Employers active in industrial relations issues

Both the trade unions and the main employer organisation, the Latvian Employers’ Confederation (LDDK), have a shared interest in improving industrial relations and strengthening social dialogue. In 2005, the LDDK made several proposals for changes to the labour law, supported increases in wages and the minimum tax-free threshold, and was involved in various activities connected with the European Social Fund. Despite the fact that the views of the unions and employers do not always converge, the LDDK uses the mechanism - or at least the principles - of social dialogue to achieve its aims. The social dialogue mechanism has played a key role in preventing several proposals unfavourable to workers from being instigated.

Employers in Latvia are continually bringing their influence to bear on industrial relations. The Latvian Employers’ Confederation (Latvijas Darba Devēju konfederācija, LDDK) brings up issues for debate and public discussion, using social dialogue institutions directly or indirectly - or at least the principle of social dialogue - to find solutions to them. Unlike trade unions, which try to keep social dialogue within the legally mandated framework, i.e. under the auspices of the National Tripartite Council (Nacionālās trīspusējās sadarbības padome, NTSP), employers take a more flexible approach to their activities, getting involved in public discussions in the media, joint seminars, discussions and projects to which the social partners are invited.

In 2005, the LDDK proposed various amendments to the labour law related to working hours and pay, supported efforts to increase the minimum wage, and performed a number of actions in the framework of European Social Fund projects.

Working hours

In 2004, several organisations representing businesses declared that Latvia has too many holidays, and called for longer working days and working hours. At the time, the LDDK and the Free Trade Union Confederation of Latvia (Latvijas Brīvo Arodbiedrību savienība, LBAS) opposed this idea. Both organisations pointed out that in Latvia people work for longer than the legally stipulated normal working time and even cancel their vacations due to work commitments. In some sectors, such as the retail trade, people work on public holidays as well.

In 2004, Latvia had 12 work-free public holidays. Additionally, each worker is entitled to at least four weeks’ paid leave, and, on days before public holidays, working time is shortened by one hour. In 2005, there were 14 work-free public holidays in Latvia.

However, the LDDK protested strongly in June 2005 when the Secretariat of the Minister of State for Integration Affairs submitted a draft law that provided for an increased number of holidays. The draft law stipulated that, in the event that a public holiday falls on a Saturday or Sunday, the next working day should be free. The LDDK considered that setting additional days off cannot be allowed at a time when Latvia’s GDP per capita is the lowest in the EU, and every lost work day leads to a loss of production. The draft law was rejected.

Minimum wage

On the issue of increasing the minimum wage, the LDDK generally has taken a passively supportive stance. The push for increasing the minimum wage is being driven by trade unions and the Ministry of Welfare. Raising the minimum wage is usually opposed by businesses, especially small and medium-sized enterprises (SMEs), and by local authorities with a high proportion of minimum wage earners, in relation to the total number of workers, and tight budgetary constraints. Businesses are afraid that raising the minimum wage will damage the competitiveness of Latvian enterprises, and the inability to meet the payments will lead to the dismissal of workers. It must be said that this has never happened up to now.

In contrast to these businesses, during talks in 2005, the LDDK supported the most radical proposal put forward by the unions and the Ministry of Welfare: raising the minimum wage by 25% to a total of €142 per month from 1 January 2006. Notwithstanding the joint position of the social partners, the government decided to raise it by a more modest 12.5% to €128 (LV0512101n).

Minimum income tax threshold

The LDDK fully supported the demand made by unions and the Ministry of Welfare that the minimum wage and the minimum income tax threshold must be increased simultaneously, since only this parallel action would result in higher wages for workers. After many delays, the government agreed to slightly raise the income tax threshold from 1 January 2006.

The LDDK now considers that raising wages is the only way to halt or at least slow down the emigration of skilled workers. The employers’ confederation and the government are divided on this issue. Although enterprises supported raising the tax threshold, they only started increasing wages when the immigration process had already become significant. In 2004, real wages only grew by 2.4%, but in 2005 they went up by almost 10%.

Payments for shift work, overtime and justified absence

The unions disagreed with a number of issues put forward by the LDDK during 2005. In early 2005, the LDDK proposed to the Ministry of Economy that amendments be made to the labour law to reduce payments for shift work from the current additional 50% of the wage rate to 25%, and to reduce payments for overtime work or work on public holidays from a 100% supplement to 50%. The LDDK argued that such changes would promote more competitive labour costs and would combat illegal employment. The LDDK’s proposals were underlined by rapid rises in labour costs at the time. The LDDK claimed that the rates for overtime and shift work in Latvia are the highest in the EU.

The unions protested against these plans, arguing that they went against the interests of workers. The LBAS claimed that the LDDK proposals were aimed at raising enterprise competitiveness at the expense of workers, rather than through increased productivity. Minister of Welfare, Dagnija Staķe, also opposed the LDDK’s proposals.

The proposals were discussed at a meeting of the Labour Issues Tripartite Cooperation Council on 29 March 2005, during which the unions, employers and the Ministry of Welfare agreed not to pass them on for further consideration.

