Changes in the determination of minimum wages

With the introduction of the support mechanism for the Greek economy, the method of setting minimum wages has been substantially modified at both national and sectoral levels. The new system has meant direct intervention by the state authorities and also significant restrictions imposed on free collective bargaining, which has determined wages for many years. However, there are some doubts about the constitutionality and the effectiveness of the new provisions.

Previous system

The minimum wages for all Greek employees, in both the public and private sectors, have been determined for many years through free collective bargaining between the social partners. If the parties failed to reach an agreement, help was sought from the Organisation for Mediation and Arbitration (OMED).

That regime was radically reversed, because of the financial crisis, between March and July 2010.

Statutory changes

The Law 3833/2010 (in Greek, 834Kb PDF) imposed, among other things, a wage freeze for public sector and public utility workers. Employees in private companies and organisations which receive regular subsidies from the state were also affected.

The law expressly bans any wage increases for these employees, nullifying whatever may have been concluded in any collective bargaining agreements.

Wages in the private sector were frozen under the National General Collective Employment Agreement, signed on 15 July 2010, for the period 2010–2012, and this was then made law two weeks later on 29 July.

This legislation, Law 3871/2010 (in Greek, 834Kb PDF) renders the provisions of the National General Collective Employment Agreement compulsory. It eliminates any possibility of wage increases set out by sector and enterprise-level agreements, regardless of the economic situation and opinions of the employers and employees in individual enterprises and branches.

More specifically, the following stipulations apply in the private sector.

  • A pay freeze is imposed throughout 2010 and for the first half of 2011.
  • As from 1 July 2011 and 1 July 2012, increases in wages (as determined on 31 December 2009 and on 1 July 2011 respectively) may be agreed upon, up to a maximum limit equal to the annual rate of inflation in Europe (1.5% for 2010 and 1.7% for 2011). This clause was set based on the European Commission’s forecasts on 5 May 2010.
  • Any rulings of the Organisation for Mediation and Arbitration which provide for wage increases beyond those determined by Law 3871/2010 shall be void.
  • Any ruling of the OMED issued after the passing of Law 3845/2010 (GR1005019I), which implements the European Union and International Monetary Fund (IMF) support mechanism in Greece since last May, and provides for wage increases by way of derogation from the provisions of Law 3871/2010, are subject to appeal within 15 days from the publication of the latter law.

Reactions to the changes

The majority of private sector employer associations are generally satisfied with these developments.

The Greek General Confederation of Labour (GSEE), welcomed the National General Collective Employment Agreement, mainly because it did not abolish or cut the so-called 13th and 14th salaries (holidays, Christmas and Easter bonuses), in contrast to the public sector, where they were abolished in 2010 by laws 3833 and 3845.

However, minority left-wing factions within GSEE and also many other trade union federations or independent unionists expressed dissatisfaction with the National General Collective Employment Agreement and Law 3871/2010. They argue that inflation was already running at 5.5% when the law was passed and that the rules are unconstitutional and violate the right to free collective bargaining.

Several trade unions have already gone to court to review the constitutionality of certain provisions of Law 3845/2010 and especially the violation of the right to free collective bargaining as the only way of determining minimum wages. The Confederation of Public Servants (ADEDY), the Centre of Labour Unions of Livadia and the Athens Bar Association (DSA) are among those organisations.

Commentary

The outcome of the appeal heard before the Council of State (STE) on 23 November 2010 with respect to the constitutionality of restricting collective bargaining is not yet known. However there is a great deal of doubt in the public sector about the effects of these laws, because the reduction of wages is expected to reduce household consumption leading to a deeper recession and a rise in unemployment.

Apostolos Kapsalis, INE/GSEE

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