The labour market requires an infusion of new blood, and workers from outside of the EU could be the way to revive it, experts say. Will Slovakia open its doors wider to foreign workers?
The Slovak economy is approaching a level of constant growth and declining unemployment to so-called full employment. Companies, however, are having trouble finding skilled workers as 5 to 6 percent of the unemployed do not want to work at all. Hence, employers are seeking to hire more people from abroad.
While within the EU people can usually migrate without restrictions, third country nationals run into several protective barriers. Slovakia needs to reduce these barriers and open the market for culturally similar workers from abroad who might like to work in the country.
“Natural evolution leads to a situation in which investments bring more jobs and more money to spend, and the economy starts running,” Peter Kremský, executive director of the Business Alliance of Slovakia (PAS), told a press conference.
Foreigners’ residence law
Slovak authorities are aware of the problem of a lack of qualified labour. In January 2017, the government approved the new version of the Act on Residence of Foreigners to simplify the arrival, stay and employment of non-EU people. Through the amendment, the Interior Ministry adjusted the rules for foreign workers in Slovakia, applied the transposition of European directives aimed at seasonal work and intra-corporate transfer to the legislation and reduced the red tape in the residency permit process.
The law divides current temporary residence into two streams of seasonal employment with the possibility of linking them. While the first regime applies to those staying in the country for up to 90 days on the basis of the Schengen visa and work permit, the other regime for stays between 90 and 180 days requires temporary residence for the purpose of seasonal employment, according to the Interior Ministry.
As for intra-corporate transfer, the law divides into two streams the requirements for residents of third-country nationals and their families for more than 90 days, with or without granted temporary residence during validity of the residence document issued by an EU member state.
The amendment also introduced a specific group of third-country citizens who work for strategic service centres, extends the validity of the so-called blue card for highly qualified employment from three to four years, equalises individuals with long-term stay permits with Slovak citizens in legal relations under the Act on Employment Services, and introduces some privilege policies for those foreigners on the Slovak labour market with the intention to innovate. If the parliament approves the law, it will become valid as of April 15, 2017.
New blood for Slovak economy
In addition, authorities are preparing tools for simplifying arrangements for workers at shared service centres, that they should introduce in March 2017, while also trying to reduce the handling time of permits for non-EU workers. The advice for these changes comes from the study Nová krv pre slovenskú ekonomiku (New blood for the Slovak economy) by PAS in cooperation with the Institute for Economic and Social Reforms (INEKO) think tank.
PAS pointed to the shortage of manpower, which poses a risk to Slovak economic growth, in addition to the arrival of new investors and expansion of existing plants. Kremský explained that their study focuses on legislation, barriers and the current position of third country workers.
“While it is a small group and there is immense international competition, Slovakia should think about whether they create obstacles for them or try to vie for them,” Kremský said.
By now, Slovak companies that employ foreigners must meet several administrative duties. If they employ EU citizens, they have to notify their respective labour office about the start and the termination of the employment. Sociálna Poisťovňa, the state-run social insurer, also must be notified in such cases, according to the biggest job-search portal in Slovakia, Profesia.sk.
Companies employing people from outside the EU, who are officially called third-country nationals, must also request a valid proof of residence, possess a copy of it during their employment and inform the labour office within seven days if the employee fails to come to work or the relation ends before the end of the permitted period.
While red tape limits employers in directly employing foreign workers, they usually use the services of agencies which deal with all permissions and lease workers to particular companies. The waiting period for such a worker is usually six months or more, according to PAS.
“Agencies want to create the highest added value, acquire services of workers cheaply and lease them expensively, which creates a certain brake in wage growth,” Kremský said.
The government supports the agency employment of third-country workers in Slovakia, although trade unions are against this measure. Agency employees do not have the same salary conditions as permanent staff because they are not covered by collective agreements negotiated with employers, Emil Machyna, chair of OZ KOVO, the organisation uniting trade unionists from the machinery industry, told the Trend economic weekly.
