SLOVAKIA has, once again, a new Labour Code. Labour Minister Ján Richter dubbed the passage of his revision to the basic document governing employee-employer relations “good news for Slovakia”. But employers and opposition MPs attacked the changes, saying they are the opposite of what Slovakia’s economy, currently affected by the economic crisis and suffering from high unemployment, needs. They argue that it will increase the costs of employment, slow creation of new jobs and reduce Slovakia’s growth prospects and competitiveness.
“It is bewildering that the government, carrying on its shoulders the burden of 398,000 jobless people, adopts such legislation, which makes solving this problem even more difficult and simultaneously endangers the jobs of thousands of other employees,” Martin Hošták, secretary of the National Union of Employers (RÚZ), told The Slovak Spectator.
Radovan Ďurana of the Institute of Economic and Social Studies (INESS), an economics think tank, said that Slovakia is afflicted not by a lack of protection for employees but high unemployment.
“The changes in the Labour Code should protect employees, but they are not going onto the streets on strike due to draconian conditions at work,” Ďurana told The Slovak Spectator. “The problem of Slovakia is the more-than-13-percent jobless rate. The revision to the Labour Code closes the door on this group of people.”
INESS says that the introduction of strict regulation of fixed-term work contracts, along with the introduction of payroll taxes on such contracts, will complicate most efforts by people with low incomes to earn some extra money. It argues that other measures in the revamped code, including the reintroduction of employees’ entitlement to a layoff notice period as well as severance pay, unjustifiably increases costs for employers and will thus prompt greater employee turnover.
On the other hand, the Confederation of Trade Unions (KOZ) regards adoption of the revision as the welcome fulfilment of a pre-election promise by the ruling Smer party – but also the result of an initiative by KOZ representatives.
“KOZ considers the adopted revision to be a more balanced code of work-legal relations between employer and employee than the previous one elaborated by [ex-]minister Jozef Mihál,” KOZ spokesperson Otto Ewiak told The Slovak Spectator. “It is at the level of the European work-legal standard.”
While KOZ perceives the reintroduction of entitlement to a layoff notice period as well as severance pay as being the most positive change adopted, think tanks and employers take the opposite view.
“It increases the costs of employers when ending jobs and motivates [them] to sack people earlier,” Peter Goliáš, director of INEKO, an economics think tank, told The Slovak Spectator.
As of the start of 2013, an employee who works for an employer for at least two years will have the right, apart from a notice period, to also receive severance pay. Employees who have worked for an employer for two to five years will be entitled to severance pay of one month’s wages. After working for the same employer for five to 10 years, they will be entitled for two months’ wages; for between 10 and 20 years they will get three months’ wages; and for more than 20 years they will receive four months’ wages.
The Slovak parliament, in which Smer holds a majority, passed the revision on October 26. The changes adopted, drafted by the Labour Ministry, will become effective as of January.
“This revision secures … the resetting of equilibrium, which puts into balance the rights as well as duties of employers as well as employees,” Labour Minister Ján Richter said, as quoted by the TASR newswire, after the revision was adopted. He added that he believed Slovakia now had a “modern and balanced” Labour Code.
Apart from the reintroduction of the entitlement to a layoff notice period as well as severance pay, the revised Labour Code shifts the status of people working on fixed-term employment contracts closer to that of regular workers in terms of working hours and the minimum wage. It curbs the ‘chaining’ of fixed-term employment contracts, whereby it is currently possible to extent a fixed-term employment contract three times over three years. As of January it will be possible to do this only twice over a 24-month period.
The revision also changes the definition of dependent work (i.e. permanent employment). The objective of this redefinition is to specify which work should be carried out under a standard employment contract, thus providing the employee with full rights and protection, rather than via self-employment, for instance. The Labour Ministry believes that the current definition of dependent work enables employers to push their employees into less advantageous working contracts, including so-called false self-employment contracts, and has sought to simplify the definition to prevent employers from doing this.
Employers have also criticised the capping and limiting of fixed-term and temporary employment contracts, changes to the definition of dependent work, conditions placed on flexi-accounts requiring the agreement of trade unions, and the omission of the condition of ‘representativeness’ of trade unions in a company.
The Federation of Employers’ Associations (AZZZ) perceives the adopted changes as another burden which does not reflect the requirements of employers, the current state of the business environment, developments in the eurozone or the global economy, or the consolidation of the public finances, all of which will significantly affect businesspeople and employers in particular.
The Business Alliance of Slovakia (PAS) does regard the increased flexibility of flexi-accounts, i.e. working-time accounts, as a positive move, one which, according to Robert Kičina, the PAS president, will help employers better handle unpredictable swings in production. It also commends easier terms for removing workers who do not perform their duties, as well as the amended calculation method for imposing fines on employees who fail to observe notice periods.
KOZ expressed overall satisfaction with the new code.
“In general we consider the changes to be positive,” Ewiak told The Slovak Spectator, adding that the unions were disappointed that their proposal to limit working on state holidays was not adopted.
According to employers, companies have already reacted to the changes and already started layoffs.
“Many companies, because of the increased costs, have started preventively laying off people already this year,” said Hošták. “It [the revision] will have a really negative impact on the situation on the labour market, which is already [in a] bad [state].”
Branislav Masár, executive director of the AZZZ, expects that employers will take a more cautious attitude to signing new employment contracts and that it will be more difficult to maintain existing contracts.
“All employers will feel the effects of the revision, but especially small and medium-sized entrepreneurs in sectors with low added value,” said Masár.
According to Kičina, those companies in marginal businesses and without financial reserves will feel the effect of the revised Labour Code in particular.
“I expect that companies that are not thriving now, have uncertain orders for 2013 and due to these reasons ponder reduction of their labour, will use the last months of 2012 for layoffs to avoid higher costs,” said Kičina. “Because the government illogically tightened the Labour Code during a period of high unemployment, the economy, employment, as well as standards of living will grow slower compared with the pace at which they would have grown if the conditions for doing business were better.”
But KOZ does not agree that the revision will reduce jobs, investment and competitiveness.
“Employers used these arguments in the past, when the crisis hit at full force,” said Ewiak. “They promised at the previous revision to create more than 50,000 new jobs and nothing like this happened."