Unregistered Employment and Its Consequences

January 3, 2024by Bünyamin Esen0

In terms of social security, the term unregistered employment can be defined as the non-reporting or incomplete reporting of the work of people who participate in employment by working in legal jobs to the relevant public institutions and organizations in terms of days or wages.

Within the context of Turkey and according to this definition, there are three types of unregistered work:

Employees are never notified to the Social Security Institution,
Incomplete reporting of working days,
Uderreporting of earnings that constitute the basis for insurance premium.

Unregistered employment has many negative economic and social consequences. In addition, it causes great harm to the country’s economy and individuals in the short and long term. The negative consequences of unregistered employment can be discussed under three headings in terms of worker, employer and state:

In terms of employees,
For employers,
In terms of the state.

Negative Consequences of Unregistered Working for Employees

People working without insurance cannot benefit from many legal rights provided to employees from the social insurance laws. For example:

  • The days worked by unregistered employees are not considered valid for retirement.
  • Unregistered workers cannot benefit from disability pension if they become injured and unable to work for any reason.
  • Surviving family members cannot benefit from survivors’ pension.
  • They may have to pay their own general health insurance premiums.
  • They cannot benefit from the temporary disability allowance or permanent disability income paid if they have a work accident or occupational disease.
  • If they become unemployed, they cannot benefit from unemployment insurance.
  • If they leave their job, they will be deprived of notice and severance pay.
  • They cannot benefit from rights such as annual leave, weekly leave, maternity leave.

Negative Consequences of Employing Unregistered Workers for Employers

Unregistered employment has many negative effects on the social and economic values of the society and causes undesirable consequences not only for employees but also for employers:

  • Liability arises towards the state and workers in case of work accidents and occupational diseases that occur in the workplace. Serious administrative and judicial sanctions may be encountered.
  • It causes unfair competition and paves the way for disruption of market balance.
  • Financial incentives, grants, loans and tax advantages provided by the government and the private sector cannot be used.
  • The biggest negative impact is administrative fines. For example, if it is determined through inspection that a worker has been employed unregistered for 1 year, the administrative sanction is an administrative fine may be given of up to 14 minimum wages. In addition, these workplaces cannot benefit from any social insurance premium incentives for 1 month or 1 year.


Negative Consequences of Unregistered Employment for the State

The most important harm of unregistered work to the State is the loss of premiums and the increase in social security deficits.

As deficits increase, future generations have to bear the burdens arising from the social security system and cannot benefit from the system adequately. It causes injustice in income distribution and moral degeneration of society.

Bünyamin Esen

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