The Employer's Obligation to Insure Workers

THE EMPLOYER'S OBLIGATION TO INSURE WORKERS AND ITS LIABILITY TO THE SOCIAL SECURITY INSTITUTION WHERE UNINSURED WORKERS ARE EMPLOYED

The right to social security is a fundamental right guaranteed by Article 60 of the Constitution: "Everyone has the right to social security. The State shall take the necessary measures and establish the organisation to provide that security." Under Article 4/1-a of Law No. 5510, "those employed by one or more employers under a contract of service are deemed insured". Pursuant to Article 8 of the same Law, "those employed under a contract of service shall be notified to the Institution by means of an insured employment entry declaration before commencing work". Where the insured employment entry declaration is not submitted, or where notification is incomplete or untrue, the employer incurs civil and criminal liability (forgery of an official document, causing loss to the Social Security Institution and, in some cases, aggravated fraud). It should be noted that the contract of service is broad in scope: unless the law expressly provides otherwise, work during a probationary period, short-term work and work during an internship period all fall within this right.

LIABILITY TOWARDS THE WORKER

Article 23 of Social Insurance and Universal Health Insurance Law No. 5510 provides that where the employer fails to notify the Institution within time that it has begun to employ an insured person, the costs relating to occupational accidents and occupational diseases occurring before notification shall be charged to the employer on the basis of strict liability.

Where a worker suffers an occupational accident or contracts an occupational disease, temporary incapacity benefit, permanent incapacity income or a survivor's pension for the heirs may become payable.

The worker or their relatives may also bring an action for damages arising from the occupational accident.

Within the five-year peremptory period, an action for determination of service may be brought (where the action succeeds, the judgment is sent to the Social Security Institution and premiums are assessed retrospectively), and in addition, notwithstanding that the worker was employed without insurance, claims such as an action for labour receivables (severance pay, notice pay, overtime pay, weekly rest day pay, national holiday and public holiday pay, annual leave pay, unpaid wages and so forth) may be asserted through litigation.

LIABILITY TOWARDS THE SOCIAL SECURITY INSTITUTION

Where uninsured employment is established on the basis of a finding by Social Security Institution inspectors, a court judgment (an action for determination of service before the labour courts) or other official records:

an administrative fine (calculated at specified rates on the gross minimum wage for each unnotified month);

all insurance premiums relating to the period worked;

unemployment insurance premiums (the deficient unemployment insurance premium is collected together with a late payment surcharge);

universal health insurance premiums; and

late payment penalties and surcharges are collected from the employer. (Where a worker employed full-time is shown as part-time, where the wage is under-declared or where the number of days worked is understated, the Social Security Institution assesses premiums on the actual wage.) These premiums have the character of public receivables and are collected in accordance with Law No. 6183 on the Procedure for the Collection of Public Receivables.

CONCLUSION

The employer's obligation to declare insured workers concerns public order and is absolute in nature. Employing uninsured workers gives rise not only to the risk of administrative fines; it may lead to serious consequences such as retrospective premium debts, late payment surcharges, recourse actions and even criminal liability.

The financial liability arising in the event of an occupational accident in particular can reach a scale that is irremediable for most businesses.

For these reasons, it is essential, for the management of legal, criminal and financial risk, that employers submit workers' employment entry declarations within time, make declarations based on the actual wage and record working periods correctly.

For detailed information and legal support on this subject, you may contact our specialist lawyers.