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Plan to prevent the shadow economy

12-05-2011
On May 7th the law "R.D. Law 5 / 2011 dated 29th of April has entered into vigour, these measures taken are to help stabilize and control undeclared work and promote the rehabilitation of properties.

At CYCLO we have tried to summarize for our customers the changes that this new Decree brings and want to make clear the most important and relevant, in our opinion, which is the largest increase ever experienced in terms of fines (almost 400% more), as examples shown more below.

From this moment until the date of July 31st, a voluntary period has opened up so that employers can register workers that do not have contracts without having to give details of the length of time the situation has been this way.

The Social Security contributions may be postponed and the Labour Inspector Board cannot sanction these companies due to regularization of their workers.

Employers can decide on the type of contract for their workers with a minimum duration of 6 months, including the contracts that allow reductions on social security payments or any other assistance referred within the Law Act.

Companies that contract or subcontract through others to carry out work for them, must check prior to commencement of work their current status with the social security system of these subcontracted workers so that they are registered and up to date.

Once the deadline for this regularization process is elapsed, as from the 01.08.2011, various situations can arise that will be a considered as serious infringements:

* Companies that have not registered their workers prior to commencement of services.
* Companies that register their workers out of time frame allowed.
* Companies that register their workers solely by order from consequences of a Labour Inspection.
* Companies that contract or subcontract works and do not verify the registration of workers with the Social Security beforehand.

In all these cases, the offense is considered serious and the penalty faced by the offending companies which up to 31.07.2011 was between 626 Euros to a maximum of 6,250 Euros, has now been changed as of 01.08.2011 to between 3,126 Euros the minimum and maximum of 10,000 Euros.

To employee persons who currently receive unemployment benefits or pensions, is considered as a very serious offense and will receive a minimum fine between 6,251 Euros to 10,001 Euros, and the maximum remains the same of 187,515 euros.

Companies who commit serious or very serious offenses, will lose all rights to reductions and any type of aid with regards to employing from the date of the offense, and may be requested to make reimbursement of the aid received in addition to being excluded from the benefits to contracting for one or two years, depending on the severity of the offense.

On the other hand, companies that fall under this law without meeting requirements or finish contracts before the 6 month period established must repay aid given with reference to this contract.

For more information, you can consult the BOE dated 06.05.2011, or come by our office at Cyclo were will be happy to advise you on how to best to implement this new regulation.

Marta Llera
Human - Resource, Management BA

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