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Employment contract – how many employees get money under the table? PIE estimates

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Eight percent of those employed under an employment contract received part of their remuneration “under the table” in 2021, the Polish Economic Institute (PIE) estimates. He also indicates that 20 to 27 percent of Poles would agree to such unofficial allowances if it was associated with a higher salary.

The report “The scale of paying under the table in Poland and its changes over time” is based on the proprietary PIE method of estimating the scale of the phenomenon on the basis of data from PIT-ZUS and the GUS Salary Structure Survey.

Part of the salary “under the table” – estimates

According to PIE estimates, in the years 2006-2021, on average, approx. employees in enterprises with 10 or more employees received part of their wages outside the official records. As stated, the estimates do not take into account micro-enterprises, where the phenomenon of paying “under the table” may be more common.

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It was estimated that in 2006, in companies employing at least 10 employees, the percentage of people receiving remuneration “under the table” amounted to 7%. After two years, in 2008, there was a slight decrease – by 1 percentage point. For the next few years there was a slight upward trend. In 2014, this percentage was 9%. and remained at this level until 2018. In the 2020 pandemic, the percentage of employees receiving wages “under the table” probably did not change, but PIE analysts do not rule out that there was a temporary increase. In 2021, analysts estimated this percentage at 8%.

– Paying “under the table” in the Polish economy is a permanent phenomenon with a relatively constant scale over the last dozen or so years. The percentage of employees receiving part of their remuneration “under the table” changed in the analyzed period (2006-2021) by a maximum of several percentage points up or down. The scale of this phenomenon is related to the scale of VAT avoidance by entrepreneurs – commented Aneta Kiełczewska, deputy head of the PIE behavioral economics team.

She added that the public finance sector, and in particular the social security system, loses over PLN 17 billion annually.

According to the report, although the majority of people surveyed want to receive their entire salary on the basis of an official contract, between 20 and 27 percent Poles would agree to receive part of their salary unofficially. One in five respondents value the extra PLN 100 more than the legal employment conditions for a salary of PLN 3,000. If the additional amount increased to PLN 500, then the percentage of people willing to make such an arrangement would be 27%. Among those who would not like to receive remuneration “under the table”, 72 percent. indicated that the reason was to reduce the future height pension and other benefits.

“The legal norm is not consistent with the existing social norm”

– The existence of the phenomenon of paying “under the table” results from the financial benefits that can be obtained thanks to it, but also from various institutional and cultural factors, such as social capital and low trust in public institutions and applicable law. Only 22 percent of respondents indicated the illegality of paying under the table as the main reason for not accepting this solution. The applicable legal norm is not consistent with the existing social norm, pointed out Łukasz Baszczak, senior analyst of the PIE behavioral economics team.

He noted that one of the possible methods of reducing the scale of payments “under the table” is to improve controls and apply adequate financial penalties. – Example Hungarian showed that actions focused on detailed audits can be effective. Provisions protecting the so-called whistleblowers – people who report violations of labor law by their employers – against criminal liability are also important – said Baszczak.

PIE analysts concluded that there is no clear relationship between the levels minimum wage in Poland and the scale of payments outside the official records. From 2006 to 2021, the minimum wage increased year by year. At the same time, the percentage of employees receiving part of their wages unofficially had periods of decline and increase.

Main photo source: concrete24



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