Transition from the Informal to the Formal Economy Recommendation, 2015 (No. 204)

Year: 2015

This Recommendation recognizes the lack of protection of workers in the informal economy, and provides guidance for improving their protection and facilitating transitions to the formal economy. It also recognizes that decent work deficits – the denial of rights at work, the absence of sufficient opportunities for quality employment, inadequate social protection and the absence of social dialogue – are most pronounced in the informal economy, and that most people enter the informal economy not by choice, but as a consequence of a lack of opportunities in the formal economy and in the absence of other means of livelihood.

Recognizing the complexity of informality, the Recommendation covers various policy areas, including legal and policy frameworks; employment policies; rights and social protection; incentives, compliance and enforcement; freedom of association, social dialogue and role of employers’ and workers’ organizations; as well as data collection and monitoring.

With regard to social protection, the Recommendation’s relevant articles set out the following:

  • Article 18: “Through the transition to the formal economy, Members should progressively extend, in law and practice, to all workers in the informal economy, social security, maternity protection, decent working conditions and a minimum wage that takes into account the needs of workers and considers relevant factors, including but not limited to the cost of living and the general level of wages in their country.”
  • Article 19: “In building and maintaining national social protection floors within their social security system and facilitating the transition to the formal economy, Members should pay particular attention to the needs and circumstances of those in the informal economy and their families.”
  • Article 20: “Through the transition to the formal economy, Members should progressively extend the coverage of social insurance to those in the informal economy and, if necessary, adapt administrative procedures, benefits and contributions, taking into account their contributory capacity.”
  • Article 21: “Members should encourage the provision of and access to affordable quality childcare and other care services in order to promote gender equality in entrepreneurship and employment opportunities and to enable the transition to the formal economy.”
  • Article 25: “With respect to the formalization of micro and small economic units, Members should …. (b) reduce compliance costs by introducing simplified tax and contributions assessment and payment regimes; … and (f) improve access to social security coverage.”

Link to the Recommendation

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