However, the LDDK returned to the issue of overtime in November 2005. It called for amendments to the labour law so that, rather than getting payment supplements for overtime work, workers would instead be granted rest periods, and that for periods of justified absence from work - e.g. to undergo a mandatory health check-up ordered by the employer - workers would retain their actual work payments (average earnings according to the labour law). Average earnings are defined as wages plus bonuses and supplements that an employee has received in the preceding month. Employers argued that compensating a worker during a justified absence according to average earnings could result in the absent employee being paid more than a colleague performing work duties at that time.

The social partners could not reach agreement on amendments to the labour law, and they are being prepared for submission to the national parliament’s Social and Employment Committee.

Issuing of illness certificates

In early 2005, the LDDK began a discussion on the unjustified issuing of documents affirming incapacity to work (illness certificates). Employers believe that, in Latvia, it is too easy to get a document proving incapacity, and therefore justifying absence from work. Often, workers declared unable to work for one employer will simultaneously be working for another employer. An employer discovering such an infringement does not have the right to punish or dismiss the employee while they are sick.

According to information gathered by the LDDK, in 2003 there were 115,800 instances where an employee received a document affirming work incapacity from a medical institution. In 99% of these cases, the reason was general illness, while in just 0.2% of cases it was a work-related illness and, in 0.8%, an accident at work. Almost 3.8 million work days were lost due to illness in 2003, with the average illness period lasting 32 days.

On the LDDK’s initiative, the matter was discussed by the NTSP. The social dialogue partners unanimously agree that the Ministry of Welfare and Ministry of Health must prepare amendments to laws to eradicate the unjustified issuing of illness certificates, and suggest the introduction of strict registration procedures for work incapacity forms (controlled listing of work incapacity forms and a special database), or procedures whereby the government pays for work incapacity due to illness from the second day of illness indicated on the incapacity form (currently, employers have to pay for the second to the fourteenth days of incapacity).

Wages during study leave

The labour law stipulates that employers have a duty to grant employees 20 days of paid study leave for taking government examinations or writing theses. In November 2005, the LDDK proposed amending the labour law so that employers would be obliged to provide the study leave, but would not be compelled to pay wages during this period. To justify the proposal, employers argue that they support education and improvement of qualifications, but do not wish to pay wages for study leave if an employee is studying in a field unrelated to his/her work, in their own free time, and possibly even without the employer’s knowledge.

The social partners could not reach agreement on this proposal either, and it is being prepared for submission to the national parliament’s Social and Employment Committee.

Flexible forms of work

Employers believe that the labour shortage, which is the result of low birth rates, emigration and restrictions on immigration, is forcing them to pay greater attention to currently unexploited sections of the labour market. More flexible forms of work have to be available to engage people from these groups in the labour market.

At the end of 2005, the LDDK organised a seminar on the Latest trends and models in industrial relations, which gathered together representatives of enterprises and associations, parliamentarians and representatives from the Ministry of Welfare, the Government Labour Inspectorate (Valsts Darba inspekcija, VDI) and LBAS. Information material about creating flexible working conditions in companies, developed as part of the European Social Fund project Strengthening the capacity of the LDDK, was presented at the seminar.

The seminar revealed that the initiative for establishing flexible working conditions mainly came from employees in individual talks with their employers. Workers usually do not support proposals from employers to introduce flexible forms of work. This is partly due to a lack of information or knowledge about the variety of work forms possible, lack of awareness about workers’ rights in the event that non-traditional forms are used, and lack of trust in employers.

There are no specific regulations governing non-traditional forms of work in Latvian law. Ministry of Welfare specialists believe that the norms of Latvia’s labour law are sufficiently flexible and permit various ways of organising work, while protecting workers’ rights. The accrued work time reporting method provided for in the labour law often serves as the basis in Latvia for introducing flexible forms of work.

The LDDK has announced that, in future, it will increasingly promote flexibility with regard to hiring and dismissing workers, education, working hours and other issues. By introducing flexible work forms, it should be possible to attract people currently involved in caring for children, studying, or who are absent from work for other reasons. Reducing regulations by the government in the area of industrial relations would put more responsibility for determining working conditions in the hands of employers and employees, which would in turn increase the role of social dialogue. Through social dialogue, by concluding collective agreements and by jointly determining working conditions, both employers and employees can effectively adjust to changes in the labour market and the economy as a whole.

Commentary

A certain contradiction has emerged in the work and published proposals of the LDDK. On the one hand, the LDDK supports increasing the minimum wage and workers’ wages, but on the other hand it is in favour of amendments to the labour law that would reduce wages. This duality can be explained by the objectives of the LDDK’s founders and supporting organisations. The companies represented by the organisation follow the law and industrial relations norms; therefore, deficiencies in the law and related unfavourable effects on their businesses impact strongly on them. The LDDK represents well-established and successful companies that ensure competitive wages for their employees, meaning that they have no problems with observing minimum wage norms. However, to improve competitiveness, they would like to eliminate what they consider to be unjustified increases in labour costs and to lower taxes. These goals are the basis of the LDDK’s proposals in relation to restricting payments for overtime, shift work and work-free days, and study leave. Employers have an interest in introducing flexible forms of work and they willingly support measures designed to increase competitiveness. This is the explanation behind the LDDK’s activities in supporting innovation, education quality, and improving career development.