There is labour informality when companies fail to comply with rules linked to social security, minimum wage, eight hours workday, payment of overtime. In other words, anything that results in the violation of the current labour act.

The most recent data, presented this year by the International Labour Organization (ILO), revealed that global informality, excluding agriculture, is around 50.5%, and, including agriculture, is around 61.2%. Latin America is below the world average, 49% without agriculture, and 53.1% with agriculture.

Paraguay is above the regional average. According to the World Bank, the figures show that the formalization of employment has gone from 21% in 2008 to 29% in 2015, including the agriculture sector. Moreover, the informality rate, without agriculture, also showed a small improvement going from 69.5% to 65.4%.

Informal unemployment can be found in every sector of the economy and in companies of any size. Nevertheless, there are differences: while the informality rate reaches 81% among small companies, it goes down to 21% among large companies.

The report shows that labour informality is higher among younger workers. Young people from 15 to 19 years old show an informality rate of 95% and those from 20 to 24 years old have a 71% rate.

Construction and commerce, restaurants and hotels show the highest informality rates (88% and 72% respectively). In addition, domestic workers and independent workers have informality rates of 96% and 79.7%, respectively.

The report points out that there is not just one way to calculate informality, but, in order to compare, it uses the proposal of international organizations, such as the World Bank and ILO, which considers social security contributions in employment, and the register of contributors for independent workers.

The concept of informality is also linked to complying with other obligations, such as: respecting minimum and maximum workdays, the payment of minimum wages as a starting point, payment of overtime, bonus, vacations, and safety and health conditions, among others. These concepts are not included in the formula.

Luis Tavella, vice-president of the Paraguayan Industrial Union (UIP), said that there is plenty of bureaucracy in public institutions for processing different permits and there is barely any control. “Due to the lack of control, there is no interest in becoming formal”, he said.

He added that controls are applied on companies that are registered, but not on others (informal firms). “Moreover, the idea that a certain company, for being small, may do as it pleases, cannot continue. This is way more dangerous in the food industry”, pointed out Tavella.  “However, there are people who sell whatever they want in the streets, even stores that have not been authorized to work”, he added.

Processes must be faster, companies must be able to go to one single place in order to register, and more control is key.

Cesar Segovia, Deputy Minister of Labour, talking about measures to reduce labour informality, said “a possible solution is for the Labour Police to work as they should. It was created by the same charter that created the Ministry of Labour, Employment and Social Security in 2013.

Segovia said that with well-trained inspectors, in 2015 the Ministry applied fines for G 757 million. He added that in 2016, fines went up to G 13,046 million, and that in 2017 fines have reached G 19,000 million.

Nonetheless, he admitted that this shows that informality still exists, but, the secretariat of State is playing its role as Labour Police. “To this date, we have applied fines to 170 companies of different sectors. A similar number is under trial, and another group is being audit”, he pointed out.

Segovia stated that, in this context, they have found higher informality levels in transport, which keeps on facing difficulties regarding the accomplishment of the eight hours working day. “We have made controls, not only in bus stops, but also in roads, with the support of the National Direction of Transport (Dinatran). This has enabled us to make a proper diagnosis of the sector”, he highlighted.

He added that a series of measures that tend to tackle labour informality are been taken, thanks to the support of ILO. “But we need more inspectors as, in the ministry alone, we have over 70,000 companies registered and only 30 inspectors. Obviously, it is impossible to cover the total number of companies”.

Segovia said that they are working on creating awareness about this issue, improving the communication with companies. “Our goal, is not to collect money by applying fines, but working on the formalization of companies; in other words, to make sure that every company is fully compliant”.

Source: Color abc