Troika approves new set of changes in jobs and pay

On 14 February 2012 Greece adopted Act 4046/12, the loan agreement and Memorandum reached with the Troika, the body supervising Greece’s fiscal and structural changes programme. Widely referred to as Memorandum 2, the new act changes employment relationships, agreements and salaries, and overturns long-standing laws, principles and practices. It also determines policy at fiscal, banking, occupational, social, insurance, retirement, development and educational levels.

Background

The first Memorandum and the Medium-Term Fiscal Strategy Framework was agreed with the Troika – the International Monetary Fund (IMF), European Union (EU) and European Central Bank (ECB) – and enacted in 2011.

At the beginning of 2012, the government brought a new Memorandum to parliament to seek its approval of a new loan agreement and the Greek bond swap programme. The Act was approved by the majority of parliamentary members of the two parties that are participating in the transitional government. The nature and the implementation of many of the provisions of Memorandum 2 are subject to decisions by the Council of Ministers.

The Council issued its first decision on employment relationships and the labour market on 29 February 2012. It cuts the minimum wages that had been agreed under the National General Collective Agreement and overturns the system and validity of all collective agreements. It also changes arbitration processes and the permanent employment status of public sector employees.

New measures on employment relationships

The Council’s measures are valid retroactively to the date of the act’s adoption on 14 February 2012. The most significant cover minimum wages, collective employment agreements, arbitration processes and public sector employment contracts.

Minimum wages

A reduction in salary is now permitted for all employees receiving the minimum wages agreed in the National General Collective Agreement (NGCA), signed by the social partners on 15 July 2010 and intended to be valid for three years. The salary cut for employees generally is 22%, and 32% for those below the age of 25. This cut can be imposed by employers without employees’ consent.

The base monthly salary agreed by the National General Collective Agreement for an employee who is single and has no children or work experience was €751.39 (gross). After the 22% cut, the new minimum monthly salary for this category of worker will be €586.08. After deduction of social insurance contributions and taxes, net monthly salary will be €476.35, and for those under 25, €426.64.

Collective employment agreements

These can now only be fixed-term, with a minimum duration of one year and a maximum duration of three years. Previously, collective agreements could be made for an indefinite term.

Collective agreements (sectoral and occupational) that have been in place for 24 months or more will expire no later than one year after the new act was adopted, on 14 February 2013.

Collective agreements signed on or after 14 February 2010 can be valid for three years, but employers have the right to terminate them and start a new bargaining round after one year.

The previous system of ‘extension’ of collective agreements meant that even after expiry, an old collective agreement would remain in force while a new round of bargaining started. The agreement could be extended for up to six months. If, after this period, no new collective agreement had been signed, the ‘after-effect’ principle meant that employees’ salaries and allowances would remain unchanged and would become a legally binding part of their individual employment contract.

  • Under the new legislation the possible extension period is reduced to three months.
  • The ‘after effect’ principle has been altered to ensure that employers are not obliged to pay all the allowances and bonuses contained in the previous agreement, but only the basic salary of that sector, occupation or firm, and only allowances related to seniority, children, studies and hazardous work. This can be imposed without the employee’s consent and will continue to apply until replaced by a new collective agreement or individual contract, which might contain even more disadvantageous terms.
  • Provision is made for a freeze of increases at the completion of one year with an employer, the so-called ‘service maturity’, with suspension of the effect of any relevant law, provision, collective agreement or even arbitration award.

Arbitration

The new legislation provides that arbitration takes place exclusively under an agreement between employer and employee, and applies only to basic salary and/or basic remuneration and does not include any other issue such as allowances, benefits or institutional regulations.

Permanent contracts in the broader public sector

As of 14 February 2012, employment agreements that would normally only expire on retirement or reaching the statutory retirement age, and that employers could not terminate under any other circumstances, are now to be regarded as collective agreements of indefinite duration.

This change makes it possible for employers to terminate such contracts as long as they comply with the relevant legislation on matters such as compensation and proper notification. This affects a large number of employees in the broader public sector, and also some bank workers who had ‘permanent’ employment contracts that protected them from dismissal.

Reactions to Memorandum 2

There have been strong reactions to the new Memorandum. The most dramatic of these has been the withdrawal on one political party from the transitional government, and the rejection of the Memorandum by 45 parliamentary members of the three government parties.

There have also been strong objections from the social partners.

Before the adoption of the draft law, the General Confederation of Greek Workers (GSEE) a nnounced a 48-hour general strike on 10 and 11 February 2012 and organised a protest at Syntagma Square on Memorandum voting day. Tens of thousands of people participated both in the strike and the demonstration. On voting day, despite clashes with police, the protesters remained in the city centre for five hours. The GSEE also asked European trade unions and the International Labour Organization (ILO) for support.

The confederation filed an appeal to Greece’s Council of State asking it to cancel the Council of Ministers’ decision, declaring that ‘the government enacts a series of unprecedented and ruthless anti-worker measures, in application of the new loan agreement’.

There have also been protests from the nationwide associations of small enterprise employers. In a strongly-worded statement, the National Confederation of Hellenic Commerce (ESEE) said:

The minimum wage is now determined by the government and not by the social partners, and the changes in collective bargaining signal the end of the sectoral agreements and of the National General Collective Agreement…Because of the Memorandum’s measures, the country joins the Eastern and Balkan countries in the field of employment, the rich European countries of the North in the field of taxation and the poor African and Asian countries at a social level.

The General Confederation of Professionals, Craftsmen and Merchants (GSEVEE) protested that the right of representatives of the social partners to decide on salaries was being taken from them. The confederation’s statement added that with the recession getting deeper, the new measures would make Greece poorer and less competitive, bring its economy and society to its knees and force companies to shut down.

The Hellenic Federation of Enterprises (SEV) did not adopt a clear position on the changes.

Commentary

The changes introduced by Memorandum 2 have disrupted Greek labour law as established and developed over previous decades. The new measures contradict Greece’s constitutional articles, international labour conventions and European Law, as well as removing individual and social rights. The objections of both the employees’ association, GSΕΕ, and employers’ associations GSEVEE and ESEE have been ignored. The measures are expected to increase the effects of the economic recession, further reduce income, violently degrade employees’ living standards, abolish collective bargaining, bring an end to individual contracts, disrupt the sense of protection provided by labour laws and abolish trade union freedom.

Penny Georgiadou, Labour Institute of Greek General Confederation of Labour (INE/GSEE)

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