Almost half from outside the EU
In 2015, there were 84,787 foreigners living in Slovakia, or 1.5 percent of the total population. About 58 percent of them were citizens of the EU, the European Economic Area (EEA) and Switzerland, while the remaining 42 percent were from third countries, according to Profesia.sk.
The Labour Ministry tracks the majority of EU/EEA workers in transport and storage, industry, professional, scientific and technical activities and commerce. Third-country nationals most often work in industry, administration, commerce, professional, scientific and technical activities, transport, storage, health care and social assistance.
Profesia.sk counted the most third-country nationals from the Ukraine (30.4 percent), Serbia (15.7 percent), Russia (10 percent) and Vietnam (6.5 percent). In February 2016, EU citizens living in Slovakia mostly came from Romania (6,279), the Czech Republic (3,300), Poland (3,062) and Hungary (2,957), the Central Office of Labour, Social Affairs and Family (ÚPSVaR) listed.
Since 2004, the number of foreigners legally residing in Slovakia has increased almost fourfold, although the country is among those EU countries with the lowest proportion of foreigners, Trend reported, based on a survey among national authorities.
On the other hand, PAS has seen a drop in influx of foreigners into the market particularly since 2011, when the government tightened employment rules.
Impact of shared service centres
In September 2016, Grafton Recruitment Slovakia, a provider of recruitment and HR solutions, prepared a survey of all 48 shared service centres (SSCs) in Slovakia which belong among the most significant employers of foreigners. The survey revealed that the biggest HR challenge in Slovakia is to attract the right skill set of employees, mainly in the production, IT and finance sectors.
Hence, SSCs accept foreigners not only from the EU, but also from third countries, said Grafton Recruitment’s marketing specialist, Lýdia Baránková. However, they require knowledge of at least one world language such as English, German, French or Spanish.
“Employers see the biggest potential in Ukrainians who offer plenty of work, are adaptable, mostly communicative and multilingual,” Baránková told The Slovak Spectator.
Baránková opined that foreigners can easily find opportunities if they demonstrate sufficient flexibility and willingness to move for work. Substantial factors include interest in applying in Slovakia at a specific employer level in the long term, she said.
Lack of qualified employees
Recently, in Slovakia and in the Czech Republic, the competitive struggle for new jobseekers has significantly intensified. While ÚPSVaR tracked almost 30,000 vacancies and Profesia.sk more than 58,000 in Slovakia in late 2016, the number of new offers has grown by 40 percent year-on-year in the service sector and 30 percent in industry, according to PAS.
In the first half of 2016, the Labour Ministry recorded a total of 7,572 job vacancies for foreigners, of which 32 percent pertained to operators and mechanics of machines and equipment, 25 percent to qualified workers and craftsmen and 12 percent to service and trade sectors. To compare, 9,901 such jobs opened in 2015 and 3,802 in 2014.
The average amount of responses to one job listing has a declining character. Katarína Tešla of Profesia.sk noted that while in the second quarter of 2015 the portal received applications from 20 jobseekers for one position, in 2016 it was only 15 applications per position.
“The decrease was more distinctive in the desired areas of the labour market,” Tešla told The Slovak Spectator, listing IT, telecommunications, electrical engineering, mechanical engineering and the automotive industry.
Proposals for changes
To facilitate the employment of qualified third-country individuals, Baránková suggests shortening and simplifying administrative processes concerning work permits, relocation packages, one-time financial aid, activating a so-called relocation coordinator for help in all necessary activities associated with finding accommodation, ensuring work permit and insurance, contacting agencies, among others.
PAS proposes the introduction of a special regime for priority sectors, employing temporary and seasonal workers, and reducing the time needed to verify whether there is a possibility to fill jobs with candidates from a database of unemployed people.
“An immediate impact measure would be to simplify the regime of employees with higher wages,” Kremský said.