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Chambers question labour plans

PARALLEL entitlement to a layoff notice period as well as severance pay, reduced overtime, making layoffs more expensive for employers, shorter temporary work contracts and more power for trade unions: this is how the Labour Ministry envisions fulfilment of one of the main election slogans of the ruling Smer party, namely “More certainties for people”. Several members of the business community nevertheless argue that people can have certainties only when they have jobs and suggest that the changes proposed by the government of Prime Minister Robert Fico to the country’s Labour Code might not encourage job creation – rather, the opposite.

PARALLEL entitlement to a layoff notice period as well as severance pay, reduced overtime, making layoffs more expensive for employers, shorter temporary work contracts and more power for trade unions: this is how the Labour Ministry envisions fulfilment of one of the main election slogans of the ruling Smer party, namely “More certainties for people”. Several members of the business community nevertheless argue that people can have certainties only when they have jobs and suggest that the changes proposed by the government of Prime Minister Robert Fico to the country’s Labour Code might not encourage job creation – rather, the opposite.

The blueprint drafted by the Labour Ministry has already hit a raw nerve with chambers of commerce representing the interests of about 500 foreign-based companies that employ around 80,000 people in Slovakia.

The German, Austrian, Spanish and Swedish chambers of commerce in Slovakia said that the plan, which includes the reintroduction of entitlement to both a two-month severance payment and the right to work out a compulsory layoff period, will increase the costs of layoffs and thus might result in a wave of dismissals before the legislation actually becomes effective.

“The draft revision to the Labour Code contains several measures which will in practice reduce the flexibility of the labour market,” Markus Halt, spokesman of the German-Slovak Chamber of Commerce, told The Slovak Spectator.

He added that, as a result, companies will be more cautious about hiring new staff, which might in turn hinder efforts to address Slovakia’s high unemployment.

The flexibility of labour legislation has an impact on a country’s employment level, something that is confirmed by OECD data, according to Robert Kičina, the executive director of the Business Alliance of Slovakia (PAS).

While the level of employment is affected by other factors aside from the Labour Code, Kičina argues that an OECD comparison indicates that if a country has a flexible Labour Code it is also likely to have a higher level of employment than similar countries with stricter labour legislation.

“If we in Slovakia make the conditions of employment stricter and increase the costs of employing people, then the impacts on employment will be negative: firms will have less money for their own development and fewer jobs will be created, while the willingness to hire people will be lower, along with the motivation to invest in Slovakia, especially if along with the Labour Code we consider the [fiscal] consolidation measures prepared by the government,” Kičina told The Slovak Spectator.

The government of Iveta Radičová revised the Labour Code in 2011 with the stated ambition of bringing more flexibility in employment relationships, creating more new jobs and protecting better the most vulnerable employees in the labour market. While businesses at that time welcomed the changes, they also said that the government could have been even more am

rs would use the new provisions to more easily fire employees rather than hiring new staff.
Based on the current blueprint, the Labour Code will not completely relapse to the times of former labour minister Viera Tomanová, whose department introduced changes to the code under the first Fico government. Nevertheless, the chambers of commerce are edgy at the prospect, for example, of reducing maximum annual overtime work from 150 to 100 hours, as well as cutting the balancing period for overtime work to three months, arguing that this will reduce flexibility in the workplace.

Considering the current economic situation, this might be dangerous, according to an official statement sent by the chambers to local media. They also noted that it will particularly affect companies which face seasonal imbalances in their orders.

“From our perspective, the best option would be to maintain the current wording of the Labour Code,” Halt told The Slovak Spectator.

According to the chambers, as compensation for shortening overtime limits, the 7-day eligibility for doctor’s visits could be modified. Specifically, this would mean limiting eligibility for paid leave to visit a physician to a maximum of four days per year, while any additional time required could be used by drawing on leave or in exchange for overtime, the chambers suggest.

The blueprint also suggests that temporary work contracts will be shorter, meaning two contracts for a maximum of two years in total, while extension of probationary periods will not be allowed. The definition of night work will be extended to cover work from 22:00 until 6:00, not until 5:00, as is currently the case.

So-called flexi-accounts for working time will have to be approved by representatives of employees as well as employers. The chambers, responding to the change to the flexible model of working hours, suggest that this will push firms to be more cautious when it comes to hiring new staff.
“These new work positions will be created only when the employer has the certainty of 100-percent effectiveness in the new position,” the chambers stated.

As far as retirement is concerned, the chambers suggested that it should be possible to agree through work contracts to define attainment of retirement age as a reason for laying off an employee, adding that this would make it possible for firms to employ more young people and “thus effectively reduce the high unemployment of young people”.

Among other planned changes to the Labour Code are more powers for trade unions as well as a rule that the terms of any collective contract cannot be less advantageous for employees than the Labour Code. The Labour Ministry and unions would like to see the new code come into effect as of January 2013, while companies are asking for the changes to be delayed until 2014.

Labour Ministry State Secretary Branislav Ondruš defended the proposed changes, saying that the Labour Code will neither create nor destroy jobs, since this depends only on the state of the economy. He added that employers would not be harmed by the new rules since the ministry would try to make it balanced for both sides, the Sme daily wrote.

The Hospodárske Noviny financial daily reported that Economy Minister Tomáš Malatinský has expressed some objections to the blueprint and supports the idea of delaying the date on which the legislation will become effective.

“It would be beneficial if the Labour Ministry withdraws the Labour Code and prepares changes that would simplify and ease the code to an even greater degree so that even more conditions could be agreed at the level of firms and not be dictated by the law,” Kičina said. “Among specific paragraphs in the current Labour Code, I can imagine the removal of the minimum wage entitlement or the administrative simplification of mass layoffs. People can have certainties only when they have work, while businesses can secure more work for people only when they have favourable conditions for business, including a flexible Labour Code.”

Emil Machyna, chairman of the OZ KOVO metalworkers’ trade union, responded to the chambers’ statements by telling public-service broadcaster Slovak Radio (SRo) that one should look at labour legislation in the light of the rights enjoyed by trade unions as well as employees in the home countries of the chambers in question.

“Foreign investors decide in regard to local conditions in Slovakia whether they want to increase or decrease their engagement in the country, while flexibility in the labour market is one of the more important factors in such decisions,” Halt responded in turn to Machyna’s comments.

The Association of Machine and Electronic Industry (ASEP), an employers’ group, also called on the government to halt preparations to amend the Labour Code, suggesting that it should evaluate the impact of the current code on employment and competitiveness in Slovakia at an expert level. ASEP argues that there have been no negative experiences with the current Labour Code in practice and thus there are no objective reasons to substantially change it, the SITA newswire reported.

The changes introduced by the amendment to the Labour Code by the Radičová government included: cancellation of employees’ parallel entitlement to a layoff notice period as well as severance pay; a longer time period for fixed-term employment contracts, which can be renewed annually for up to three years; a longer layoff notice period for employees with long service in the same job; and greater protection for new mothers and pregnant women.

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