Eastern Slovakia is drawing investment interest, says labour law expert

A slew of investments, including Swedish carmaker Volvo’s plan to build a €1.2-billion plant to produce electric cars near Košice, has put eastern Slovakia in the investment spotlight.

“There is clearly a growing interest in eastern Slovakia,” Miloš Kvasňovský, partner at Kvasňovský & Partners law firm, told The Slovak Spectator.

The fact that it borders three countries – Poland, Hungary and Ukraine – makes it especially interesting for investors.

With the latter trying to repel a full-scale invasion by Russia, towns and villages in eastern Slovakia have become refuges for people fleeing the war in their homeland. And as those people settle in these localities, they in turn have become an important potential workforce for businesses in the area.

The Slovak Spectator spoke with Kvasňovský about eastern Slovakia, labour laws, and employing Ukrainian refugees.

Are there any parts of current labour legislation that pose any problems specifically for eastern Slovakia?

It might look that way at first, and one might think that they are related to employment of foreigners. But these problems occur across Slovakia. This is because foreign workers are scattered all over Slovakia. I don’t think there are any differences. What should be highlighted is that eastern Slovakia is certainly interesting, partly due to recent significant investments, one of them being by Volvo. These will create thousands of jobs in a region where workers continue to accept lower remuneration compared to, for example, workers in western Slovakia. The war in Ukraine has also made the region, which neighbours not just Ukraine, but Poland and Hungary too, more interesting for investors from Ukraine who have opened branches of their companies here.

Is Slovak legislation being tailored sufficiently to the inflow of foreign investment to the region?

In my opinion, yes. Regardless of their party composition, Slovak governments have supported the development of regions and the reduction of disparities between them. For instance, Volvo, which is building a brand new plant near Košice, has received state support. In terms of Ukrainians, Slovakia has provided a significant support framework for them. It has adopted appropriate legislation to enable Ukrainians to stay here – by giving them temporary refuge, to establish themselves in the labour market, including opening bank accounts, which initially was very difficult as some of them did not have all the necessary documents.

Has Slovakia tapped the employment potential of Ukrainians fleeing their home country?

The question remains how to persuade those suitable for the Slovak labour market to remain here, as Slovakia cannot compete with the salaries offered in countries further westwards. We also need to take advantage of the geographic proximity and cultural similarities of the countries. Slovakia could try harder at this.

In what respect?

I do not have in mind any special benefits, but allocating sufficient administrative capacities so the employment permitting process can be carried out quickly would be enough. The process as it stands is quite demanding. People always perceive any administrative process to be good if it is quick. In Slovakia, however, administrative capacities are not sufficiently large and it has to be admitted that Slovakia was actually caught by surprise by the influx of refugees. Then there are the state-set quotas for employment of people from third countries in individual sectors. When demand exceeds these quotas, foreigners circumvent them by getting a trade licence and working self-employed. This raises the question of whether it would not be better for the state if they were to work as ordinary employees. The latter would mean higher payments of compulsory levies to the social insurance provider Sociálna Poisťovňa and health insurers. But this applies to other foreign workers, not just Ukrainians.

Is there anything employers should look out for when employing Ukrainians, for example any pitfalls?

No. The Slovak government has addressed this issue quite well in terms of legislation. But an issue raising a bit of concern are the reports in the media that Ukrainian consular offices should not provide, let’s call it ‘assistance’, to Ukrainian men. When their passports expire and the consular office will not cooperate, they could end up being without a valid travel document and this might disqualify them from getting or keeping a job in Slovakia. I get a lot of phone calls from our clients, whether direct employers or labour leasing agencies employing Ukrainian men. These men are now part of their work teams, employers are satisfied with them, but they don’t know what’s going to happen next. We can’t answer their questions because the information is still just from media reports so far. Nevertheless, Slovakia needs Ukrainian workers as there is actually a shortage of between 80,000 and 100,000 workers in Slovakia, and that’s just for qualified positions.

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Is Slovakia’s labour legislation generally flexible enough for the employment of foreigners?

One area where there is room for improvement is labour leasing. In terms of entering an employment contract, it is flexible, but its termination is very inflexible, especially for the employer as it is actually the same as a regular employment contract. When we look at, for example, the Czech Republic, there labour leasing, or temporary assignments, can be terminated unilaterally – it is flexible at the beginning and at its termination. And the Czech labour market obviously has no problem with that, contrary to Slovakia.

How do you view Slovak labour legislation in general?

It is employee-centric. By this I mean that some provisions are tailored in such a way that they predominantly protect the employee from the other party, the employer. This sometimes creates an artificial, negative polarity between the two parties, who are not enemies, but live in a symbiosis with each other and need each other. There should be greater equality between employees and employers – not by the employee not being protected, but by the employee being forced to take more interest in his or her own affairs. The labour law is at a point that although everyone in Slovakia is supposed to know the law, there are certain parts of society where this is not such an important requirement, or to put it another way, the burden of proof in employment disputes is shifted to the employer. This is not okay, in my opinion. This is one area of Slovak labour legislation where a lot of work could be done.

Is the government aware of this?

There is certainly general knowledge about this issue, but I do not have any information that the government is preparing any changes [to the legislation].

Are there any areas in which current Slovak labour legislation needs to be updated or expanded?

I would accept a certain modernisation of labour law, especially in terms of signing processes, but especially delivery. It requires a clear regulation of remote signing, in justified cases through a qualified electronic signature. In practice, the introduction of platforms for signing and the dismantling of traditional approaches to signing documents. Because we have an increasing number of foreign companies, managers are not always present in the offices for signing purposes, employees working from home or teleworking. A fundamental change in delivery in labour law and enabling delivery via an electronic network, say to an employee’s e-mail address beyond the reach of the employer, for example with the employee’s passing consent, would be welcome. [This would be] a modification similar to the model of the Czech Republic, which is starting to work there.

Are there going to be any significant changes to labour legislation in Slovakia?

There are some changes in the pipeline related to higher collective agreements. Although there is some opposition to them from employers in Slovakia, they are common in western Europe. For example, when somebody gets a job in the metallurgical sector in Germany, a respective higher collective agreement sets a minimum wage that he or she should get. We will see what the final wording [of the changes] will be.