Employers criticise proposal to increase overtime bonuses

The government’s recently proposed amendments to the Labour Code contain regulations granting employees substantially higher overtime payment bonuses than at present. The proposal was welcomed by the trade unions but was strongly criticised by employer organisations.

In April 2006, the ruling Polish Workers’ Party (Polskie Stronnictwo Ludowe, PSL) put forward new amendments to the Labour Code. The proposals envisage a 150% increase in overtime payment bonuses for workers in the following situations:

• working night shifts, on Sundays and on public holidays where these are not normally part of an employee’s work schedule;

• working instead of taking the time in lieu granted individually in place of Sundays and public holidays where these are not normally worked by an employee;

• working instead of taking the time in lieu granted individually for work performed on Sundays and public holidays.

As part of the binding regulations, in all of the above cases an employee shall thus now receive a bonus amounting to 100% – rather than the previous rate of 40% – of the basic wage. For overtime work on any other day and excluding night shifts, the bonus shall also amount to 100% of the standard remuneration rather than one half of the basic rate, as has been the case up to now.

The government bill has been accepted by the trade unions.

Aims of proposed amendments

The proposed amendments to the Labour Code are aimed at reducing unemployment. According to PSL, the amendments are intended to discourage employers from asking workers to carry out overtime where the new rates would mean an excessive financial burden for the employers. The authors of the bill assumed that – in view of the considerably increased rates – the employees would not be willing to take time off in lieu but would choose instead to work more hours and receive the bonus payment in return. The hope is that, by making overtime a more expensive option, employers will be forced to hire more workers instead.

Employer criticisms

However, the employers consider this line of thought to be flawed, as other Labour Code regulations, which explicitly specify the terms under which an employee can work overtime, contradict this logic. According to the Labour Code regulations, overtime work can be performed only in exceptional circumstances that cannot be anticipated, whereas an increase in employment is usually closely related to increasing demand for additional work. Generally, the need to hire more workers would be planned in advance in a strategic manner as a company expands.

The employers also highlighted that, on the basis of the proposed amendments, Polish employers will be forced to pay the highest rates for overtime work in the European Union. Moreover, the government bill renders labour relations less flexible and weakens the interest of both parties in drawing up individual employment conditions.

Furthermore, the employers draw attention to the costs of introducing such amendments. According to calculations by the Polish Confederation of Private Employers Lewiatan (Polska Konfederacja Pracodawców Prywatnych Lewiatan, PKPP Lewiatan), adoption of the bill in the form proposed by PSL will raise the overall wage bill by 1.95%, as the total cost of overtime work will amount to 4.55% of average gross remuneration. Consequently, both private and public sector employers will be faced with a considerable increase in personnel costs.

Rafal Towalski, Institute of Public Affairs (ISP) and Warsaw School of Economics (SGH)