THE DARK prospect of a general strike is no longer looming over Slovak industry. What trade unions called the toughest negotiations in the modern history of Slovakia have finally produced a deal that will push up wages in Slovakia's key industrial sectors by 6.5 percent. OZ KOVO, the trade union organisation representing engineering workers, originally demanded a 7 percent wage hike while employers had responded with a 3 percent offer.
Employers yielded at the prospect of a strike that experts predicted would have caused major losses to industry, especially in the automotive and electrical technology sectors. In return, the unions promised more labour flexibility, by easing their demands over conditions for fixed-term employment, fixed-term contract extensions, and overtime work, which became stricter under the latest revision to the Labour Code.
Wages in the engineering sector, where the average monthly rates currently stand at between Sk20,000 - 21,000, should go up from March.
Industry insiders said the hike is in fact at the limit of what the sector can afford to pay, while some economists have warned that it is simply too high and might have a fatal impact on smaller companies.
However, the unions, strengthened by a recent revision to the Labour Code are comfortable with the deal, suggesting that economic developments justify their demands.
"The country's economy has been growing and there is a lack of qualified labour," the chairman of OZ KOVO Emil Machyna told The Slovak Spectator. "Employers can no longer tell their employees: just be careful with your demands because we have here 30 others lined up to do your job."
The unions have been on strike alert since early January; OZ KOVO representatives said that the alert would end when the parties sign a collective agreement covering wages and labour issues, which would be valid until 2009. Under the law, unions can announce a strike if, during the process of negotiating a deal, they fail to reach an agreement with employers within 60 days.
Unions will use the achieved deal as a framework for further bargaining at company level on salaries.
"It was one of the most difficult negotiations ever because the unions had to resort to collecting signatures and organising other pressure actions," Machyna said. "Still, it is strange that with the kind of economic growth Slovakia posted last year, it took so long to reach a deal."
Machyna still feels that the unions have achieved what they set out to.
During the first three quarters of 2007, profits in the engineering industry reached about Sk14 billion (€415.7 million), which is enough to pay for higher wages, Machyna said earlier this year.
Milan Cagala, president of the Slovak Engineering Industry Association (ZSP) told media that the 6.5 percent wage hike is at the limit of what the industry can afford.
Though the deal is now sealed, employers said the industry would have been more comfortable with a lower rise.
The original three-percent offer from the ZSP reflected inflation expectations and GDP growth, Juraj Borgula, the employers' main negotiator, told The Slovak Spectator in an interview in January.
The employers also argued that company profits are needed for more than just filling workers' wallets.
"The profits must be seen in the context of investments that are needed to modernise the engineering industry," Borgula said.
About Sk50-60 billion is being spent on investments in the engineering industry each year, and depreciation is at about the same level, Borgula said. In the light of these numbers, the Sk14-billion profit achieved in 2007 is enough to pay for gradual modernisation, according to Borgula, leaving only enough room to pay for higher wages once productivity grows.
"Last year, growth in the engineering industry stood at 14 percent; we hope we can keep the sector growing by at least twice the level of wage increases, so at a minimum of 13 percent," Borgula told the Sme daily on February 27.
Pavol Kárász of the Slovak Adademy of Science said that the 6.5 percent wage increase is dangerously high, and for smaller companies its impact might be ruinous.
"For the economy it would be better if the difference between productivity growth and the growth in wages was higher," Kárász said in an interview with the economic daily Hospodárske Noviny.
Machyna said that if the employers had remained hard-headed over wages, the unions would have reached for additional levers.
"The next step would not necessarily have been a sudden strike to halt production, but rather different ways of making the lives of the employers more complicated," Machyna told The Slovak Spectator. "We could have insisted that all the occupational and safety regulations were observed 100 percent."
The unions also won the right to be involved in the preparation of the so-called labour catalogues, which list positions with exact job descriptions and offer a guideline for determining each employee's wages.
"If we do not have these catalogues, the employers could abuse the system of ranking people into labour groups that define their income," Machyna told The Slovak Spectator. "They could rank different employees within one labour category and they all would get just the basic salary for that category."
Machyna said that the unions do not want to intervene in the process of ranking each employee, but rather to have clear definitions in the labour catalogues along with a definition of the minimum wage that the employer is obliged to pay for each category.
"If these definitions are not there, the employer might rank the employee in a different category and then reduce his payment," Machyna said.
Earlier this year Borgula said that union pressure on wage growth has not been the greatest problem.
"We are more concerned about changes to social laws, such as the Labour Code and the law on tripartite negotiations, which favour employees and, most importantly, the unions," he told The Slovak Spectator.
One long-standing problem, Borgula said, is that firms that have collective agreements are at a disadvantage compared to firms that don't bother to negotiate with the unions. Firms which negotiate carry 10 percent higher expenses in wages and benefits, he added.
Machyna also admitted that the unions have drawn some confidence from the latest revision to the Labour Code.
The amended Labour Code, which took effect on September 1, 2007, grants more powers to unions. Prime Minister Robert Fico also renewed the so-called 'tripartite', a consultation body bringing together government, business and labour representatives. The tripartite had lapsed under the 2002-2006 Mikuláš Dzurinda administration.
Under a 2006 agreement, unions representing metal, textile, tourism, construction and service workers openly supported Prime Minister Robert Fico's Smer party in its election campaign and recommended that their 84,000 members do likewise. In return, Smer pledged to advance union concerns once in government.
The amended Labour Code reached out to unions by requiring businesses with less than 50 union members to grant at least one trade union representative four hours every month for union-related work and pay them for their time. Companies that have 100 union members have to grant the union representative 12 paid hours, while union representatives in businesses with more than 100 union members get 16 hours a month.
Business said that even if the modified code doesn't substantially hurt the labour market, it won't encourage companies to hire new employees.
The revised code also bans employers from terminating a fixed-term work contract without a formal legal reason and guarantees severance payments for employees who are fired due to company restructuring. Employees can also immediately terminate a work contract in some cases, such as when their employer refuses to cover the costs of a foreign business trip.
