2003 Annual Review for Bulgaria

This record reviews 2003's main developments in industrial relations in Bulgaria.

Political developments

In 2003, local government elections took place, with mayors and municipal councils elected throughout the country. Turn-out in both types of elections was about 50%. The 'traditional' parties - the right-leaning Union of Democratic Forces and left-leaning Bulgarian Socialist Party- to a large extent retained their positions in local government, though other parties are emerging. With this in mind, the poor results registered by the governing party, the National Movement Simeon The Second, contrasted sharply with the performance of other parties. Almost everywhere, the governing party came in after the first three parties (ranked by their influence in the newly elected municipal councils). This electoral failure is likely to lead to increased internal pressure in the governing party. A feature of the elections was the widely-used practice of creating broad regional non-party coalitions, which succeeded in attracting a significant portion of the votes and formed influential groups of municipal council members.

In foreign policy terms, the most significant event during 2003 was the final decision of the supreme bodies of the North Atlantic Treaty Organisation (NATO) to admit Bulgaria. Joining NATO should be seen in the context of the general position of all major political parties in the country in favour of the active inclusion of Bulgaria in the 'anti-terrorist coalition'.

In 2003, the Bulgarian institutions continued their activities aimed at finalising accession to the European Union. An additional motivation for speeding up the harmonisation of Bulgarian legislation and institutions with the EU’s 'acquis communautaire' was given by the unconditional support of the European Commission for the efforts to get Bulgaria ready for full membership in 2007.

Collective bargaining

Changes in labour legislation made in March 2001 defined the sector and branch levels of collective bargaining and outlined the responsibilities of the partners more clearly (BG0307204F). It also introduced fixed durations (of one to two years) and expiry dates for collective agreements, as well as terminating agreements at all levels signed before March 2003. As a result, 59 sector/branch collective agreements were signed in 2001-2, rising to 63 (nine sector and 54 branch agreements) in 2002-3, covering an estimated 40% of all employees (BG0312203F). Sector/branch collective agreements are now absent only in the chemicals and machine-building sectors. In over 75% of cases, the bargaining parties have agreed on the maximum two-year duration for collective agreements permitted by the law. Bargaining also occurs at enterprise/company level, and at municipal level in the case of local public services.

Pay

In 2003, pay was, as usual, the main topic of collective bargaining. The introduction of so-called 'minimum social insurance thresholds' (BG0307101F) had an influence on bargaining. From the beginning of 2003, the Law on the Budget of the State Social Security introduced a requirement on employers to pay social insurance contributions in respect of their employees on the basis of a specific minimum amount of pay - the minimum social insurance threshold - to be determined by collective bargaining at sector and branch level for 48 economic activity groups and nine occupational groups. The aim is stop the practice of employers paying contributions on the basis not of the employees' actual wage but of the much lower national minimum wage. During 2003, agreements on this issue were thus signed at sector/branch level. Even though it was introduced for the purposes of social insurance, this new instrument has had a positive impact on earnings growth. In practice, the agreed new minimum social insurance threshold for all branches and sectors (which in principle was higher than the threshold for 2002), became a minimum pay level in 2003. This helped to promote higher starting pay rates for occupations in most sectors.

In 53% of sector and branch collective agreements, minimum pay rates in 2003 were higher than nationally-set rates. A range of additional elements of pay were also increased, such as payments for long working hours (in over 95% of agreements), for night work (in 77% of agreements) and overtime (60% of agreements). There was also bargaining over social benefits, such as specific payments to 'needy workers', additional payments on religious holidays and additional annual holiday payments. A decreasing number of agreements provide for meals (31%), while 29% contained provisions relating to the provision of transport to and from work. However, medical services for workers are not yet included in many collective agreements.

Despite the generally positive results of pay bargaining in 2003, labour costs in Bulgaria remained among the lowest in Europe. The average hourly remuneration for Bulgarian employees was around EUR 1.35 per hour, compared to an EU average of some EUR 23 per hour. Unpaid wages amounting to more than EUR 75 million are a persistent problem (BG0307205N).

Working time

Collective bargaining generally provides for improvements to statutory provisions in the areas of working time, holidays and leave. Flexible forms of working time organisation are being extended, seeking more efficient work organisation and improved competitiveness of companies.

