Bringing Household Services Out of the Shadows

Annex A. Other international systems

Austria: Dienstleistungsscheck

Since 2006, the Household Service Cheque (Dienstleistungsscheck) is available in Austria, with which Households can pay for personal and household services, such as cleaning, gardening, and childcare. The Household Service Cheque is not subsidised and only applies to workers in marginal employment, who earn at maximum EUR 651.86 (PPP 867) per month in 2021.¹ The cheques can be bought for either EUR 5.10 or EUR 10.20, with value EUR 5 or EUR 10 (PPP 6.55 or 13.10). For each cheque, the 2% difference between the price and the value cover administrative costs of the scheme (Ad-PHS, 2020[143]).

Household service providers under this scheme are covered by some social security, such as accident insurance paid by the employing households, though health and pension insurance are voluntary at a price of EUR 67.18 (PPP 88.00). These insurances are also only provided in the case of regular employment relationships, relevant criteria are met by submitting a cheque for reimbursement at least every two months (Ad-PHS, 2020[143]).

Despite its growing volume over the years, the Household Service Cheque is not particularly popular. In 2007, about 337 000 cheques were used, tantamount to a volume of EUR 10 million (PPP 13 million) (Williams, 2018[68]). As such, the effects on formalisation of household service work in Austria have also been rather limited. While the number of marginal workers in these arrangements increased from 2 038 in 2006 to 10 881 in 2017, only a third of them are in regular work arrangements (Ad-PHS, 2020[143]). According to the EFSI, the system only contributed to the formalisation of approximately 1.55 million work hours until 2013. A primary reason may be that the Household Service Cheque is overall not very attractive to service providers (EFSI, 2013[144]).

Canada (province of Québec): Chèque emploi service

Building on an earlier allowance system, the government of the province of Québec introduced the Chèque emploi-service in 1998, after piloting in 1997, in order to formalize the sector and ease access to services for households. The paycheque is available to individuals with loss of autonomy, such as the elderly or individuals with disabilities, and eases the administrative aspects of hiring directly employed domestic workers for care or non-care purposes, in conjunction with financial allowances granted to this group. The Centre de traitement du chèque emploi-service handles most of the tasks concerning pay and social contributions. As a result, the share of services provided to households with loss of autonomy by employees under the paycheque is relatively high, making up 43% of all long-term home help services (Boivin, 2017[89]).

However, the conditions for the workers providing household services are relatively precarious. A major reason is that the workers under this scheme, about 10 386 between 2015 and 2016, are categorised as gardienne employees, which excludes them from a range of labour protections that other groups of employees are granted. The particularly low salary, about CAD 12.62 (PPP 10.11) on average per hour in 2015, and their variable, unpredictable and fragmented working hours add to the unattractive working conditions on the sector (Boivin, 2017[89]).

Denmark: BoligJobordningen

In 1994, the Danish Government introduced household service subsidies under the Home Service Scheme (Hjemmeserviceordningen). The scheme offered a tax subsidy on services, such as cleaning and gardening, costing the Danish Government DKK 600 million (PPP 70 million) at its height. The tax subsidy itself changed at various times, reaching 60% on the service price at maximum. The effects of the scheme on undeclared work have been rather limited, even though the demand for declared services increased (European Commission, 2018[145]).

In the year prior to the abolishment of the Home Service Scheme in 2012, the Danish Government had already introduced the Housing Job Scheme (BoligJobordningen). With some similarities to the old system, the Housing Job Scheme offers non-refundable tax deductions on domestic help and renovation work, which are administered with the annual tax returns by the Danish Ministry of Taxation. As of 2021, the available tax credit is 35% for household services (servicefradrag), including cleaning, laundry, gardening and childcare, and 25% for renovation work (håndværkerfradrag), while a maximum of DKK 25 000 (PPP 3 750) can be deducted for either service per year. In 2019, more than 300 000 persons have made use of household services under the Housing-Job Scheme. Similar to other tax deduction systems in the Nordics, the schemes usage increases substantially with income (European Commission, 2018[145]; SKAT, 2021[146]; 2020[147]).

The only labour supply evaluation of the Housing Job Scheme focusses exclusively on the renovation part of the subsidy and failed to find any significantly positive effects. In terms of undeclared work, it is estimated that only 5% of the services subsidised under the Housing Job Scheme would have otherwise been performed undeclared (European Commission, 2018[145]). Overall, the effects of the scheme must been seen as rather limited, especially as 4 to 10% of Danish households still made use of undeclared cleaning work in 2017 (Mailand and Larsen, 2020[148]).

Italy: Libretto di famiglia

With the buoni lavoro system, a first declarative system was introduced in Italy in 2003. The goal of the system was to reduce informal work and to regulate wages for occasional work, such as seasonal employment in the agricultural sector. Resulting from wide‑spread use for non-occasional use over the years, the system was replaced by the libretto famiglia (Family Booklet) in 2017 (Williams, 2018[68]).

The Family Booklet is a paycheque system, through which private households can pay for occasional domestic service work, such as cleaning, gardening and childcare. The value of each cheque is set at EUR 10 (PPP 15.95) and can be used for one hour of domestic service work. Workers that receive the cheque, who can only perform these tasks occasionally, can exchange each for EUR 8 (EUR 11.97), while the remaining EUR 2 (PPP 2.99) is going toward social insurance and management of the system. Certain ceilings limit the possibility for abuse as in the previous system and underline the occasional nature of the service that shall be provided under the scheme. As such, workers under the Family Booklet system can at maximum receive EUR 5 000 (PPP 7 480) in cheques per year, of which EUR 2 500 (PPP 3 740) can be from the same employer. Workers can also not be registered as self-employed or be employed by a service provider organization. Private households that make use of the paycheque can only do so for a maximum of EUR 5 000 (PPP 7 480) per year (Ad-PHS, 2020[149]).

