increased significantly. In particular, the number of such requests to the member organizations of the Legal Development Network has doubled.

“Unfortunately, in cases of violation of labor rights, informal laborers have almost no chance to protect their rights,” said Yevgen Poltenko, the executive director of the Legal Development Network.

The study, conducted with the support of the International Renaissance Foundation, allows to “shed light” on the problem of informal employment, the reasons for its emergence, understand the scale, and propose and discuss specific solutions. As informal employment is a complex, multidimensional phenomenon with various manifestations in the Ukrainian context and the world, it is essential to look at it in a global context.

Gustavo Maurino, Research Fellow, Center for International Cooperation, New York University, Former National Director of the Office of Access to Justice in Argentina and member of the Working Group on Justice, said:

“Research confirms that all countries have the same problems, regardless of income level. We must have a global dialogue on these studies and these issues. The methodology is important: it is about capturing the experience of people who face this problem on a daily basis. A people-centered approach to focus groups was important because it explains how people experience these problems. Then we move on to another level – institutional, to find solutions.” 

Swati Mehta, Senior Program Officer, Pathfinders for Peaceful, Just and Inclusive Societies, emphasized the leading role of studying contexts and conducting public dialogue, involving all stakeholders, such as ministries, employers, and, most importantly, the people affected.

“When we talk about people-centered justice, we also have to think about a strategy to prevent injustice. One of the critical factors of injustice is the development of relations between people and the government. When people do not have access to basic services, they lose faith in the government. We need to find other ways to protect human rights and how to regulate this sector. And this, in turn, should become an important component of the social contract, which will affect the level of public confidence in the entire justice system, “ said the expert.

In confirmation of this, Maksym Shcherbatiuk, Program Director, Ukrainian Helsinki Human Rights Union, noted:

“Today, our judicial system and administrative mechanisms are not efficient and accessible to the people, so they have little confidence. To turn to human rights institutions more often, it is necessary to create such mechanisms that would allow the judiciary to respond more effectively to these challenges. “

Vasyl Andreiev, Head of the Trade Union of Construction and Building Materials Industry of Ukraine, noted:

“Employers do not consider formal employment at all as a way out of overcoming the personnel crisis. They talk about advertising campaigns, agencies to attract new employees, but not about formal employment. Because it is expensive, unprofitable, and in general, it is difficult to lay off laborers later. There is no strategy to formalize all employees in Ukraine. There is an approximate strategy that the legislation will change, and the conditions of employment and dismissal will be facilitated. But no one asked employers if they would formalize their employees’ employment after such changes. “

Olga Halchenko, Human rights and justice Program Coordinator, International Renaissance Foundation noted that the Covid-19 pandemic had raised issues in labor relations.

“We have heard experts from different countries, and I think we can say that we are on the same page on human rights issues. I think that study can become a solid foundation for a common agenda and joint actions in the future, ” said Olga Halchenko.

The study “The Impact of the Covid-19 Pandemic on the Legal Needs of informal employees in Ukraine” was a challenge for the research team due to the lack of reliable statistics on the statistical population of informal laborers and the secrecy of this social group. Oleksandr Shcherbatiuk, the sociologist, coordinator of the sociological group of the study, spoke about how these difficulties were overcome, outlining the research methodology.

“When we planned to conduct both focus groups and quantitative research, we understood that we would face problems of failure and low dynamics of focus groups. The situation was the same with in-depth interviews. I want to note the professional work of the entire team that was involved in the study. Despite these challenges: a large number of failures and the complexity of the negotiations, we managed to collect data of sufficient quality to be considered reliable, ” said the expert. He also explained that the leading group of informal employees included a control group – officially employed persons. As the study is not representative of the informally employed, the control group allows comparing the results among the informally employed and the formally employed at the stage of problem analysis and development of recommendations.

“It seems to me that many aspects still remain unexplored, such as the role of employers, the role of the judiciary in informal employment. In my opinion, the research tools that have been developed can be adapted and used in future projects, set the vectors of future research and future activities in general, “– summed up Oleksandr Shcherbatiuk.

