Abstract

Main theoretical approaches to the definition of the informal employment in the context of a structuralist school, legalist and complementary approach have been studied in the article. The aim of this article is to provide a critical overview of how informal employment can be defined and measured, to analyse the researches on its extent and character, and to make a summary of competing views regarding its role in contemporary economies and how it can be tackled. The basis of the research is a set of conceptual frameworks on understanding the burgeoning literature on informal employment. Each of the above-mentioned approaches has been presented in this article. Before the analysis, however, a definition of informal employment, or what is variously called the ‘black’, ‘cash-in-hand’, ‘hidden’, ‘undeclared’, ‘underground’ or ‘shadow’ economy/sector/work, is required. The review of the literature on this topic has shown that almost all definitions are describing insufficiency or absence of formality in this form of employment and a strong consensus exists regarding what is missing or absent. Informal employment is widely defined as paid work that is not declared to the state for tax, social security and labour law purposes when it should be declared, but that is legal in all other respects. Informal employment takes various forms. On the one hand, there is absolutely informal employment, where the worker is not formally employed by the employer and person’s activity is not declared to the state for tax, social security and labour law purposes. This may take the form of either waged employment or self-employment. On the other hand, however, an employment relationship can be concurrently both formal and informal, as when a formal employee receives from his or her formal employer both a declared salary and an additional undeclared wage. In this paper, informal employment will include not only absolutely informal employment, but also employment, where undeclared envelope wages are paid. Despite an increasing interest to the undeclared employment, the single approach to its definition is missing. Positive social aspects of the undeclared employment have been described in the article. Therefore, the further studies are necessary to analyze the complexities and motives of those, choosing to work on an undeclared basis. Furthermore, due to its heterogeneity, there is also a need to investigate this phenomenon in specific contexts.