Promoting transition to formality

The informal economy absorbs more than half of the global workforce and includes more than 90 per cent of small and medium-sized enterprises, as well as the majority of micro-enterprises in developing countries. The share of women in informal employment is higher than men in most countries. Other vulnerable populations, such as youth, ethnic minorities, migrants, older people and the disabled are also disproportionally present in informality. As a result, millions of workers around the world suffer from poor working conditions and a lack of rights at work. Low-quality employment, inadequate social protection, poor governance and low productivity are some of the obstacles that workers and enterprises face when caught in the informality trap.

ILO’s Transition from the Informal to the Formal Economy Recommendation, 2015 (No. 204) was adopted to provide guidance to member States on how to: facilitate the transition of workers and economic units from the informal to the formal economy; promote the creation of enterprises and decent jobs in the formal economy, and prevent the informalization of formal jobs.

The Recommendation’s twelve guiding principles for supporting a transition out of informality include the promotion and protection of human rights; promotion of gender equality and non-discrimination; and a call for special attention to those most vulnerable to decent work deficits. The Recommendation calls on Member States to undertake a range of strategies including:
  • Legal and policy frameworks to ease and promote access to formal systems;
  • Employment policies that favour formalization;
  • Enforcement of fundamental principles and rights at work for those in the informal economy, including freedom of association, elimination of forced labour, abolition of child labour and elimination of discrimination in employment and occupation;
  • Promotion and enforcement of Occupational Safety and Health in all workplaces; and
  • Extension of social protection to all.
This broader framework for supporting pathways out of informality may be part of national Decent Work Country Plans, poverty reduction strategies or other plans. The TREE programme may be intentionally situated as an intervention in support of these broader frameworks, serving as a pilot or demonstration, or testing various strategies such as enrolment of informal sector workers in national pension plans, or including OSH regulation and enforcement of the sectors of employment.

Whatever the broader context, TREE programmes should incorporate a range of supports for creating pathways out of informality. These include:
  • Incorporating awareness-raising on fundamental principles and rights at work, social protection and OSH rules and services available in the country in all training and services provided to beneficiaries and stakeholders.
  • As part of participation in TREE, beneficiaries should be supported to obtain all relevant national identification documents and register in all relevant programmes and services.
  • Supporting TREE beneficiaries who will establish enterprises, including cooperative enterprises or self-employment to obtain relevant business and other operational licenses (such as health certifications for food production). This may involve research and consultation by the TREE team to determine the licences required and the procedures. Awareness raising and negotiation with the licensing and regulatory authorities may also be required to ensure the process is accessible. Costs and timing for obtaining such licenses must also be factored into overall programme planning.
  • Assisting with obtaining skills and occupational certifications and licenses. In some countries, occupational licenses are required for some types of work, and these are based on satisfying criteria including skills proficiency. Skills certifications, issued by relevant national or industry authorities can also assist with pathways to formal employment for individuals, providing them with a means of documenting their skills and easing access to employment or further training. Access to systems for recognizing prior learning (where they exist) may be integrated into training plans or post-training support.
Assisting stakeholders and partner organizations to understand and implement, to the extent they can, support for pathways out of informality will potentially benefit a much larger population than those directly benefitting from a TREE programme.