Almost all of the sector and branch collective agreements in force provide for longer paid annual leave than that established by the Labour Code (20 days). A total of 70% of the agreements take a differentiated approach to the length of paid annual leave, depending on length of service.

Most collective agreements set the normal working week at 40 hours. In September 2003, during a meeting between the social partners and Minister of Labour and Social Policy, trade unions launched a demand for a gradual reduction of the duration of normal weekly working time from 40 to 35 hours. The initial response of all employers’ organisations was negative, while the Ministry of Labour and Social Policy does not want to intervene, preferring to leave debate on the issue to the social partners (BG0309102F).

Job security

In the context of labour market problems (BG0311203F), one of the main items on the bargaining agenda is employment. All sector/branch collective agreements refer to the development of sectoral policies aiming at preserving existing jobs and creating new ones. Over 80% of agreements contain clauses determining criteria/priorities for selecting personnel as well as concrete procedures for workforce reductions. In 52.4% of agreements, there is a provision that the employer should inform trade unions in advance about forthcoming privatisation or restructuring and its effects on employment. In 35% of cases, there should be prior negotiations with trade unions, while under 54% of agreements the employer should coordinate its actions with the unions. Some 31.7% of agreements stipulate that there should be consultations over employment in sectoral and branch councils and commissions for social cooperation. The development of trade union positions on employment is provided for in 39.7% of agreements, and the development of new employment structures and programmes in 22.2% of cases.

Equal opportunities and diversity issues

Women make up around 50% of the Bulgarian labour force. An analysis of sector and branch agreements signed in 2002 and 2003 shows that there is a trend towards concluding accords on the protection of the employment rights of women. Most often the agreements aim to help women combine work and family life. Thus, some agreements include longer than the standard paid annual leave for those with childcare responsibilities. In more than 70% of cases, however, the agreements only adhere to the provisions of the Labour Code.

The first steps have been taken to agreeing a shorter working day/week and part-time work for pregnant women and mothers with children below 10 years of age or with a disabled child. A large number of sector and branch agreements include provisions on various types of social benefits and social support enabling workers to improve the work-life balance. These include additional payment for national and religious holidays, recreation and annual leave, sickness pay and leave, and the possibility for both parents to take their paid annual leave at the same time.

On the negative side, high unemployment is reportedly forcing many women to accept whatever work is available, including low-skilled jobs not corresponding to their educational attainment, low-paid work or work in difficult conditions. Agreements allow women to work flexibly, part time, at home or at a distance from the workplace are still relatively rare. Collective agreements also very rarely contain clauses and operational mechanisms to protect women against various forms of discrimination at work (BG0312104F).

Training and skills development

The practice of collective bargaining in Bulgaria during the last few years shows that more and more employers and trade unions are seeking to improve of quality of the workforce. This is evidenced by the fact that 95% of sector and branch collective agreements include provisions and even whole sections concerning the improvement of the education, training and upgrading of staff. More than a third of the agreements include the development of special programmes, plans and systems. An important provision is the establishment of commissions, which include representatives of trade unions, for the training and retraining of staff. More than 17% of agreements provide for preliminary retraining in cases of restructuring, insolvency or liquidation proceedings, and for new or transferred workers. In some specific cases, such as the leather, knitwear, cotton and sewing industries, it has been agreed that the employers will allocate at least 2% of annual working time for vocational training and upgrading purposes. The light industry and metalworking sector has agreed to establish branch funds for the training, upgrading and recruitment of staff.

Other issues

Over 96% of sector and branch collective agreements contain sections relating to safety and health at work. The main issues are: additional payment for work under hazardous and harmful working conditions; and additional paid annual leave for work under these conditions. Around 77% of agreements include longer leave arrangements (between six and 25 days longer) than statutory requirements. This indicates that the attention of the bargaining parties is still focused on compensatory mechanisms rather than on eliminating the causes of harm to workers' health and ability to work, or encouraging a real improvement in the working environment. Only 37% of sector and branch agreements provide for regular measurement of working environment parameters. About 40% of agreements include provisions for the development of programmes to limit hazards and harmful factors at work.

Clauses regarding trade union monitoring of health and safety, the timely submission of safety information to unions or the mechanisms for unions to participate in improving working conditions have been included in more than 75% of collective agreements.