The family booklet system has resulted in substantially better labour protection and access to social security for household service workers that would otherwise likely to work informally. Workers pay social security, are covered by accident insurance, are guaranteed minimum daily rest periods and maximum weekly working times, and receive a minimum wage corresponding to the voucher value (Williams, 2018[68]).

Despite these provisions and the prevalence of domestic work in Italy, the paycheque is rarely used. In both 2018 and 2019, only slightly more than 2 million hours of service work are financed through the booklet, while approximately 1 100 workers are active in the system each year (Istituto Nazionale Previdenza Sociale, 2020[150]). Instead, most domestic workers are employed in regular directly employment relationships, such that Italy has largest share households directly employing domestic workers in Europe. While declared employment in these settings is regulated by the National Collective Labour Agreement, estimates state that more than half of all domestic workers are providing their services informally and thus forego any social security coverage and labour protection (Ad-PHS, 2020[149]). Overall, the Family Booklet paycheque system has had a rather limited effect on formalizing the household service sector.

Luxembourg: Abattement pour charges extraordinaires

Luxembourg offers a fixed tax deduction for care and non-care households services, provided either by directly employed workers or through intermediary service providers, under the allowance for extraordinary charges (Abattement pour charges extraordinaires). Households that make use of such services receive a non-refundable monthly tax deduction of EUR 450 (PPP 531) per month or EUR 5 400 (PPP 6 375) per year. The incurred costs must be declared both to the tax administration in Luxembourg and the Centre commun de la sécurité sociale (Joint Social Security Centre). The latter of these declarations generally serves as the contractual basis for the work arrangement. The Joint Social Security Centre further simplifies the administration of direct employment through the centralized issuance of payslips and the determination of social security contributions (Ad-PHS, 2020[151]).

The predominant work arrangement in the household service market is direct bipartite employment and, just as in many other countries, households with higher incomes are the main beneficiaries of the tax deduction. The household service sector, employs about 8.300 directly hired workers, many of which are cross-border commuters from France or Belgium, as well as labour migrants from Eastern Europe. There is no qualification standard, nor regular training, for workers in the non-care part of the sector, in particular those that work in bipartite arrangements. Payment rates for domestic workers is among the highest in Europe, reaching between EUR  3 and EUR 16 (PPP 15.34 and 18.89) for workers in direct employment, including paid leave and paid public holidays (Ad-PHS, 2020[151]).

The Netherlands: Regeling Dienstverlening aan huis

The Dutch Government creates incentives for private employment of care and (non-care) household service workers who are hired for four days or less per week. The Service Provision at Home scheme (Regeling Dienstverlening aan huis), which was launched in 2007, exempts such households from all taxes and social security contributions on wages. The services covered range from cleaning and cooking to child- and personal care. In the absence of employer contributions, private households and service workers freely negotiate the wage for the services provided. These negotiations are theoretically limited by the Dutch minimum wage, though not every household employer pays minimum wage to their service workers. It is also the households themselves who are responsible for the monitoring of service quality (Jansen and Ramos Martin, 2020[152]; Ad-PHS, 2020[153]).

The exemption from social security contributions results in weak labour protection and adverse working conditions for household service workers. While regular employees on the Dutch labour market are able to claim sickness benefits for two years at 70% of the previous wages, household service employees under the Service Provision at Home scheme are only granted six weeks. In addition, employees on open-ended contracts under this scheme are exempt from prior consent to dismissal by their employers. The vast majority of Dutch households employing service workers do not pay their workers during vacation or sickness and more than three‑quarters do not comply with any of their remaining employer duties (Jansen and Ramos Martin, 2020[152]; Panteia, 2014[154]).

The market for the Service Provision at Home scheme is nevertheless substantial. In 2014, it was estimated to be worth about EUR 1.5 billion (PPP 1.9 billion), most of which concerned cleaning work. There were about 1 million users of the scheme, most of which are generally more affluent than the average Dutch household. With on average EUR 10.5 (PPP 13) in 2014, the wage paid to the service workers is low and a quarter of employees pay below minimum wage (Panteia, 2014[154]). There are nevertheless about 435 000 care and non-care household service workers in the country (Ad-PHS, 2020[153]).

Spain: Sistema Especial para Empleados de Hogar

In Spain, the Special System for Domestic Employees (Sistema Especial para Empleados de Hogar) provides households that directly employ non-care household service employees with a partial exemption on their social security contributions. The exemption covers 20% of the regular employer contributions and is increased to 45% for families with 3 children or more. Excluded are those work arrangements with less than 60 hours of monthly work which are bound by an agreement to pay the social contributions themselves (Ad-PHS, 2020[155]; Ministerio de Trabajo y Economía Social, 2021[156]).

In general, the Spanish non-care household service sector is very large and formal employment therein makes up only about 3% of the Spanish workforce (seeFigure 2.1). Direct employment is by far the most common work arrangement, concerning about 626,000 non-care domestic workers directly hired by households. While there is dedicated training and a formal certification system for these employees, it is not compulsory for employment (Ad-PHS, 2020[155]).