Labour Code changes set to dominate 2011

Slovakia has been operating in savings mode. Over the last year, expressions like downturn, closedown and hiring freeze have been gradually replaced by terms such as economic revival, trimming cure for the public sector and vitamins for the business environment, as promised by the government of Iveta Radičová after it took over from the Robert Fico administration in July 2010. Market watchers offer neither gloomy predictions nor any miracles for the economy in 2011, though they say that the year ahead might provide some fertile soil for economic reforms if austerity measures do not significantly dampen reformers’ zeal.

The government of Iveta Radičová promised a trimming cure for the public sector and vitamins for business.The government of Iveta Radičová promised a trimming cure for the public sector and vitamins for business. (Source: TASR)

Slovakia has been operating in savings mode. Over the last year, expressions like downturn, closedown and hiring freeze have been gradually replaced by terms such as economic revival, trimming cure for the public sector and vitamins for the business environment, as promised by the government of Iveta Radičová after it took over from the Robert Fico administration in July 2010.
Market watchers offer neither gloomy predictions nor any miracles for the economy in 2011, though they say that the year ahead might provide some fertile soil for economic reforms if austerity measures do not significantly dampen reformers’ zeal.

One area which will certainly not escape change is the labour market, since the government is determined to revamp the Labour Code. The centre-right administration revealed the broad outlines of its proposed revisions in early February, suggesting that it intends to make the law more flexible to better meet the needs of the economy while reducing unnecessary bureaucracy. The government is also promising more protection to those who need it most. Businesses have long called for a more flexible Labour Code, but the unions want it to stay as it is. Indeed, unions have already launched protest action aimed at blocking the planned changes.

Though the labour market is no longer on its knees and the hiring freeze has thawed, it will take much longer to push the unemployment rate back down to pre-crisis levels. Nevertheless, recent months have brought more stability to the market, with unemployment climbing only very little or remaining flat, Michal Páleník of the Employment Institute, a think tank, told The Slovak Spectator.

The important numbers

At the end of December 2010, Slovakia’s employment offices registered a total of 334,903 people who were unemployed and immediately available to take up jobs. This put the country’s jobless rate at 12.46 percent, 0.20 percentage points lower than in December 2009, according to Slovakia’s Centre of Labour, Social Affairs and Family (ÚPSVAR).

Meanwhile a major austerity package announced by the government has frozen wages in the public sector. Though average wages in Slovakia kept rising during 2010, market watchers noted that this was mainly due to the loss of many lower-paid jobs and thus the increase was mostly illusory. The average nominal monthly wage stood at €744 across Slovakia for the first three quarters of 2010, 3 percent higher than in the same period of 2009, according to data from the country’s Statistics Office.

For 2011 the Financial Policy Institute of the Slovak Finance Ministry has predicted a 3.7-percent rise in the nominal monthly wage, meaning it would grow to €798.

Vladimír Vaňo, chief economic analyst with Volksbank, said he expects that a recovery in economic activity as well as an increase in labour productivity will contribute to positive dynamics in average wages, with an increase in nominal wages of between 3 and 4 percent in 2011 and potentially even more in 2012.

Where is the HR business heading?

Though human resources professionals have detected a revival in the market they are quick to point out that it has not translated into lower unemployment figures. Companies, albeit carefully, have begun to re-open their wallets and start investing and searching for people to reinforce their teams.

The number of positions offered via different web portals and personnel agencies has been growing, which implies that people are no longer as worried about changing jobs as they were last year, Peter Pelegrim, area manager of Manpower, pointed out. Nevertheless, this does not necessarily mean that firms are creating new jobs, he added.

Mario Fondati, a partner at Amrop Slovakia, confirmed that there are more available positions and offers of work than there have been for one or two years and that firms are no longer afraid to take on new people.

“Nevertheless, caution remains, as far as costs are concerned,” Fondati told The Slovak Spectator.
Yet, both applicants and employers have changed their expectations, and in many cases these have become more realistic in terms of remuneration.

“People value their jobs more and tend to be risking less,” said Fondati. “They are willing to lower their expectations in return for more certainty. Nevertheless, it is still true that there is a lack of good quality people, who are needed more by businesses than ever before.”

His colleague Igor Šulík, managing partner of Amrop Slovakia believes that the business finding people for organisations faces two fundamental challenges.

“One of them is the fast spread of social media and social networks, where information on candidates is easily accessible,” Šulík told The Slovak Spectator. “The other trend, which I believe will set the pace of development for personnel consultancy, will be the growing interest for services with higher added value.”

Mariana Turanová, managing partner of Target Executive Search, suggests that globalisation is one of the significant phenomena which have been influencing the Slovak labour market. A large proportion of the positions which are being opened will be located in Slovakia, but the jobs will have a regional scope, she added.

However, labour market watchers agree that finding qualified workers in certain areas will remain a challenge. Though the crisis has made more labour available, those who have found themselves unemployed are not necessarily able to fill the gaps created by a lack of qualified labour.
“The crisis has brought enough labour, but with lower qualifications,” said Silvia Jelínková, human resources manager of Dell's European Business Centre in Bratislava.