At the same time, Roman Romanov, Human rights and justice Program Director, International Renaissance Foundation, said: “We often underestimate the importance of research not only in shaping public policy but also in setting priorities for civic activism. There is a hypothesis that people suffer and need to be protected. But it is important to understand what people really need before protecting them. This study shows that many people do not want to be protected because informal employment is their conscious choice. This is due to a number of reasons: the difficulty of building a career in official institutions, the uncertainty of the prospects for pensions, and non-functioning protection mechanisms. Therefore, the people-centered approach to the study opens an interesting agenda for the activities not only of government agencies, public policy-making but also for stakeholders of the sphere of employment.”

Yevgen Poltenko presented the key findings of the study. He pointed out that the most undeclared work occurs in such areas as trade, construction and repairs, industry, personal services, hotel and restaurant business, household assistance, especially in small and medium enterprises. Instead, it is almost non-existent in medicine, pharmaceuticals, education, science, security, and safety; informal employment is practically non-existent in big business, public, and municipal sectors.

“It came as a surprise to us that a relatively large number of informal employees work full time – almost 60%. The study found that informal employment is more common in women between the ages of 18 and 45. Informal laborers have a slightly lower level of education than officially employed, and work an average of 4.5 years, while formally employed 9.5 years, “– said Yevgen Poltenko.

Motivational factors to resort to informal employment are higher wages by avoiding paying taxes, the ability to get it at a convenient time, quickly changing jobs, and work remotely.

Interestingly, three-quarters of the informally employed are trying to find a formal job or legalize their employment. However, employers cannot satisfy such a request. According to the respondents, the simplification of the procedure for registration of employees for small or irregular jobs and the process of paying taxes can solve the problems of informal employment.

The informally employed are more likely than the officially employed to have consequences such as stress, loss of health, job loss, and damage to family relationships.

The study showed that advocating for labor rights in the case of informal employment is 6.5 times more likely to end in dismissal than in the case of formal employment.

As a result of the pandemic, informal laborers receive lower wages, lose their jobs, cannot seek social protection, do not receive sick leave, and face deteriorating working conditions.

Vitalii Okhrimenko, Program Manager, Legal Development Network, remarked: “Today, some of the speakers have already mentioned the formation of new social contracts. And this is a fundamental issue in the context of new areas of the economy and such systemic structural phenomena as informal employment, the shadow economy. “

Vitalii Okhrimenko presented the recommendations developed based on the results of the research. He also drew attention to the need for systematic analysis to help monitor the situation, find trends, make decisions, and shape policies. “We understand that we have researched only 50% of what is needed – the needs of employees. Research should also be done on employers – those who work officially, semi-officially, in the “shadow.” This is a great challenge for all of us because it is not possible to form a road map without this data. It is also essential to improve administrative statistics. It would be good if the State Statistics Service of Ukraine paid attention to improving its methodology for defining informal employment and also paid attention to individual workers, self-employed persons in the informal sector, and household members, who are undoubtedly representatives of the informal sector, but which we often forget “, – said Vitalii.

Olena Konovalova, Deputy Director, Department of Labor of the State Labor Service of Ukraine, spoke about the service’s approach to formalizing undeclared work.

“Thank you for your study. It was my pleasure to learn it. We have not yet taken into account certain aspects in our analysis. We will start using some points shortly when assessing the level of undeclared work, ” said Olena Konovalova.

One of the possible components of resolving the issue of undeclared work, Heorhii Sandul, Head of the Labor initiatives NGO, considers associations in which informal laborers could unite. This, in turn, requires strengthening the institutional mechanism.

Oleksii Dobronravov, Head of the expert group, Directorate of IT Industry Development of the Ministry of Digital Transformation of Ukraine, shared his experience of transforming informal employment into a formal plane in IT and creative industries through the implementation of the tax and legal system Diia City. Among the ways to formalize the relationship, she offers a GIG contract.

“Through the prism of civil law – this is a specific form of contract. Gig-workers have all the social guarantees that employees have today – sick leave, guaranteed leave of at least 18 days, in case of dismissal earlier than two weeks – compensation. The idea is to create self-government among Diia City residents that is better than the government knows what the industry needs. The industry has effective tools for participation in policy-making, ” Oleksii Dobronravov explained.

Summing up the discussion, Yevgen Poltenko drew attention to the key opinions of experts: building social dialogue to find common solutions with the participation of all stakeholders, building trust, a people-centered approach, assessing the costs of injustice. “Speaking of our next steps, it is important to understand the needs of employers, if we talk about building communication platforms, a social contract, without which change will not happen,” – said Yevgen Poltenko.

An Executive Summary of the study

Video

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