Legislative developments

Over 2002-3, three important labour laws were amended - the Labour Code, the Healthy and Safe Working Conditions Act and the Employment Promotion Act.

After long and difficult discussions which lasted nearly a year, parliament passed several disputed amendments to the Labour Code concerning tripartite cooperation and procedures. Another amendment of the Labour Code foresees that the employment contract is only effective if issued in writing. At the same time, to protect the social insurance rights of workers, the employer must inform the National Social Security Institute (NSSI) of the conclusion of amendment of an employment contract within three days and of its termination within seven days.

Amendments to the Civil Procedures Code at the end of 2002 brought significant changes to the procedure for the court hearing of individual labour disputes. Currently, the regional courts hear all labour disputes, regardless of the amount of the claim, as the court of first instance. Another major amendment is the introduction of limits on the kinds of disputes which are heard in 'three-instance' legal proceedings. These proceedings are now only used for claims regarding unfair dismissal, remuneration or payments of more than BGN 5,000 (approx. EUR 2,500). All the other labour disputes are subject to 'two-instance' hearings.

In October 2003, parliament adopted a law creating a new fund to guarantee employees’ pay claims in the event of their employer's insolvency (BG0312102N). Trade unions had demanded such a fund for many years.

Since 2000, Bulgaria has being undergoing a process of major pension reform. The latest stage came in July 2003 with the adoption of a new, unified Social Insurance Code, which brings together the legislation governing the various pillars of the pensions system (BG0308101F). The new Code was based on lengthy discussions, which included the social partners, but disagreements remained over the future course of pension reform.

The organisation and role of the social partners

There were no significant changes in the organisation and the role of the social partners during 2003. However, an exercise to assess the representativeness of the social partners, in line with the Labour Code, was an important event. This was the second exercise of this kind for the trade unions since 1999, and the first for employers' organisations. The results are to be announced in 2004. The preliminary data indicate that, as far as the trade unions are concerned, the two current representative confederations - the Confederation of Independent Trade Unions in Bulgaria (CITUB) and the Confederation of Labour Podkrepa (CL Podkrepa) - will retain their status. On the employers' side, the expectations are that a new organisation will join the current four representative organisations (BG0310103F).

December saw the first plenary session of a new Economic and Social Council, an advisory body made up of representatives of employers' organisations, trade unions and non-governmental organisations (BG0401202N). The creation of the Council is regarded as completing Bulgaria's social dialogue system.

Industrial action

A range of sectoral and local industrial conflicts took place in 2003. The leading trade unions also held a number of joint national protests.

In the spring and summer, thousands of workers protested against what they viewed as the 'anti-social parameters' of the privatisation of the Bulgarian Telecommunication Company (BTC) (BG0402101N) and Bulgartabac (tobacco).

In the autumn, CITUB and CL Podkrepa held a series of regional protest meetings and, together with their sectoral organisations, called a national protest demonstration against the economic and social policy of the government (BG0311201N). More than 17,000 people expressed their dissatisfaction with the government and asked for the resignation of the cabinet. According to the organisers, this was the largest protest held by the two trade union confederations since the winter of 1996.

In 2001, a law amending the Labour Code established a National Institute for Reconciliation and Arbitration (NIRA), on the basis of a proposal made by the social partners to the government. After a delay of almost two years, the Institute was set up in 2003 (BG0401103F). NIRA’s main activity is, for the first time in Bulgaria, to provide mediation and arbitration for the settlement of collective labour disputes.

During 2003, trade unions continued their long-running campaign to abolish legislative provisions which prohibit workers in power supply, healthcare, communications and postal services from taking strike action (BG0401101N).

Employee participation

Bulgaria still has no legislation or practice on the establishment of work councils. During the past few years, there have been several pilot projects on this issue, but the results have not been evaluated yet. The 1997 Health and Safety Working Conditions Law makes it obligatory to establish working conditions committees, or working conditions groups in small enterprises. The representatives of employees in these bodies are elected by a general assembly of employees. According to the Labour Code, trade union organisations have information and consultation rights on: the collective bargaining process; changes in the employment situation; collective redundancies; and the extension and allocation of working hours. Information and consultation is currently a live issue in legislative terms and in collective bargaining. However, a broad debate has not yet taken place on the implementation of relevant EU legislation, such as the information and consultation Directive (2002/14/EC) (EU0204207F) and the employee involvement Directive (2001/86/EC) linked to the European Company Statute (ECS) (EU0206202F). European Works Councils are still a subject of relatively limited discussion, mostly within training seminars.

