Dirty secret of Estonia’s building sites

Photo: Politsei- ja piirivalveamet

The number of violations related to the recruitment of foreign labour has increased steeply, because some Estonian construction firms have discovered a new source of wealth – Ukrainians willing to build houses in Estonia for a few hundred euros per month while living in ascetic conditions.

“It is concerning that the nature of violations has begun to change. While they initially occurred because of the employers’ incompetence, it has currently moved towards deliberate lawbreaking”, said Indrek Aru, head of the Northern prefecture’s border and migration control service.

The photos illustrating the article were made by the police in Tallinn this summer. In once case a group of 27 men from Ukraine and Moldova was found living crammed together in an old production facility. Information gathering revealed that the group was apparently working in Tallinn on several construction sites.

Immediately after the police raid and fearing that the police have learned about the use of illegal labour, the enterprise officially registered the entire team for short-term employment.

Aliens residing in a warehouse is no reason for investigation in itself if their presence in the country is lawful, for instance, is they have visas. “If we had not checked and sent a signal that we are keeping an eye on them, the unregistered working would have probably continued”, Aru said.

He added that the police do not necessarily aim to process misdemeanours, but to point the enterprises towards legal behaviour.

“There were cases, when we discovered violations, contacted the employers, explained the situation and specifically ordered them to cease the violation,” Aru said, adding that the police also carry out extra checks.

Attracting the interest of the police is often actually good news for foreign labour – instead of paying the 300-euro monthly salary the employer will have to pay, after officially hiring them, the 1.24-time Estonian average gross salary according to the law – or almost 1,400 euros.

The Ukrainian men on the photo, who shared a narrow living space, attracted the officials’ attention due to a noisy drinking party. The police was alerted by one of the residents of the apartment house in central Tallinn. “It appeared that the foreigners were crammed into one room, but their presence was completely legal,” Aru said. “This case reached official procedure, but not that evening”.

Two of the four men were already known to the police for working in Estonia. “We initially issued a warning, but they kept on. Together with the Tax and Customs Board and the Labour Inspectorate they were found on a construction site and upon realising that they are being checked, they hid under a tarpaulin on a balcony”.

The fine of a couple of hundred euros was now combined with the invalidation of visas and expulsion from the country. “After repeated offences we shall impose entry ban, which means that the offender can no longer enter the Schengen area for a certain period. If he has already been caught working illegally, knows what can happen and keeps on working, the punishment will be severe”, Aru explained.

However, in most cases the workers have little choice. Illegal working is demanded by the local entrepreneur, who often does not mind punishment.

The Riigikogu did approve a law amendment last week, which lowered the wage level for foreign labour to the Estonian average, but this does not provide a solution.

“If an Estonian construction worker in Harju county earns 1,200 – 1,400 euros per month, the Ukrainian workers accept 300 euros. If the employer imports a dozen illegal workers, he can save considerable sums on their salary. Plus the taxes he would not pay to the state,” Aru said.

If caught by the police, the Tax and Customs Board or the Labour Inspectorate, an entrepreneur faces a fine of up to 3,200 euros. Furthermore, the firm may be banned from officially hiring foreign labour and the punishment may disqualify him from attending state procurement tenders.

“Yet the profit is so high that it outweighs the maximum fine for a few workers. We have an actual case, where the firm declared that they reckon with the maximum fine upon being caught, but would still make profit;” Aru added.

According to Aru, the enterprises make use of the Ukrainians’ miserable situation, but the ones exploited are happy with it. “They say that back in Ukraine they would earn 200 dollars, but receive here 300 euros per month. Of course, such agreements are hardly ethical”, Aru said.

Liis Valk, chief experts of the Police and Border Guard Board identity and status office, explained that the restrictions on bringing in foreign labour have been established in order to protect the Estonian residents’ interests and fair competition. Granting residence permit for labour depends on two basic rules: one has to check with the Unemployment Insurance Fund that no such labour is available in Estonia. Secondly, one has to pay a salary, which would not harm the local market.

“This is not just a police problem and business, but an issue of broad social impact”, Aru added.

On the other hand, the police find that labour shortage in some areas is too high, while the standards may be too strict.

For example, hiring foreign labour means a lot of red tape, the regulations are complicated for entrepreneurs and the foreign workers and the law contains pages and pages of exceptions. “If the rules are clear, they are easy to follow”, Valk said. Estonia will employ four migration advisors from next March, who would also consult the entrepreneurs.

“We have a great need for qualified skilled labour. The media claim that we need engineers and medics, but builders and welders are in high demand as well. The Estonian construction sector suffers from labour shortage and this labour needs to be brought in from somewhere, but the question is, whether those operating in the sector are honest and observe the state’s regulations”, Aru said.

According to Aru, some foreign workers have admitted that they were building their first house in Estonia. “This of course poses the question of what quality we can talk about. The entrepreneurs do not really feel their responsibility for obeying the law and for the consequences to the society”, Aru added and quoted a Ukrainian involved in an illegal labour scheme, who had heard Estonian entrepreneurs claiming that the labour shortage is so acute that if he could bring in 200 Ukrainian workers, Estonian companies would start buying his services.

“We prevented that case and expelled the man”, Aru said.

The immigration quota for regulating the movement of labour has been set at 1,317 people for 2016 and that quota has been met, for the first time in history, according to Liis Valk. A couple of hundred people are therefore waiting for their turn. The quota would remain in force the next year as well, again at 1,317 or 0.1 percent of Estonia’s permanent residents.

A law amendment does exclude from the quota investors, start-up entrepreneurs and other specialists in the ICT sphere starting from 2017, but the police do not expect this small contingent to have any major effect. “Labour migration is increasing anyway every year, so that the quota will be met next year as well,” Valk said.

There is the question: why do we even need to regulate labour migration with a quota if some spheres experience serious labour shortages.

“The quota is no excuse, because it has not been met previously, but increased migration will bring along more abuse. Whether the quota will influence some people in the future to evade the law is a matter of speculation, but it may have its effect,” Valk said, adding that the quota does not concern short-term work (up to six months) anyway.

Although the police are unwilling to make the names of the offending construction firms public, Aru assured that none of the large and well-known firms would have imported illegal labour on their own. “But we do have indications that the main contractors are aware of subcontractors having problems with hiring legal workers“, Aru hinted. According to him, the police will step up checking on the working conditions of foreign labour, considering the increasing trend of labour migration and the type of violations.

Indrek Peterson, executive director of the Estonian Association of Construction Entrepreneurs, said that the association has not directly raised the issue, since its members are honest businessmen who do not have such problems. “We have said that labour should be imported to Estonia, because of the shortage of specialists and the failure of the training system to meet the market’s demand”, he said.

He did not rule out that there may be problems with subcontractors, who probably pay unreported wages to local workers as well as foreign ones.