CHANGES to the country's labour laws are paying off as far as business is concerned. A standard 45-hour work week and simplified employment contracts, among others things, have turned Slovakia into one of the most flexible labour forces in Europe.
According to the World Bank, Slovakia ranks ahead of Denmark and Switzerland in its ability to shift workers from one economic activity to another quickly, smoothly and without disruption. Economists say that countries with a flexible labour market are more competitive because they can adjust to shifting demands as technology progresses and consumer tastes vary.
Cheap and qualified labour, stable macroeconomic results and location continue to attract investors seeking fertile ground for their investments. According to a 2005 survey by The Economist's Intelligence Unit, foreign managers listed Slovakia, together with India, the Czech Republic and Poland, as the most attractive countries for building or relocating production facilities.
Human resources experts say that Western Europe, already worried that cheap Eastern European labour will invade their markets, have another reason to worry.
"Many Western companies decide to move their operations to Slovakia because of the inflexible labour laws in Western Europe. Western regulations have become too expensive and too rigid for companies to manage global competition in an effective way. Slovakia offers the opposite: maximum flexibility, and this will help attract many foreign investors," Gerard Koolen of Lugera & Makler told The Slovak Spectator.
Experts also feel that the World Bank ranking will give Slovakia extra clout when overseas companies are considering where to place foreign investments.
Paul Binder of the Target Group told The Slovak Spectator: "I see the biggest positive impact on potential investors overseas. These investors usually make a pre-selection of potential FDI locations at a distance by using models that include many macro-factors. This World Bank ranking should raise Slovakia's score against its competitors."
He says that investors closer to home are largely unaffected by the ranking. "Investors from Continental Europe, from Austria or Germany, for example, are closer to Slovakia and already have more information about the country. For them, such a ranking is nice to have but not as important as for overseas investors."
The country's Labour Ministry says the most important benefit of having a flexible labour market is the increased potential for foreign investment and along with it, the promise of new jobs.
"Such a positive ranking has an enormous impact on Slovakia's image in terms of its ability to attract further major investments that might be aimed at this region," Labour Ministry spokesman Martin Danko told The Slovak Spectator.
The key changes within Slovakia's labour code that contributed to a more flexible labour market are an increase in the number of working hours (45 hours plus three overtime hours per week) and a simplification of part-time and fixed-term contracts.
Furthermore, the new legislation makes it easier to fire undisciplined employees and decreases the term of notice for standard work contracts from three to two months.
It also increases flexibility in labour relations as it defines only the basic framework and leaves the details up to collective bargaining.
The reform also tried to make the system of benefits and contributions more transparent.
"We consider the Labour Code amendment and the introduction of the flat-rate tax as the crucial legislative initiatives that have helped us create a flexible labour market. The Labour Code amendment came into effect in 2003 and subsequently has reframed the employer-employee relationship resulting in improved labour market flexibility," Danko explained.
The Slovak labour market is not without growing pains, however.
"Low labour mobility remains a problem in our labour market. Another issue is part-time work. The high contribution of part-time labour negatively affects the cost of labour and is a critical obstacle in creating new jobs," Danko told The Slovak Spectator.
He added that the Labour Ministry would focus on these "points of crucial importance" going forward.
Work force mobility impacts long-term business development. Human resources experts agree that Slovakia struggles with a work force unwilling to relocate, although it is not the only country having difficulty.
"The lack of labour mobility can be observed throughout Central Europe; it is not only a Slovak phenomenon. There are differences in the level of mobility between generations but also education levels. The mobility of labour is still low for several reasons: low salaries, high rents and a scarcity of housing, at least housing that workers can afford," the Target Group's Binder said.
A family-oriented society also contributes to Slovakia's work force immobility. Binder said: "Along with economic factors such as affordable housing and insufficient transportation there is also one important human aspect: the majority of Slovaks are family-oriented. If we put aside career-oriented managers, the remaining majority of Slovaks would move only out of economic necessity or pressure," Binder told The Slovak Spectator.
Koolen of Lugera & Makler has a different view. He claims that Slovaks tend to be mobile.
"Many people from Eastern Slovakia moved to Western Slovakia for a nice job. Many of our candidates are willing to move to other cities for a suitable job," he said.
According to Koolen, the problem is the lack of adequate housing.
"The real estate market does not offer enough low-priced housing. Candidates that would like to move to another city for a nice job are not able to find affordable housing. We are working for PSA Peugeot Citroen in Trnava. We have many vacancies and we would love to attract people outside of the Trnava region. And people would love to accept a job at this great new car factory. But they face one problem: Where to live?
"I think that if the Slovak government would build affordable housing in the regions they want factories to open, the labour mobility problem would be solved immediately," Koolen told The Slovak Spectator.
Binder says that the main labour challenge ahead will be a shortage of qualified middle managers, technicians and engineers as foreign investment expands in Slovakia. He also predicts that the cost of unskilled labour will increase as well.
"Regional differences will become increasingly important. Usually you do not find enough senior executives in the areas where you have a sufficient number of unskilled workers available. When looking at the Slovak labour market from a macro perspective, we foresee a steady supply of top managers and senior executives but some shortage in middle managers down, Binder told the newspaper. Human resources experts emphasize cooperation between business and education.
"We have to ensure that our schools produce graduates with the appropriate skills, and in the quantity required, to meet the demands of the business world," Binder concluded.