Stress at work

Influenced by the new priorities set by the European Commission for the candidate countries in the area of safety and health at work, the Bulgarian social partners and government have launched a wide public discussion concerning stress at work. A first national conference for research and fight against stress took place in September 2003. The focus was on the need for the prevention of occupational and social risks, such as stress at work, alcohol dependency and drug dependency. Discussions centred on the reasons for stress and the consequences, not only for the individual worker but also for the whole enterprise. It was highlighted that stress can lead to accidents at work, frequent absence, reduced capacity to work and low morale. Significant attention was paid to so-called 'secondary prevention'- identification and management of stress and training workers in order to help them limit this risk.

On a stress-related issue, at a conference held in October, the social partners discussed the growing problem of workplace violence in the health sector, based on the findings of an international research project (BG0311202N). Participants at the event agreed to launch a follow-up action plan for the prevention and elimination of workplace violence in this sector

Undeclared work

The recruitment of workers with no employment contract at all is a major problem in Bulgarian industrial relations. The scale of this practice is now so large that it has replaced the previously most widespread problem - the abuse of temporary agency contracts (see below under 'New forms of work'). Workers without contracts are paid in cash, the employer makes no social security contributions and no length of service is recorded. In these cases, labour legislation does not apply, which can cause problems for both the employer and the employee, particularly if there is an accident. This type of work creates major difficulties for workers as they cannot protect their rights in court. They do not have any opportunity to establish through legal proceedings that they have been in work, due to the lack of any written evidence, and in many cases are dismissed without being paid for their work.

In order to reduce these cases of major violation of labour legislation, since the beginning of 2003 employers have been obliged to register at the NSSI any employment contract concluded, amended or terminated (BG0307101F). Without this, the worker may not start work. Thus, based on NSSI data, more than 130,000 cases had been legalised by the end of the year.

Work of undefined or concealed character is not always illegal, and CITUB and CL Podkrepa have thus expressed their concern that there is a danger that the Bulgarian labour market will become an area for 'social dumping'. Some commentators believe that there is a need for social dialogue, which would help to:

• identify groups which widely use work of undefined or concealed character, by carrying out research into areas and activities where such forms of work are used, productivity and the status of workers;

• improve the understanding of the nature and character of this type of work; and

• study and define the role of family businesses, which are the main environment in which such 'unidentified' employment relations are being developed.

New forms of work

Part-time work is relatively uncommon in Bulgaria. In 2002, according to the Eurostat labour force survey, only 3.1% of the workforce worked part time, down from 3.5% in 2001. Fixed-term work is somewhat more widespread, at 6.1% of the workforce in 2002, down from 6.8% in 2001.

The past two to three years have seen the rise of the phenomenon of 'triangular' contracts between workers, employer and a third party. These types of employment arrangements are often put into place in order to help employers avoid the obligations contained in collective agreements. The third party benefits from these arrangements as it is obliged to comply with the provisions of a collective agreement only in the case of workers with employment contracts. However, this type of work is normally well paid, far exceeding the minimum rates and even average income in the formal employment sector.

Outlook

It is expected in some quarters that the fragmentation of representative employers’ organisations (there are now five such organisations) will increase the tension during collective bargaining in 2004. The increasing competition among the various employers’ associations to attract new members may have unexpected effects on the representative trade unions, which otherwise feel secure about their future. 2004 will bring great challenges for the newest Bulgarian industrial relations institution - the Economic and Social Council (see above under 'The organisation and role of the social partners').

2004 is the last year before the next regular parliamentary elections, which will take place in the first half of 2005. According to the traditions of Bulgarian politics, the elections will have a significant impact on the prospects for industrial relations. It is possible that the reforms in the economic and social sphere may slow down, and even regress in some areas, such as pension reform. (Ivan Neykov, Balkan Institute for Labour and Social Policy)