The economy, not the code, impacts jobs

Ján Richter is confident that developments in the economy, which is being squeezed by the crisis, and not the revised Labour Code, are negatively impacting employment in Slovakia. While he suggests that the state will not be able to prevent layoffs if the economy is not performing well and businesses’ sales are in decline, the ambition of the state should be to create new jobs. The Slovak Spectator spoke to Labour Minister Ján Richter about the revision of Slovakia’s key labour legislation, changes to the pension system, risky groups in terms of unemployment but also the practical on-the-job training of graduates as well as protected workrooms for disadvantaged groups.

Labour Minister Ján Richter Labour Minister Ján Richter (Source: Sme - Vladimír Šimíček )

Ján Richter is confident that developments in the economy, which is being squeezed by the crisis, and not the revised Labour Code, are negatively impacting employment in Slovakia. While he suggests that the state will not be able to prevent layoffs if the economy is not performing well and businesses’ sales are in decline, the ambition of the state should be to create new jobs. The Slovak Spectator spoke to Labour Minister Ján Richter about the revision of Slovakia’s key labour legislation, changes to the pension system, risky groups in terms of unemployment but also the practical on-the-job training of graduates as well as protected workrooms for disadvantaged groups.

The Slovak Spectator (TSS): The revision of the Labour Code and its impact on the labour market has been discussed extensively for some time. Critics say that changes to the Labour Code will put so much pressure on employers that they will have to resort to mass layoffs. What impact do you expect the revision to have on the market?
Ján Richter (JR):
I still insist that the development of the economy and not the Labour Code is what impacts employment. I also want to underscore this with the fact that not all countries in the eurozone have adopted new labour codes, and unfortunately the unemployment rate throughout the eurozone is getting close to 12 percent. Quite naturally, Slovakia’s economy is open - even the Slovak labour market is open which means that these influences, considering the fact that this economy is intertwined [with other economies], are very serious. Unfortunately, we will not be able to prevent some people from being laid off in the future, based on how the economy will perform and the health of some businesses’ sales. But the government must have the ambition to address new jobs. It has the legislative tools and EU funds, and I am ready to offer some solutions.

TSS: When adopting the Labour Code the government of Robert Fico promised that if it proves to have negative impacts, it would re-evaluate them. When do you plan to review these impacts?
What I said at the beginning applies, but in case it is necessary, we are willing to discuss this issue with the social partners. However, we will be able to analyse the possible impacts only after a certain period of time. Our priority is to achieve a balanced and stable Labour Code.

TSS: Unemployment in Slovakia at the end of 2012 reached its highest level in nine years. You have said that the crisis and economic developments in Germany are behind Slovakia’s high jobless rate. What are the options of the Labour Ministry in its fight against unemployment?
I consider the revision to the law on employment services, which is in parliament, to be important. This law from 2004 was in need of revision since the labour market is being affected by the crisis and needs forms of support other than what has so far been applied, which is made evident by the jobless numbers. In the draft revision we give clearer definitions to particular tools of the active labour market policies so that they can fulfil their intended role.

We are geared toward modernising employment services at labour offices so that they are oriented to the client, which is the citizen. Apart from that, at the end of last year we launched two national projects to support the employment of young people aged up to 29, which should create 14,000 jobs. We are preparing a project of voluntary military service in cooperation with the Defense Ministry, in which we want to involve the long-term unemployed within the non-military unit.

TSS: Young people are a group threatened by high unemployment rates. How do you assess the measures adopted so far in the fight against unemployment of the young and what other measures do you plan to implement?
I am very sorry that more than a third of the unemployed are young people aged up to 29. This is also why in November, as I mentioned earlier, we launched a project to employ this category of people. We have clearly defined what we are able and what we are not able to draw from the current EU funding available through particular schemes. Individual ministers defined the risk factors and we simply relocated [the funds], which means that we merged funds that were risky in terms of [our ability to] draw them, and I am very glad that these funds ended up at my department.
The first project, worth €50 million, is heading to businesses while the condition is that they give jobs to applicants who have been registered with the labour office [as unemployed] for a minimum of three months. The employer will pay the price of labour for 12 months within the minimal wage; this means not only what is paid to the employee but also what the firm pays on payroll taxes. However, the firm must guarantee that it will keep the employee for an additional six months after the state support ends.

In the second project, which we launched in relation to the self-governments, municipalities and self-governing regions, we similarly support the employer, which would hire an unemployed person younger than 29 years of age. There is a relatively high level of interest in the first business project: we can talk minimally about [having received] thousands of applications from businesses. There is less interest in the specific activities of the transport industry and self-governments, but to a certain degree I am attributing this to seasonal factors and the adoption of new budgets. It will be more objective to return to it [their assessment] in a couple of months.

TSS: People aged 50 and older are another group facing the threat of unemployment. What challenges do people in this group face in Slovakia, and is their work experience being sufficiently utilised?
These people quite naturally find it more difficult to find a job considering their age, [due to] physical and other factors, while this age group is considered a disadvantaged group on the labour market. Within the revision to the law on employment we propose to re-introduce the authority of the labour offices to run regional projects to address specific problems of unemployment, including the joblessness of the 50+ category within their territorial arrangement. We have made this category of applicants one of the target groups in the national projects I have already mentioned. If there is not enough interest from young people in these projects six months after their launch, we can change the target group to 50+. I am also interested in creating individual projects in the next [EU] programming period of 2014-2020 to employ disadvantaged applicants aged 50 and up, since people in this category should also have jobs before reaching retirement age.

