“Use of Risk Analysis Tools and Nudge Letters to tackle Undeclared / Underdeclared Work”
January – June 2019

The Action Plan “Use of Risk Analysis Tools and Nudge Letters to tackle Undeclared / Underdeclared Work” was implemented with the assistance of the Structural Reform Support Service (SRSS) of the European Commission (EC) and is monitored by the European Platform Tackling Undeclared Work. It was a pioneering action across all Europe, the results of which were presented for discussion to the other European Platform Member States. Τhe Action Plan reviewed and evaluated the impact of the four different approaches (explained below) about the transition from undeclared/ underdeclared work to fully declared work. The Action Plan reviewed the impact of each approach separately, as well as comparatively with each other, per geographical area and business sector.

Key Objectives

Promotion and better exploitation of:

1. SEPE’s IT Systems (MIS & ERGANI),
2. Risk Analysis method and tools and
3. onsite inspection techniques,
   during the implementation of the 4 different approaches on the Inspectors work.

Timetable

• Informative & Training meeting: Friday, 25 January 2019, at the Ministry of Labour and Social Affairs, 29 Stadiou Str., 4^th floor.
• Starting date of implementation: Monday, 28 January 2019
• Letters sent to Employers: Monday, 11 February 2019
• Ending date of implementation: Friday, 24 May 2019
•  Presentation of results’ analysis and Action Plan’s Final Outline: Tuesday, 2 July 2019

Participants

• Central Management Team (CMT) – 2 employees of the Central Unit of the Labour Inspectorate
• Multimedia Communication Center (Hotline of 15512) – 3 employees
• 4 local departments of the Labour Relations Inspectorate, in total 29 inspectors:
  • Local Department of Patras
  • Local Department of Glyfada – Dafni
  • Local Department of Magnesia (Volos)
  • Local Department of South Part of Piraeus
• the Structural Reform Support Service (SRSS) of the European Commission (EU) – 1 observer
• Technical Support by NICO – 2 technical advisors

Control Group

One more SEPE local department was selected and participated in the action plan as a Control Group, for which the same risk analysis rules were applied with the above-mentioned local departments. The Control Group remained anonymous and did not know that it participated in the Action Plan. The purpose of the Control Group involvement (which did not carry out any agreed activity) was the final comparison of the results – impact of the 4 approaches that were applied to the above participant local departments with the results of the Control Group, where no approach was applied.

Business Activity Sectors

For the Action Plan, two business sectors have been selected:

• Food Service Activities (STAKOD 56)
• Other Provision of Services (e.g. Hair Saloons, Beauty Centers and well-being activities, etc.) (STAKOD 96)

Pilot Sample

The companies that took part in the Action Plan, belonged to the above two business sectors of financial activity (STAKOD 56 and 96) and were located in the area of responsibility of the above selected local departments.
Through the Risk Analysis subsystem of SEPE MIS, the Central Management Team produced lists of companies, per business sector and per local department, each of which contained 400 companies for which, based on specific risk analysis rules, a high-risk score had been calculated. These lists were given to the local departments on the training day (2 lists in each local department per STAKOD: 56 and 69).

Following that, each local department, from the list of 400 companies per business sector, chose the final sample of 200 companies per business sector that were finally involved in the Action Plan. For the final selection of the 200 companies per business sector, the Inspectors used risk analysis techniques based on the Information system ERGANI, as well as their experience (factors: locality and seasonality).

Risk Analysis Rules

To produce the lists with the 400 companies per selected business sector and local department, the following five “rules” were applied for the employers/ companies located in responsibility of the local department and do business in the selected business sector, using the “Risk Analysis” subsystem of SEPE MIS. The resulting lists of companies were sorted by their corresponding calculated risk score and the 400 companies with highest score were selected.

• Rule 1: If the company makes numerous hiring and firing declarations in ERGANI, in a predefined timeframe (exceeds a specific percentage)
• Rule 2: If fines in relation to undeclared work, working hours, and owing employees’ salary have been imposed to the company in the last 2 years
• Rule 3: If the company employs more than 20% of employees with part time job of less than 20 hours per week
• Rule 4: If the company has changed more than 20% of the contracts of its employees, converting them from full time to part time, within a pre-defined timeframe (six months)
• Rule 5: If the company makes frequent changes to the working hours of employees (exceeds a specific percentage)

Approaches

Following that, the below approaches were followed to “face employers”:

1. Fierce Nudge Letter
2. Gentle Nudge Letter
3. Information Letter for an upcoming – announced inspection (Announced Inspection Letter)
4. Conduction of onsite inspection, without prior employers’ notice (Unannounced Inspection)

Each local department implemented two of the above approaches, one not including on-site inspections (approach (1) or (2) in one of the two selected business sectors) and one involving on-site inspections ((3) or (4) approach to the other business sector). The selection of the approaches per local department was done by the Central Management Team and the local departments received information on them on the training day.

