Undeclared work

Undeclared work is considered something the employer does, such as not declaring that their employee is active. Commonly, synonyms for hidden work are: undeclared work, off-the-books work, or off-the-books work.

It is obviously referred to as the underground economy because it is an offense punishable by law and is divided into two types:

• The first being the concealment of part or all of the activity
• The second would be the concealment of the fact that the employee is employed and performing their duties

Hidden Work Labor Code

The applicable article is L8221-3 of the labor code which clearly states that in the case where an employer has their employee perform tasks or services to earn money and does not report it, it is concealment of activity.

• This could initially be voluntary on the part of the employer, meaning they do not want to record their employee’s registration in the commercial register
• It may also be a continuation of activity due to a refusal of registration or even retrospectively because the said employer has been removed from the commercial registers
• Finally, there is the fact that the company continued to operate even after social protection prohibited it from operating because it did not declare its taxes or income for two consecutive years.

But in 2018, new content was added to the labor code, namely article 2018-771. This refers to concealment of work. By way of example, it describes a non-French based company that has an outsourced activity in France and needs to employ French employees. To overcome this difficulty, they will try to hire foreign personnel so that social contributions are less burdensome.

There are also other cases of hidden work

• Firstly, when the employer recruits their new employee, they do not declare them
• It is also possible that there is no payslip or a falsified payslip that only indicates the legal hours when the hours worked are much longer.
• Sometimes, employers do not declare their contributions owed to Urssaf or the tax authorities and even the statements, they do not send them annually regarding the declarations of data and social contributions.

Hidden Work Penal Code

According to the labor code, stipulated in article 8211-1, hidden work or off-the-books work is an action that violates the law and leads an employee to work illegally. It literally means that a company or employer hides from the administrations and competent authorities that work is being performed by a person.

This work will be carried out to obtain an increase in the company’s production, to transform goods and products, and also to repair things. It also refers to services or exchanges performed by a company that intentionally seeks to evade its obligations under the law.

The means that can be used for this undeclared work are the following:

• Not requesting the registration of the said company in the company register or the commercial register.
• Not registering with the commercial register, even though the law requires it.
• It is also likely that the company continues to operate even after the refusal of its registration or even after its removal.
• It is also possible that the employer has not made a declaration of activity to the social security organizations.

Moreover, declarations to be made to organizations protecting business life have not been made, neither to the tax administration nor to the competent administrative authorities. For this reason, article L8221-5 stipulates that the concealment of employment by the employer is considered undeclared work. Notably because this employer will intentionally try to evade administrative formalities such as declaring a hiring, for example.

It is also for this reason that every employer is obliged to provide or issue a payslip indicating the exact hours worked by their employee. In the case where the declared hours are not equal to those actually worked, it will be undeclared work.

Sanction for undeclared work

What risks does the employer face in this case?

There are two types of sanctions. The first is that undeclared work is an offense formally prohibited by legislation and punished by the penal code. This is stipulated in articles 8224-1 and 8224-3 of the labor code. Thus, when a person reports an employer who engages in undeclared work, they will be inspected.

Firstly, in the case of a natural person, they face a penalty of 3 years imprisonment and a fine of up to 45,000 euros. In the case of a legal entity, a company to be precise, the penalty can even reach 225,000 euros, in addition to the closure of the establishment or even the dissolution of the company.

What does the employee face in this case?

In principle, the administration and labor inspectors consider that a person working illegally is not the initiator of the act, but rather the victim of their employer. Therefore, this person working illegally will not have access to social coverage and will not be able to obtain compensation in case of a work accident or illness, nor be compensated in case of unemployment.

There is also the fact that if this employee receives benefits, such as RSA (minimum income) or unemployment benefits, they could be required to repay them or have these benefits withdrawn. And of course, they will be unemployed unless their employer rehired them properly.

How to report undeclared work?

Here are the procedures you must follow if you want to report illegal employment. First, you are probably aware that an employer or a company employs one or more people illegally. You will then notify by mail the labor inspector of the region where the company is located.

This is where the company or employer in question is located. You can also call the tax office of the city where the company is located. And finally, you can simply notify the police station near the company. 

To do this properly, you must provide the company’s address, the name and contact details of the employer if you know them. You must also give the competent person in charge of the case the name and address of the employee as well as the position they hold in the illegal work.

Urssaf undeclared work

To avoid a potential URSSAF inspection, strict management of your activities is necessary. The most frequently checked points concern the exemption from social charges, benefits in kind, and expense reimbursements.

Be especially wary of these topics:

• You are penalized because: you did not pay your social contributions on time;
• you did not submit your social declaration or you are late;
• You did not register or registered late.

Income declaration is an essential task in the life of a self-employed worker, whether it is a micro-entrepreneur declaring monthly or quarterly, or other types of independents declaring annually to an accountant on their financial statement.

Sworn Statement on Undeclared Work

The sworn statement on undeclared work is a kind of certificate issued by company services. The signature of this certificate is first made by the employer, who will be represented by a person from the company’s administration, and also by a person responsible for doing so (a company staff member, of course), most often the CFO (Chief Administrative and Financial Officer).

In the event of a false declaration, the person who made the declaration faces up to 3 years in prison with fines up to 45,000 euros. This is stipulated in the penal code article 441-7, and additionally, the sworn statement will serve as proof document.

The content of the sworn statement is that all tax declarations made on behalf of the company or corporation have been submitted to the competent tax administration.

This statement also proves and acknowledges that all employees, according to articles 8211-1 and 1221-10, are certified employees and regularly employed. Moreover, this statement will certify that these said employees are declared and have proper pay slips with actual working hours.

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