Government fails to explain the benefit of ceasing to criminalize concealment of contracts in domestic service

The government wants to end the criminalization of failing to hire workers from Social Security, which includes the domestic service sector, but does not explain the benefits of the measure, nor the impact on tax and contribution evasion.

The preliminary draft reform of labor legislation that Luís Montenegro's government presented to social partners in July, known as "Trabalho XXI", proposes to revoke a rule of the General Regime of Tax Infractions (RGIT) that, since May 1, 2023, considers the failure to communicate the hiring of workers a crime.

At this time, if employers do not declare a hiring within six months of the end of the legal deadline for making such communication – as a rule, within 15 days prior to the start of the activity – they may be criminalized with a prison sentence of up to three years or a fine of up to 360 days (up to 180 thousand euros).

When questioned by Lusa, the office of the Minister of Labor, Solidarity and Social Security, Maria do Rosário Palma Ramalho, did not clarify why it considers it positive to stop criminalizing the failure to declare domestic work, taking into account the level of tax and contributory informality that is historically associated with it.

He also did not respond when asked about the impact of the end of the penalty on tax and contribution evasion.

The draft labor reform bill does not include alternative measures to encourage employers to declare domestic service work. When asked if any such measure was considered and why it was not included in the draft, the minister's office said nothing.

To the set of questions posed by Lusa, the ministerial office responded only that the preliminary draft “aims to increase the competitiveness and productivity of companies, value workers and reinforce the balance between professional, personal and family life” and that its discussion will be held “in its own venue”, in social dialogue (with employers' and trade union confederations) and in Parliament (with MPs).

Even if the amendment goes ahead as proposed by the government, employers will still be required to report the hiring of a cleaner to Social Security. And those who fail to do so continue to risk fines if the situation is reported to the public institution.

However, labor lawyers contacted by Lusa believe that decriminalization could lead to a potential increase in tax and social security evasion in a sector already characterized by informality.

Madalena Caldeira, a lawyer at the Lisbon law firm Gómez-Acebo & Pombo, states that “the absence of criminal consequences can be interpreted as a weakening of the State's protection of these obligations, with the consequent risk of increasing the vulnerability and lack of protection of workers in this sector, since, if the respective communication is not made, they will not be able to make the due contributions to Social Security.”

Still, he says, “maintaining a solid and effective administrative offense regime continues to represent a relevant instrument in deterring non-compliance.”

For her part, Rita Robalo de Almeida, a lawyer for Antas da Cunha Ecija, notes that criminalization has a preventative role, “from a psychological perspective.”

With the end of criminalization, he believes, some employers will see the change as "a relaxation of the contribution obligations that fall upon them, thus encouraging negligent behavior, particularly in a sector where oversight is still less incisive."

The lawyer anticipates a "significant increase in tax and contribution evasion scenarios" if the end of criminalization is not accompanied by complementary measures, such as "the strengthening of inspection activities, the implementation of awareness campaigns among employers and the possible simplification of reporting procedures."

The “White Paper on Decent Domestic Work”, published in April 2024 by the Union of Workers in Concierge, Surveillance, Cleaning, Domestic and Miscellaneous Activities Services (STAD), identifies informality and job insecurity as central characteristics of this activity.

The problem, the study says, is “proportionally greater” among domestic workers who work part-time (those who have several employers or who work in a company and do domestic work in addition).