Nevertheless, Jelínková noted that applicants themselves have become more courageous as a result of their experience and do not worry about entering the market and searching for jobs.
The crucial code

Undoubtedly, one of the law changes that will most significantly impact the labour market over the next couple of years is the revision of the Labour Code. Prime Minister Radičová presented the government’s proposed changes to the code on January 31 and it is unlikely that the government, trade unions and employers will reach an agreement over the code by the time this Career Guide goes to print in mid February.

The Labour Ministry stated that its proposed Labour Code will be more family-friendly, giving both employers and employees the option to work flexible hours based on their own needs. The ministry gave an example of an employer having the opportunity to distribute tasks linked to one specific work position among several employees by creating a shared position. The possibility of using parental leave until a child’s fifth year is also on the ministry’s list of changes.

The government is also proposing a shorter probationary period for employees in junior positions, while designating longer periods for positions with higher pay. The proposal provides an employer with the option of negotiating a flexible combination of severance pay and layoff notice with an employee, with the minimum notice period depending on the number of years of employment with the firm or organisation in question.

The ministry said that the law’s current form is unfair because it does not take into consideration the different status of employees based on their salary levels or positions in a firm. A low-level worker needs more protection than a top manager who has decision-making powers, the ministry argued. Another reason for change, according to the ministry, is that the current law does not reflect different life situations linked to students’ employment or parents with small children. It also stated that some parts of the Labour Code burden both employees and employers with redundant bureaucracy.

The ministry said the current law lacks flexibility in regards to employees changing jobs, and in terms of the opportunity for employees to seek higher earnings. The fifth objection the ministry offered to the current code is that it mandates unnecessary privileges to public officials and union representatives at the expense of social dialogue, collective bargaining and equal representation of all employees.

Miroslav Gazdík, president of the KOZ trade union confederation, said on February 2 that at first sight some of the propositions evoke “satisfaction” but when they are considered more thoroughly they evoke “a smile” and “if one goes into their details, then certain concerns [arise]”, the SITA newswire wrote.

The unions have already rolled out the big guns against the proposed changes to the Labour Code and announced on January 10 a drive to collect enough signatures to initiate a national referendum on the new code. Under the banner “Preserving the Rights of Employees”, KOZ claimed that the proposals in its petition would ‘humanise’ the working environment: a 35-hour week – as opposed to the current 40 hours – without a reduction in pay, as well as an overall limit on overtime work of 80 hours per calendar year.

The president of the Slovakia’s Federation of Employers’ Unions (AZZZ), Tomáš Malatinský, said that the government’s proposal did not exactly meet with employers’ expectations.
“We thought that the programme theses of the government regarding the Labour Code would be fulfilled better,” he said, as quoted by SITA.

According to Malatinský, employers are not agreed in their responses to the plan to differentiate between probationary periods according to the wages of an employee.

KOZ spokesman Otto Ewiak told The Slovak Spectator in an earlier interview that the unions’ petition was a response to what unionists see as the “threat” of large-scale changes to the current Labour Code.

The confederation stated that the proposed changes would significantly reduce employees’ protection in hiring and firing, prolong the probationary period for new employees from three months to six, shorten the layoff notice period to one month, cancel combined severance pay and notice periods, generally worsen working conditions for employees, and weaken protection during mass layoffs.

The leader of the opposition Smer party, Robert Fico, stated that the battle over the form of the Labour Code is central to his political party.

“This is as important for us as perhaps abortion is for the Christian Democrats,” Fico said on January 9 in an interview with SITA. “We will take a very principled stand behind the protection in the form of the Labour Code and we reject the interventions that the rightist government is talking about today.”

Education sector still hungry for reform

Human resources professionals continue to stress the need for greater responsiveness in the education sector to the needs of business. The most frequently cited reasons for the current disjunction are a lack of money and a lack of systemic support from the state.

Šulík suggests that a systematic change is needed, which would start with resources: “making students co-responsible for financing their studies could bring resources to the system”.

According to Šulík, more autonomy for universities and the introduction of a governance model to manage these institutions could be another way to help them become better managed and reflect what the labour market needs.

“I think that both teachers and students need to get tough with each other,” Šulík told The Slovak Spectator. “Students need to demand that teachers are better prepared and work on themselves, and teachers need to demand that the students work to earn their degrees, and that if they do not, then they should not graduate.”

The Education Ministry said it is now preparing a mechanism which should eliminate higher educational institutions of the worst quality.

“We will preserve in the system every higher educational institution that offers better quality rather than those schools at the bottom of the current ladder,” Jurzyca said, as quoted by SITA on January 27. “The system will be set in such a way that schools at the bottom drop out.”

The ministry is planning changes to the rules for financing public universities in Slovakia and Jurzyca met the Slovak Rectors’ Conference in mid January to discuss some of these changes. The minister said that the method of financing should be simpler but that the criteria according to which the ministry decides on funding would become much tougher.

“Now we will take more into consideration whether universities are publishing in internationally acknowledged peer-reviewed journals,” Jurzyca said, as quoted by SITA.

Slovakia currently has 34 higher education institutions. The schools which might be forced out are those with a weak record of publication in peer-reviewed research journals, or in scientific research results.

The ministry is also considering prolonging the period of external study by at least a year. In the coming months, the Ministry of Education, Science, Research and Sport will also announce a new system of accreditation for university professors, SITA reported.

University rectors have acknowledged that there is a need to address issues such as the spread of plagiarism and the notorious case of so-called fast-tracked diplomas – qualifications issued after little or no study – a scandal which made news headlines last year.

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