Informal employment comprises persons who in their main or secondary jobs were:
- Own-account workers, employers and members of producers’ cooperatives employed in their own informal sector enterprises. The informal nature of their jobs follows directly from the characteristics of the enterprise.
- Own-account workers engaged in the production of goods exclusively for own final use by their household (e.g. subsistence farming or do-it-yourself construction of own dwellings), if covered.
- Contributing family workers, irrespective of whether they work in formal or informal sector enterprises. The informal nature of their jobs is due to the fact that contributing family workers usually do not have explicit, written contracts of employment, and that usually their employment is not subject to labour legislation, social security regulations or collective agreements.
- Employees holding informal jobs, whether employed by formal sector enterprises, informal sector enterprises, or as paid domestic workers by households. Employees are considered to have informal jobs if their employment relationship is, in law or in practice, not subject to national labour legislation, income taxation, social protection or entitlement to certain employment benefits (paid annual or sick leave, etc.) for reasons such as: non-declaration of the jobs or the employees; casual jobs or jobs of a limited short duration; jobs with hours of work or wages below a specified threshold (e.g. for social security contributions); employment by unincorporated enterprises or by persons in households; jobs where the employee’s place of work is outside the premises of the employer’s enterprise (e.g. outworkers without an employment contract); or jobs for which labour regulations are not applied, not enforced, or not complied with for any other reason. Operational criteria used by countries to define informal jobs of employees include:
- Lack of coverage by social security system;
- Lack of entitlement to paid annual or sick leave;
- Lack of written employment contract.
Employment outside the formal sector includes persons who are employed in the informal sector and in households, the latter of which is mainly comprised of persons employed by households as paid domestic workers. Employment in the informal sector refers all persons who, during a given reference period, were employed in at least one informal sector enterprise, irrespective of their status in employment and whether it was their main or a secondary job. An informal sector enterprise satisfies the following criteria:
- It is an unincorporated enterprise, which means that:
- It is not constituted as a legal entity separate from its owners, and
- It is owned and controlled by one or more members of one or more households, and
- It is not a quasi-corporation (it does not have a complete set of accounts, including balance sheets);
- It is a market enterprise: this means that it sells at least some of the goods or services it produces. It therefore excludes households employing paid domestic workers;
- And at least one of the following criteria:
- The number of persons engaged / employees / employees employed on a continuous basis, is below a threshold determined by the country
- The enterprise is not registered
- The employees of the enterprise are not registered.
Statistics presented in ILOSTAT usually refer to the main job of employed persons.
The harmonized series on informality are derived by the Department of Statistics from processing national household survey microdata files using a consistent navigational path. The process involves identifying the production unit (formal sector, informal sector or household) and the nature of the job (formal job or informal job) of each employed person in their main job in order to derive the final indicators.
First, the unit of production is identified as either formal sector, informal sector or household. The operational definitions used are:
- Informal sector: All workers in unincorporated enterprises that produce at least partly for the market and are not registered. It excludes households that produce exclusively for own final use, subsistence agriculture, construction of own dwellings, etc.
- Formal sector: all workers in incorporated enterprises.
- Household: All workers in unincorporated enterprises that produce goods and services exclusively for own final use. It includes paid domestic employees, subsistence agriculture, construction of own dwellings, manufacture of own wearing apparel, own furniture, water and fuel collection for own use, among others.
If households cannot be identified, only the formal and informal sectors are tabulated. This occurs in many cases and as such, it is the rationale for deriving the final indicator on employment outside the formal sector, i.e., with the informal sector and households combined, since these often cannot be differentiated.
The definitions are derived from the following criteria: