IT HAS become a custom in Slovakia for each new cabinet to offer a different direction from the previous one, whereby after its arrival in power, it overhauls the Labour Code, the most significant legislation concerning employee-employer relations. The Robert Fico cabinet, which took over the driver’s seat after this year’s March election, is no exception. It has already produced a draft revision, which it claims redresses the balance in relations between employees and employers, which it believes was significantly harmed to the detriment of employees by the previous cabinet of Iveta Radičová. This means that the current version of the Labour Code, valid since September 2011, will survive only until the end of the year as the revision is to become effective on January 1, 2013. Parliament will deal with this revision during its upcoming September 11 session.
Labour Minister Ján Richter believes that the planned revision will not negatively impact the business environment and the competitiveness of Slovakia’s economy. Employers and other business organisations, however, warn that the revised Labour Code will be one of multiple factors that will significantly affect employment in the country.
“The changes will not have any impact on the business environment or competitiveness,” said Minister Richter when introducing the major changes to the current Labour Code to journalists on September 3. “If the development of the economy in Europe and in Slovakia is favourable, then also unemployment will decrease. If it worsens, then it will reflect also on Slovakia.”
Employers believe that the revised Labour Code will have a negative impact on the labour market and its flexibility.
“All the changes which return the Labour Code to 2007 will have a negative impact,” Martin Hošták, secretary of the National Union of Employers (RÚZ), told The Slovak Spectator. “Moreover, in combination with the increase to income and payroll taxes it might [lead to businesses closing].”
Branislav Masár, the executive director of the Federation of Employers’ Associations (AZZZ), also believes that the flexibility would decrease.
“Even though the revision does not revert completely to its pre-September 2011 form, it would be unquestionably better to keep the Labour Code in its current wording,” said Masár.
The draft revision partially returns the Labour Code to the form under which it existed after it was overhauled by the previous Robert Fico cabinet, carried out by then labour minister Viera Tomanová. It returns to employees the entitlement to a layoff notice period as well as severance pay, shortens temporary work contracts, introduces more protection for workers working under temporary work contracts and changes the definition of so-called dependent work, all changes which are said to please the Confederation of Trade Unions (KOZ).
According to Richter, the ambition of his ministry was to achieve during discussions with trade unions and employers as much of a consensus over the revised Labour Code as possible, and while all the involved parties have made some concessions, there have remained some sore points. These include a stricter definition of dependent work, limiting the ‘chaining’ of fixed-term employment contracts, omitting any possibility for employee conditions to decline through collective bargaining negotiations and the insistence of implementing the entire revision at the start of 2013. In this respect Richter said that because of the nature of relations between employers and employees it is not possible to expect a full consensus over the changes to the Labour Code.
Labour Code will change after 16 months
One of the main objections of employers to the revision is the hastiness with which the cabinet is making changes to the Labour Code.
“We view the timing negatively, even though we know the programme’s focus of the ruling party and its goals toward that direction, which are actually not very identical to our view on the need for flexibility within the Labour Code,” said Masár. “We requested [that] the revision become valid as of 2014 at the earliest. Frequent and fundamental changes of key provisions are not beneficial for the stability of the business environment.”
Hošták of RÚZ agrees, adding that frequent changes in the legislation result in financial as well as administrative burdens for business people.
With regards to the changes proposed to the Labour Code, Masár pointed out that these changes are concurrently being adopted with other measures which will further increase costs for businesses through higher payroll taxes, income taxes, and other fees.
Apart from the timing of the revision, Masár listed as the most problematic changes the reintroduction of the entitlement to a layoff notice period as well as severance pay, the redefining of dependent work and placing restrictions on the use of fixed-term employment contracts. This latter change pertains to the ‘chaining’ of fixed-term employment contracts, whereby currently it is possible to sign a fixed-term employment contract for three years and then renew or extend it up to three times, the new code will permit the signing of such contracts for only two years with the possibility of two extensions.
The AZZZ is also critical of moves to make temporary employment agreements, known in Slovakia as “na dohodu”, less flexible. This revision to the Labour Code seeks to protect people working under “na dohodu” contracts, and involves also a change to the social insurance law that would require employers to pay levies for workers with “na dohodu” contracts at the same level as those with standard working contracts.
When asked whether any of the proposed changes were positive, Masár said that the blueprint contains some specifications and improved wording, for example that which pertains to holidays, which will facilitate clarification of and adherence to the Labour Code. Hošták also views as positive the fact that some regulations will remain unchanged, for example those pertaining to flexi-accounts and overtime.
The change to the definition of dependent work (whereby someone is permanently employed by a company as opposed to working through an independent contract) has struck a raw nerve with employers. The objective of this redefinition is to specify which work should be carried out under a standard working contract, securing the rights and protection of employees. The Labour Ministry believes that the current wording enables employers to push their employees into less advantageous working contracts, including so-called false self-employment contracts, and seeks to simplify the definition to prevent employers from doing this. While trade unions welcome this change, employers view it as unnecessary.
The current Labour Code reads that “Dependent work, which is carried out in a relationship where the employer is the superior and the employee is subordinate, is defined solely as work carried out personally as an employee for an employer, according to the employer’s instructions, in the employer’s name, for a wage or remuneration, during working time, at the expenses of the employer, using the employer’s means of production and with the employer’s liability, and also consisting mainly of certain repeated activities.” It continues that “Dependent work may be carried out only in an employment relationship, a similar labour relation or in exceptional cases defined herein in another form of labour-law relation. Dependent work shall not encompass business activity or another earning activity based on a contractual civil-law relation or a contractual commercial-law relation according to special regulations”.
The new proposed wording changes the first sentence to “Dependent work is work performed in a relationship where the employer is the superior and the employee is subordinate, carried out personally by the employee for the employer, according to the employer’s instructions, in the employer’s name, during working time set by the employer, for a wage or remuneration”.
It also changes the last sentence to “Dependent work cannot be carried out within a contractual civil-law relation or a contractual commercial-law relation according to special regulations”.
AZZZ does not see this change as necessary and it is afraid that in the end it may result in chaos.
“It will increase the number of disputes over whether work is dependent or not,” said Masár, adding that it proposes omitting three or four key definition attributes clearly distinguishing employment from doing business. One of them is, for example, “the employer’s means of production”.
KOZ welcomes the more precise definition of dependent work, on whose basis employers would not be able to push people en masse into so-called forced self-employments, Otto Ewiak, spokesperson of KOZ told The Slovak Spectator. KOZ expects that this would result in more dignified work and more opportunities for protection.
What Michal Páleník from the Employment Institute think tank believes is missing from the discussion is a comparison of Slovakia’s definition of dependent work with those from abroad as well as a more extensive debate on the issue. But he sees as much more important the implementation of reasonable control mechanisms, something which he currently believes to be completely absent in Slovakia. Páleník told The Slovak Spectator that currently when the Labour Inspectorate examines companies, the question over whether a work position to be filled by a standard employee is occupied by a self-employed or a person working under a different working contract, is being completely omitted.
He believes that the increase in compulsory levies for non-standard work contracts will have a bigger impact on employers who switch their employees from standard work contracts to self-employed and other contracts.