TSS: What challenges does Slovakia’s pension system face, and how do you plan on addressing these issues? How do you view the frequency of changes made to the existing system and its impact on the stability of the whole system? In what stage are the preparations of the constitutional law, which should guarantee the whole pension system’s stability?
The pension system in its current form was not sustainable and continuously contributed to the enormous deepening of the deficit of public finances and the increase of Slovakia’s debt. It can be said that if we had not changed this system, it could have threatened the payment of future pensions. It was necessary to change mainly the parameters of the second private pillar, which in the long run appeared to be unsustainable and unrealistic. Yet significant changes have also been made in the first [pay-as-you-go] pillar, while relevant European institutions and authorities responded positively to these changes as well.

Within systemic changes and equalising different existing types of employment relations, we have included in the circle of those with social insurance also temporary employees, with specific changes also for students and old-age pensioners along with physically disabled pensioners. With this move we want to provide them with social security similar to what regular employees have. Within the pension reform we also would introduce as of next year the so-called minimal pension, which would secure for each pensioner at least a minimal income. We want to make a clear distinction between someone who worked for several decades and someone who has never joined the work force or has only worked for a few years.

As far as the opening of the second pension pillar is concerned, we did it to give people the option to decide whether, even after the changes we introduced, they are interested in staying in the second pillar. However, in the future it would not be good to open it too frequently or at all, but now it is in the hands of the pension fund management companies, who are in charge of increasing the value of the invested funds.

We are ready to talk about the constitutional law, which would guarantee certain things that are already embedded in the [existing] law. We are now involved in a more intense debate with representatives of the opposition deputy factions, while we have prepared six points for them: the first two concern the second pillar, while we are dealing with the gradual increase of payroll taxes to the accounts of savers from 4 percent to 6 percent, and under what conditions we are willing to reflect the development of the economy and again increase the percent share. The next point suggests that we do not wish to cut the share below 4 percent. The additional two points pertain to the first pillar and the way we intend to increase the retirement age. We also want to guarantee that the ownership rights of the saved funds are untouchable and agree on defining the span of the pension savings, which we propose to stretch from 15 to 20 years.

TSS: How do you view the proposal for a provision on quotas for the number of females in high managerial positions? How do you view the current number of females in general who are in high managerial positions in Slovakia?
I am certainly not against a more significant representation of women in public posts; I consider a more balanced rate between males and females after all a necessity even in management as it helps labour effectiveness. I am able to judge this also through the situation at my ministry where there is a quite logical imbalance to the benefit of females, though I think they can work quite effectively with us. But seriously, I assume that this topic calls for a lot of discussion and similar steps under our conditions cannot be done immediately and by command.

TSS: People with health disabilities worry that the revision to the law on employment services that the government approved will worsen the conditions under which they look for employment, since the state plans to limit payments that help people with severe health disabilities find jobs or start businesses. It will also be more difficult to set up protected workrooms for disadvantaged groups. How do you view these concerns? What was the ministry’s intention with this revision?
Before we made the final decisions and defined the content of the changes, which pertain to people with health disabilities, we went through a number of negotiations with their representatives. I want to stress that we are not liquidating protected workrooms but identifying and removing the risks that emerged in practice during their establishment. We managed to agree on almost all the changes with the National Council of Citizens with Health Disabilities, which represents this group of citizens. We also refute the claims that we want to cut funding for the protected workrooms; we only want these funds to be effective and specific. This year too we plan to allocate for them at least the same amount that they received last year. Yet we are certain that after the adopted changes we will be able to support a larger number of protected work places.

TSS: The Employment Institute proposes in its comments on the law on employment services to introduce inclusive companies and improve the practical on-the-job training of graduates. How does the state plan to improve the practical on-the-job training, how would these inclusive companies work and what should be their specifics?
Currently we are discussing with the author of the proposal the scale of activities and services that should be the subject of inclusive business. The introduction of such a model should have an inter-departmental nature and would call for other departments or social partners, mainly the Association of Towns and Villages of Slovakia (ZMOS), to join in. In the submitted revision to the law we propose to link the graduates’ practical on-the-job training to the education achieved in the related field of study. It means that not only in the field from which the graduates graduated but also in related fields, for example, a trained confectioner could also receive training in related food industry fields, not only confectionery. By this we do not want to limit the graduates’ practical on-the-job training, but we rather want to limit its abuse, because currently this training is frequently used by employers to obtain a cheap work force, or by graduates to get well-paid part-time work.

TSS: Does the ministry plan to reduce the bureaucracy of employers in the area of employment and payroll tax policies? In which stage is the electronisation of services in this area?
The Operational Programme of Informatisation of the Society (OPIS), which concerns our ministry too, is currently being implemented. OPIS should contribute to making the public administration more effective at all the levels: central, regional and local. Of course it will make the lives of businesses easier as well. Currently we are working on the electronisation of services at the social insurer, which could lift the administrative burden on citizens when arranging some of their affairs. For example, the insurer will take over the duty to inform the employer about his or her temporary sick leave while it will also provide information about the period of exclusion from paying social insurance fees. The administrative burden will also drop in the area of pension insurance, even if the employee works for an institution or an organisation of the EU.

For more information about the Slovak labour market, HR sector and career issues in Slovakia please see our Career & Employment Guide.

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