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Formalizing domestic work
3
Background
and
context
Over half of the world's workforce is estimated to be in the informal economy.
Although informality and its causes affect sectors across national economies, informal employment may be concentrated in particular sectors, with sector-specific forms and drivers.
Domestic work is one such sector. It is characterized by a high incidence of informal arrangements and contributes significantly to informality, especially among women.
50 million of all domestic workers are estimated to be in informal employment.
Characteristics of domestic work in the informal economy
Recommendation 204 calls on Member States to pay special attention to domestic workers, as one group that is especially vulnerable to the most serious ecent work deficits in the informal economy.
1. The employment relationship takes place within the private sphere (the household)
2. It can be blurred by social norms and highly personalized contexts
3. It falls outside the conventional regulatory frameworks of many countries
Dimensions of informality
When is work considered informal?
Waged workers are considered to be in an informal employment relationship if their employment, in law or practice, is:
- not regulated by national labour legislation
- not covered by social security
- not subject to income taxation
- or if it does not provide access to certain employment benefits
Most often, it is defined as the absence of employment related social security, sometimes together with a lack of annual paid leave or paid sick leave.
Models of employment relationships
in the domestic sector
The recognition of the existence of an employment relationship is critical to formalizing domestic work. It is through that relationship that both parties gain access to the regulations meant to protect their respective rights.
Private individual /
household
Domestic worker
Agency /organization
Private individual /household
The employer may be a private individual that directly employs a domestic worker. The private household is both employer and consumer of the outputs of the tasks performed by domestic workers.
Domestic worker
In some triangular or multiemployer arrangements, it may not be so clear who bears the employment obligations towards the domestic worker. The householder may give the instructions to the worker and control the performance of duties, but the agencies issues the paychecks and pays the social security contributions. Such arrangements may make it necessary to test where the employment relationship resides.
Agency /organization
Private individual /
household
Domestic
worker
The employer may also be an organization (public or private, for profit or not), which then sells the service of domestic workers by deploying them to private households. In this model, the private household is only a consumer whose contractual relationship is with the service-providing organization, although the workplace continues to be the private home.
Drivers of formality and informality
Drivers
of
informality
The drivers of formality and informality in the domestic work sector may be grouped into four themes:
- labour regulations
- social insurance
- other labour market institutions
- social norms.
Labour regulatory frameworks
Exclusion from, or falling outside of the scope of regulatory frameworks is a key driver of informality.
This includes exclusion from:
- Labour and labour migration laws and policies
- Enforcement agencies such as the labour inspectorate, grievance and dispute settlement machinery
Depending on their design, these regulations and institutions may facilitate and encourage (incentivise), or hamper and discourage, formal and informal practices.
ILO research has established that only 10 per cent of domestic workers are covered by general labour legislation to the same extent as other workers.
In some cases, national labour regulations cover domestic workers generally, but exclude particular sub-groups of domestic workers (casual and part-time domestic workers, workers with multiple employers, etc).
Examples:
- USA: homecare workers who are privately paid by employing households
- Brazil: domestic workers who work two days or less
Conversely, some regulations fully recognize and cover the diversity of employment.
Examples:
- Swiss canton of Geneva: standard contract defines workers in the domestic economy as both full-time and part-time workers
- Uruguay and Burkina Faso: legislations of domestic work recognise that a domestic worker may have multiple employers
Social insurance schemes
Domestic workers may be covered by legislation on working conditions but not by social insurance. Entitlement to social insurance may be provided for within labour or social security laws, which define the terms of coverage for domestic workers. These may include minimum threshold with regard to length of employment, minimum hours of work, or minimum earnings. As a result, some categories of domestic workers who do not reach these thresholds might find themselves excluded from coverage.
Certain design elements of social security schemes may indirectly exclude particular categories of domestic workers. For example, social security eligibility requirements and contribution structures might be appropriate for workers with single employers or who are employed on a full-time basis, but not workers with multiple employers or for employers with part-time workers.
For migrant workers who do not have permanent residency or regular status, affiliation to social security in the host country, even if permitted by law, may not be worthwhile or too costly if this is not portable.
Other labour market institutions
Other institutions can promote or impede formality:
- Private and public agencies that recruit and place domestic workers
- Enterprises, government agencies and non-profit organizations that directly provide households and individuals in their hones with personal care (such as home-based elderly care) and household services (such as cleaning)
- Domestic workers' organizations and trade unions, and organizations of employers of domestic workers and national employers' organizations that represent the interests of the domestic work sector in social dialogue
Cross-border agencies, when they are formal, legal entities, regulated by national governments, can engender formal employment practices. However, regulations governing their operation can be so complex and compliance so difficult and costly, that all parties involved resort to irregular channels, practices, and migration status.
Illegal and unethical practices are also known to be common, which can channel migrant domestic workers into exploitative and abusive labour conditions, and forced labour.
Organizations and collective initiatives of domestic workers exist across the world. Many are behind processes of legal reforms extending coverage to domestic workers, raise awareness about rights and responsibilities, and assist in the implementation of labour and social protection.
Employers' organizations also exist in some countries and facilitate formalization through awareness raising and promotion of compliance.
Examples:
In France, Italy and Uruguay, collective agreements negotiated by organizations representing domestic workers and their employers, set the terms and conditions of employment for the sector.
Social dimensions
Certain norms, values, traditions, attitudes and perceptions influence employment relationships in the sector. Employers may think of the worker as an extension of the family, rather than as a worker. Heads and members are generally unfamiliar with labour laws and regulations, and administrative authorities. Formalization procedures are often complex and difficult to apply. As a result, a majority of domestic work is still kept off the books.
Interactions between the worker and members of the household take place in close proximity and tend to be highly personalized. Because of the low social status of domestic work, individuals who perform paid domestic work tend to come from groups that face discrimination and inequality on grounds of sex, ethnicity, race, and nationality, further reinforcing the social stigma of domestic work.
Poverty, lack of employment options, unequal access to available formal jobs for lack of education, skills and resources, and discrimination in the job market, push many to take on precarious jobs in domestic work.
Approaches
to
formalization
Approaches
to
formalization
Extending scope of law
Extending the scope of labour legislation and social security to cover domestic workers defines the rights and obligations of the employment relationship.
Within 5 years of the adoption of the Domestic Workers Convention No. 189 and Recommendation No. 201 in 2011, some 50 countries had adopted policy, legislative and institutional reforms aimed at extending protections to domestic workers and improving working conditions.
These measures reinforce the legal recognition of jobs in domestic work as work like any other, involving an employment relationship under State supervision, not a private matter.
Examples:
- Comprehensive reforms addressing all domestic workers in an employment relationship: Spain, the Philippines, Argentina
- Reformed labour standards in one or several aspects of the conditions of employment, e.g. remuneration of working time: weekly rest day in Singapore, paid annual leave and holidays in Thailand
- Regularization campaigns in Italy to prevent the imposition of serious sanctions against families employing irregular domestic workers: In 2009, 61% of housekeepers and 39% of family assistants were regularized
Deterrent
approach
Standard government measures include labour and social security inspections, complaints mechanisms, and dispute settlement systems. Several governments have adapted these to the particularities of the domestic sector.
Examples:
- South Africa: interviews by labour inspectors of employers and domestic workers in neutral places, so as not to violate the privacy of the household.
- Ecuador: blitz visits organized by labour inspectors to identify abuses, particularly undeclared domestic work
Recommendation No. 204 advises Member States to "prevent and sanction deliberate avoidance of, or exit from, the formal economy for the purpose of evading taxation and the application of social and labour laws and regulations."
Criminal sanctions, typically imposed on criminal cases, or cases of forced labour, can also be imposed for violations of labour regulations.
(Note: The ILO stresses that the functions of labour inspectorates are intended to secure workers' rights under relevant laws rather than concerning themselves with the lawful nature of their employment, and that workers should not be excluded from protection on account of their irregular employment status.)
Examples:
- Belgium: Portal to crosscheck data about a worker's nationality, immigration status and registration for social security and tax purposes is available to the labour inspectorate
- South Africa and Singapore: Measures taken to allow penalties to be directed to the household (employer) or its members, or to the recruitment agencies infringing the law
Enabling approach
The enabling approach focuses on removing barriers to formalization and strengthening the benefits of formal jobs, thus encouraging compliance.
Enabling approach
Enabling
approach
Information
dissemination
Awareness-raising campaigns, hotlines and call centres are among the most common options of labour inspectorates to promote compliance in domestic work.
Domestic workers' organizations raise awareness through information materials and radio programmes, phone messaging, social media and area-based fairs.
Examples:
- Uruguay and Bolivia: Employers' organizations participate in the fairs. In Uruguay, labour inspectors also carried out information dissemination through household visits, providing advice to promote compliance
- New York State: Domestic Workers' Bill of Rights (2010) contains a state obligation to plan and implement an outreach strategy
Reducing costs, increasing
financial incentives
Cost is a major barrier to formalization, for both workers and employers. If the perceived cost of formal arrangements is lower than the cost of informal arrangements, formal employment may be more attractive.
Income tax reductions or tax credits, VAT reduction, wage subsidies, reduced social security contributions, and exemptions are some of the instruments that have been used to reduce the cost or enhance the benefits of formal arrangements. The target recipients may be private households, enterprises, or workers.
The most common types of incentives are income tax deductions or credits for households that employ domestic workers. France and Germany offer reductions or exemptions from social security contributions for domestic workers or employers.
Measures to reduce the VAT charges to enterprises that employ domestic workers and deploy them to households promotes their role as employers and service providers, and reduces the final price of domestic work for households.
Measures aiming to reduce costs for the worker have included reducing levels of social security contribution and income tax, resulting in higher "take home pay" (although they may also imply fewer benefits).
Simplification measures & service vouchers
Complex, long bureaucratic procedures mean big transaction costs for employers and workers, are not easily accessible for low literacy populations, and discourage those unfamiliar with administrative offices. Simplifying administrative procedures is an important way of helping and motivating parties to comply with regulations and formalize their employment procedures.
Some countries have simplified registration and payment systems:
- In Luxembourg, the employer paid a single declaration, and sent it to the social security institution, which directly calculated the gross salary and collected the contribution from the employer.
- In Hungary, most important transactions can be conducted by SMS.
Countries have also simplified compliance by developing model contracts, payslips and guides on how to conclude employment contracts and calculate social contributions. These can be found on the sites of labour ministries (e.g. Columbia, Portugal, South Africa, Uruguay, among many others).
A growing number of countries use vouchers, which facilitate the formal declaration of a job or worker. Vouchers contribute to formalization by:
- facilitating the formal declaration of a job or worker
- ensuring payment of social security contributions
- working to channel subsidies or other fiscal incentives to target populations, thus promoting people's use of these services
- guarantee the domestic worker the stipulated minimum wage and social security coverage