Gentle and Fierce ‘Nudge’ Letters

A special aspect of the Action Plan was the use of “nudge” letters to employers, to motivate them to comply more with the provisions of labour law. Nudge letters are found in behavioral science and are intended as a positive reinforcement and way of influencing behavior and decision making. They are effectively used worldwide by private companies, tax authorities, social security institutions, as well as labor inspectorates, to change employers’ behavior and encourage compliance.

Nudge letters are, in some cases, a cost-effective way for employers to comply. The purpose of their use in the Action Plan was to measure the impact of these three types of “nudge” letters, as an alternative approach to inspections, and to examine their effectiveness in two business sectors of economic activity. During the implementation of the Action Plan, no other actions or approaches were taken in regards to the companies that received either a “gentle” or a “fierce” nudge letter (approaches (1) and (2)), and this was done in order to measure the impact or effectiveness of these letters and also to compare it with the effectiveness of the approaches (3) and (4) which included inspections (with or without employer prior notice), as well as with the results of the Control Group, where no approach was applied and its employees worked as usual.

Monitoring of the employers’ behaviour

During the whole period of the Action Plan implementation, the “behaviour” of all the involved employers was monitored through the Information System ERGANI declarations, to evaluate the impact of the Action Plan approaches.

More specifically, each week, at a specific day and time, the following data were retrieved from the databases for each selected Company:

1. Total contracts of employees with full time employment
2. Total contracts of employees with part time employment
3. Total contracts of employees with rotational employment
4. Total working hours of all employees (in the branch) per week
5. Total declarations of changes in the working hours of the employees (in the branch)
6. Total number of submitted overtime working hours of the employees (in the branch) during the last week.

By retrieving the above data on a weekly basis, we were able to monitor any changes in the “employers’ behaviour” during the implementation of the Action Plan and to evaluate the impact of each approach individually and comparatively.

Selection of final participating companies by the local departments

On the day of the training, each local department received 2 lists, one for each business sector with the 400 high-risk companies of their area of responsibility. One of the two lists was applied to one of the two approaches, specifically in the case of sending a “nudge” letter to employers, i.e. (1) or (2), and did not include onsite inspections. The second list concerned one of the other two approaches involving onsite inspections, namely (3) or (4).
The final selection of the 200 companies per list that finally took part in the approaches was made by the local departments.
In particular, the selection of companies, where onsite inspections were carried out, was done by each local department on a monthly basis, with the inspections’ scheduling being done in the beginning of the month, with the aim to cover the required 200 onsite inspections in companies included in the list of 400, until the end date of the Action Plan.

For the selection of these companies, the inspectors used risk analysis techniques using the Information System ERGANI, and also taking into consideration the statistics received each week from ERGANI, which were related to the monitoring of the “employers behaviour”. Other factors that played a role in the final selection of the participating companies by the local departments, were the personal experience and knowledge of the locality of each inspector separately, therefore the inspectors were asked to keep notes of the reasons/ selection factors per company, aiming to evaluate their effectiveness, in combination with the use of risk analysis tools.

Analysis of Results and conclusion of the Action Plan

Following the end date of the Action Plan implementation, when all the required onsite inspections had been carried out and the entry of all their data in the “Inspections” subsystem of SEPE MIS had been completed, the analysis of all data collected during the Action Plan was conducted. These data included:

1. The data collected weekly by the Information System ERGANI, regarding the monitoring of the “employers’ behaviour”, of the companies that took part in all the approaches, as well as those of the Control Group.
2. The final lists of the companies that took part in the approaches and the reason/ way of their selection by the local departments.
3. Information from the local departments regarding the reactions of the employers who received the letters of approaches (1.), (2.) and (3.). More specifically, the inspectors from the local departments were requested to keep record of all the reactions of the employers, either during the onsite inspections (where they were asking the employer whether he/she received the letter and what they did about it), or by telephone calls (when the employers were calling the local department to ask about the received letter, what it is about), or even when the employer had come in person at the local department to ask about the received letter).
4. The results of the onsite inspections of the companies participating in the Action Plan.
   

All the above data were analyzed autonomously and comparatively, in order to evaluate the effectiveness of each approach.

The results of the Action Plan are described in detail below: