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AMENDMENT WAS A STEP BACK FROM 2003 CHANGES, REPORT SAYS

World Bank pans Slovakia's Labour Code changes

THE WORLD Bank has joined the chorus of disapproval over recent changes made to Slovakia's labour legislation.
Prime Minister Robert Fico has called the amendment to the Labour Code the law of the year, but the World Bank shared the opinion of business associations and employers who worried that the new code might make the labour market less flexible and put a heavier financial burden on companies.

THE WORLD Bank has joined the chorus of disapproval over recent changes made to Slovakia's labour legislation.

Prime Minister Robert Fico has called the amendment to the Labour Code the law of the year, but the World Bank shared the opinion of business associations and employers who worried that the new code might make the labour market less flexible and put a heavier financial burden on companies.

A revamped code was part of the deal that Fico made with trade unions shortly before the parliamentary elections last year, in return for a massive unionist endorsement.

Changes made to the legislation weaken the flexibility of the labour market and increase employment costs, reads the World Bank's Regular Economic Report on the new EU member countries, with a special focus on the labour market, released at the end of September.

The last time Slovakia amended its Labour Code, in May 2003, it introduced the most far-reaching changes and the least rigid hiring regulations, placing the country next to Singapore and United States, according to the report.

The code adopted by the previous government of Mikuláš Dzurinda increased the working week to 48 hours (with overtime); enabled flexible part-time arrangements; introduced an allowance for the indefinite repetition of fixed-term contracts; cut severance pay; and considerably eased the conditions under which workers can be dismissed. The code also weakened the powers of the trade unions and worker councils, the report said.

"The 2007 revisions to the Slovak Labour Code are regarded as a step backward," the World Bank wrote. "The amendments result in lower flexibility of labour relations and hence higher labour costs. The new regulations reversed positive changes from 2003."

The Labour Ministry, however, insists that the changes are fully in line with modern European labour laws.

"Along with preserving the flexibility of the labour market, it improves the conditions for employees," ministry spokeswoman Oľga Škorecová told the TA3 television news channel.

The revised code grants more powers to unions, limits overtime work, toughens conditions of fixed-term employment contracts and limits the use of trial periods before signing a permanent-status contract with an employee. It also bans the employer from terminating a fixed-term work contract without a legal reason and guarantees severance payments for employees who are fired due to restructuring. And employees can immediately terminate a work contract in some cases, such as when their employer refuses to cover the costs of a foreign business trip.

Fico said back in June that all this finally brings the country's labour legislation up to par with European Union standards.

Labour market experts say the changes to the code have not yet substantially hurt employment in Slovakia, but they do not encourage hiring, either.

"Higher protection for employees has boosted employers' concerns, for example, about what do to with an employee who does not perform adequately in the job," Luboš Sirota, president of the Association of Personnel Agencies and director of the Trenkwalder human resources firm, told The Slovak Spectator.

It is positive that the government accepted comments from the association and allowed firms to keep employing external workers through personnel leasing, Sirota said.

"However, the government's actions do not encourage employers to hire more people," he said. "Changes to the Labour Code discourage small businesses from more extensive hiring. The government should make sure that it is more beneficial for people to work than to live on subsidies."

The most positive changes to the Labour Code were made in 2003, when it was considerably pushed towards flexibility and compatibility with European standards, said Miroslav Poliak, partner of the Menkyna & Partners human resources firm.

"Changes that the current government has made to the code are a step back," Poliak told The Slovak Spectator. "Fortunately, these changes are not as extensive as they looked at the beginning of the amendment process. And they were also discussed quite intensively by the market, so employers had enough time to prepare for them."

Employers will also be affected by the extensive support for the unions and their duty to pay union representatives, which probably gives them more than a regular employee would earn, Poliak said.

The World Bank also said that labour market flexibility in the new European Union countries has not improved much in recent years. The problem of long-term unemployment is pervasive in virtually all countries in the region, but particularly in Slovakia, Croatia, Romania, Poland and Bulgaria, the report read.

"Slovakia is an extreme case: three out of four unemployed are jobless for more than one year," the bank wrote.

In the first quarter of 2007, the unemployment rate in Slovakia stood at 11.5 percent, which means that 303,000 people did not have a job, according to the Slovak Statistics Office. Out of that number, 72.5 percent of people were unemployed for more than one year.

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