Dutch companies easily profit from illegal labor; Fines are far too low, experts say

Dodgy companies knowingly and intentionally illegally bring in workers from abroad because the fines against doing so are so much lower than the money they earn through exploiting them, the Labor Inspectorate warned.

The Inspectorate investigated 24 cases of undeclared work. “In most cases investigated, the benefit for employers is so great that paying a fine for an established violation entails fewer costs than normal payment of the collective labor agreement wage and the additional employer charges.”

The investigators calculated an average cost benefit of 60 percent. In ten of the cases, the benefit amounted to over 20,000 euros per person, compared to someone who works in accordance with collective labor agreements. The fines in the Foreign Nationals Employment Act have been set at a maximum of 8,000 euros per violation since 2005.

The Inspectorate pointed to one incident in which a company spent 6,240 euros on wages but would have spent 15,750 euros if it had followed proper procedures. The Inspectorate was only able to issue a maximum 8,000 euro fine, even though the company managed 9,510 euros in cost savings with the illegal hiring practice.

“Even if the fine standard amounts grow with prosperity and inflation, other social costs, like added pressure on the housing market, healthcare and education, are not included. The employer who hires people illegally transfers these external effects to society,” the Inspectorate said. “If these effects were also taken into account, the standard fine amounts would be much higher.”

The organization noted that it takes less than a year for 90 percent of companies hiring labor illegally to save more money than the value of a fine. Nearly 30 percent of cases studies showed that this period was even three months or less.

It is difficult to say how many workers are exploited in this way because illegal employment occurs “by definition in secret,” a spokesperson for the Labor Inspectorate told the Financieele Dagblad. “Based on the numbers that we do gain insight into through research, we estimate this to be in the tens of thousands.”