1. M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 19 – Social Policy and Employment Bilateral screening: Chapter 19 PRESENTATION OF MONTENEGRO Brussels, 11- 1 3 March 2013

2. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT Undeclared work Vladimir Radovanić Counsellor to the Minister for Labour Market and Employment Ministry of Labour and Social Welfare vladimir.radovanic@mrs.gov.me

3. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT CONTENTS: I. Data on the of undeclared work in Montenegro II. Legislative and Institutional Framework III. Control and sanctions IV. Specific activities for combating grey economy V. Proposed measures to counter undeclared work VI. Directive 2009/52/EC

4. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT I. Data on the undeclared work in Montenegro There are no reliable and precise data on the scope of undeclared work in Montenegro; According to the ILO’s report “Global Employment Trends in 2013”, despite the continuous improvement in key labour market indicators, there is still a growing presence of informal employment. The informal employment in the countries from the region experienced an increase, namely in Croatia from 31% to 33%, in Serbia from 17% to 19%, in Macedonia from 20% to 21%, in Bosnia and Herzegovina from 20% to 23%, while in Albania and Kosovo it is 35%; According to the mentioned research, Montenegro experienced an increase in the number of undeclared workers from 17% to 19% in the period 2000-2010.

5. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT I. Data on the undeclared work in Montenegro The specificity of Montenegro: a large number of foreign nationals is employed, especially during tourist (summer and winter), construction and agricultural season. Reasons for this specificity: Labour market openness (in the spirit of the European principle of free movement of workers); High workforce supply from the region (as a result of both global economic crisis impact and very broadly established framework for working permits); Inertia inherited from the time of unitary state (when Montenegro had a liberal system of employment of foreign nationals in line with the Decree on employment of non-residents. At that time, there were between 50 and 60 thousand non-residents in our labour market on an annual basis).

6. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT II. Legislative and Institutional Framework Legislation that reduces the scope of undeclared work: - Labour Law (“Official Gazette of MNE”, no. 49/08, 26/09, 59/2011); - Law on unified registration and reporting system of clearance and payment of taxes and contributions (“Official Gazette of MNE”, no. 29/05 and 75/10); - Law on employment and work of foreign nationals (“Official Gazette of MNE”, no. 22/08 and 32/11); - Law on foreign nationals (“Official Gazette of MNE”, no. 82/08, 72/09, 32/11 and 63/11); - Law on inspection control (“Official Gazette of MNE”, no. 39/03, 76/09 and 57/11);

7. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT II. Legislative and Institutional Framework Institutions which are, directly or indirectly, dealing with the activities aiming to combat undeclared work in Montenegro are: – Ministry of Labour and Social Welfare; – Ministry of Finance; – Employment Agency of Montenegro; – Inspection Directorate (Labour Inspection); – Tax Administration; – Ministry of Interior (Police Administration).

8. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT III. Control and sanctions Within the Inspection Directorate, the Labour Inspection conducts direct inspection control over all employers working on the territory of Montenegro, with the exception of national and local authorities. The priority task of this Inspection is to combat undeclared work by continuous control and implementation of prevention and repressive measures: - indicating to the employer on illegal employment of persons present during inspection control; - issuing a decision prescribing the deadline for the elimination of irregularities; - administrative monitoring of execution of decisions by adopting conclusions on financial penalties for the employer until the final execution of those decisions; - pronouncing a fine on the spot by issuing offence warrant to the legal and responsible person or entrepreneur; - Tax Administration also conducts direct inspection control, while other institutions indirectly contribute to combating undeclared work.

9. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT III. Control and sanctions Preventive measures which are being implemented: - simplifying administrative procedures for more favourable business environment; - improving tax policy; - conducting public campaigns to raise awarenes of empoyees and to educate them with the aim to regulate legal work arrangements and to protect rights from employment and on the basis of work; - indicating to employers on consistent application of law and on sanctions in case of infringing the declared work regulations; - consultancy work with employers with the aim to implement legal procedures when employing workforce;

10. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT IV. Specific activities for combating grey economy A Governmental body for combating grey economy – Coordination team for combating grey economy, set up on 12 April 2012, headed by the Minister of Finance, while its members are the representatives of the Ministry of Finance, Ministry of Labour and Social Welfare, Tax Administration, Customs Administration, Inspection Directorate and other public authorities, when appropriate. - The Coordination Team prepared a Report on measures for combating grey economy – the measures will be implemented through systemic improvement of legal framework, institutional framework, administrative capacities, internal procedures, professionalism or corporative culture of the administration, which will lead to better tax discipline of the taxpayers.

11. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT IV. Specific activities for combating grey economy Performance of the Labour Inspection as regards implementation of measures for combating grey economy is reflected in the continuous control over employment of Montenegrin and foreign nationals, with an increased inspection control during summer tourist season, as well as during national and religious holidays. The effects are reflected in combating undeclared work by regulating legal employment for 1,746 persons, out of whom 835 foreign and 911 Montenegrin nationals. The Coordination team for combating grey economy was strengthened in 2013 - at the session held on 27 December 2012, the Government entrusted the Ministry of Finance with the preparation of the Proposal of measures for combating grey economy in 2013, including measures necessary for strengthening institutional and human capacities; - consequently, at the session held on 14 February 2013, the Government considered the Information on measures taken to combat grey economy and instructed all authorities to get actively involved in addressing the grey economy issue;

12. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT V. Proposed measures to counter undeclared work Proposed measures to counter undeclared work: – Prepare amendments to legislation in the field of labour market with the aim to increase fines for offences related to undeclared work; – Define employment quotas when determining the Decision on the number of work permits for foreign nationals, especially in the areas characterised by seasonal employment; – In direct communication with employers, define an estimated labour force demand during the tourism season; – Intensive control over residence and work of foreign nationals, especially during construction and tourism season;

13. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT VI. Directive 2009/52/EC Directive 2009/52/EC providing for minimum standards on sanctions and measures against employers of illegally staying third-country nationals has been separately elaborated within the chapter 24 – illegal migration. Legislative framework: 1. Law on employment and work of foreign nationals (“Official Gazette of MNE”, no. 22/08, 32/11); 2. Criminal Code (“Official Gazette of MNE”, no. 70/03, 13/04 and “Official Gazette of MNE”, no. 40/08, 25/10 and 32/11); 3. Law on criminal liability of legal persons (“Official Gazette of MNE”, no. 2/07).

14. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT VI. Directive 2009/52/EC Law on employment and work of foreign nationals – level of compliance - partially compliant. Illegal employment and work of foreign nationals are punishable in accordance with the provisions of the Law on employment and work of foreign nationals. This represents an offence for which fines are charged to the employer-legal person and entrepreneur, natural person and responsible person as legal person and foreign national (article 39, 40, 41). Fines are charged in the amount ranging from 30 EUR to 20,000 EUR. Non-compliant – The Directive prohibits employment of illegally staying third-country nationals in order to fight illegal immigration. To this end, it lays down minimum common standards on sanctions and measures to be applied in the Member States against employers who infringe that prohibition.

15. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT VI. Directive 2009/52/EC It is necessary to harmonise provisions of the Law in parts which refer to stipulating: - liability of the employers to require that third-country nationals have and submit prior to employment a valid residence permit and that during the employment they have copies and recorded data from the residence permit in case of possible inspection control; - effective, proportionate and dissuasive financial sanctions for the employers who employ illegally staying third-country nationals; - liability of the employer to pay any outstanding remuneration to the illegally employed third-country national.

16. Chapter 19: Social Policy and Employment M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 19: SOCIAL POLICY AND EMPLOYMENT VI. Directive 2009/52/EC - other measures, including exclusion of the employer from entitlement to some or all public benefits, aid or subsidies, if employing illegally staying third- country national; - that the infringement of the prohibition to employ illegally staying third- country national constitutes a criminal offence when committed intentionally; - criminal penalties for natural persons, and liabilities of legal persons for the said criminal offence, as well as penalties for legal persons. The abovementioned will be harmonised through amendments, i.e. by adoption of the new Law on employment and work of foreign nationals. At this moment, it is estimated that Montenegro will not have difficulties in transposing the acquis stated in this list.

17. Thank you for your attention. QUESTIONS