Introduction Informal employment, despite infrequent in the European Union compared with middle and low-income countries, affects an important number of workers. However, little is known about informal employment and its association with health. The aims of this study were to estimate the prevalence of informal employment in the EU-27, a well as their associated working and employment conditions (extent of employment precariousness), and to analyse its relationship with health compared to other employment arrangements.

Methods Data from the fifth European Working Condition Survey of 2010 was used. A subsample of 27,076 salaried workers from EU-27 on working age people (15–64 years) was selected. As dependent variables we selected psychological well-being and self-related health. We calculated the prevalence of poor working conditions (i.e. psychosocial risk variables, job satisfaction, place of work,…) and employment precariousness across three classes of employment arrangements: permanent, temporary and informal. Logistic regression models were fitted in order to test the association between psychological well-being and self-related health with contract arrangements.

Results The proportion of informal employees in the EU-27 was 4% among men and 5% among women. A gradient of poor working conditions and employment precariousness was present according to type of contract, where the best conditions were observed among permanent employees and the worst among informal employees. In spite of this gradient, temporary and informal employees had similar risks compared with permanent workers regarding both poor psychosocial well-being and self-related health for both sexes.

Conclusions Informal employment is also present in high-income countries and is characterised by worse working conditions and higher employment precariousness than formal employment. However, their risk of poor psychosocial well-being and self-related health was similar to that of temporary employees, both being higher than that of permanent employees.