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End of Amnesty period on undeclared work

Source: Lexology - Thu 18th Aug 2011

Earlier this year the Spanish Official Gazette published Royal Decree 5/2011 on measures "to regularise and combat undeclared employment, and to promote renovation works for habitual residences in order to regularise and combat undeclared employment". This Decree offered a period of amnesty between 7 May to 31 July 2011 in which employers could register employees with the Social Security authorities. The social security contributions payable for these employees prior to this period could also be postponed.

Those who decided to register their irregular employees under this process would not face administrative penalties, unless :

1. Their employment contracts were renewed within 6 months of the official registration

2. A social security inspection had begun before the employers opted to make their employees officially recognised

3. Complaints or claims had already been submitted to the Labour Inspectorate or to the labour courts.

In simple terms this means that employers must have made a permanent or temporary contract lasting at least six months with their newly-registered employees in order for the amnesty to be recognised.

The Royal Decree also provides a number of measures that aim to combat undeclared employment after the amnesty period. These measures enforce the current regulations, increasing the penalties for infringements relating to undeclared employment, and amending the Public Sector Contracts Law to prohibit public sector contracting with companies that seriously breach these obligations.

Overall, this measure has had a very mixed reception in the public due to the aims of regularising employment contracts and reducing tax evasion being laudable, but the same time it is rewarding such 'Black' employers, even if the intention is to reduce Spain's high rate of unemployment. Time will only tell if this measure has been effective or not.

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