Impact of new austerity measures on industrial relations

In November 2012, a third package of austerity measures was approved by the Greek Parliament as the country’s economic crisis continued. The new law was a prerequisite of approval for a further tranche of the country’s bailout programme under the supervision of the International Monetary Fund, European Union and European Central Bank. The measures will have a major impact on labour laws and national collective bargaining, and introduce more cuts to wages and pensions.

Background

On 6 November 2012, the Greek Government – formed by a three-party coalition of New Democracy, PASOK and Democratic Left – submitted the third package of austerity measures to the Hellenic Parliament for approval. This third memorandum document was called Approval of the medium-term fiscal strategy framework 2013–2016 – Urgent measures for the implementation of Law 4046/2012 and the medium-term fiscal strategy framework 2013–2016.

The legislation was drafted so that Greece could receive a €31.5 billion bailout tranche from the Troika – the European Union (EU), European Central Bank (ECB) and the International Monetary Fund (IMF). The scope of the austerity measures drew harsh criticism from unions and MPs during the preparation of the Bill. There was more unrest during the two-day voting procedure between 6 and 7 November 2012, and strong reaction from the Greek people.

Protests fail to halt new laws

In protest at the cuts, the General Confederation of Greek Workers (GSEE) and the Greek Civil Servants’ Confederation (ADEDY) called a 48-hour national general strike. The strike was backed by the National Confederation of Hellenic Commerce (ESEE) and the General Confederation of Professionals, Craftsmen and Merchants (GSEVEE).

On 6 November 2012, striking trade unions marched to Parliament, and the following day they organised a rally during the voting on the Bill. Thousands of workers, freelance professionals and owners of small and medium sizes businesses took part in the rally. Small shops and craft stallholders closed for business as an act of protest.

The Memorandum was voted in by Parliament by a narrow majority – 153 out of 300 members voted in favour, 128 MPs against, and 18 abstained.

The Democratic Left, one of the members of the coalition, joined the opposition to vote against the new measures. Seven MPs from PASOK and one from New Democracy also voted against the Government and were subsequently expelled from their parties.

Key changes

Among the areas affected by the new regulations that came into force under the Bill were taxes, the banking system, denationalisations, pensions, and the insurance system.

The regulations also had a huge impact on labour affairs.

National collective agreements

The new law says that the objective of the national collective agreement is to set the minimum non-employment conditions that will apply to all workers in the country.

Any conditions governing minimum salaries and bonus payments – such as three-yearly length-of-service increments or marriage allowances – and any other pay conditions will apply only to workers employed by employers/members of the contracting employing organisations. They must be paid at least the minimum wage, which is now the salary provided for by law.

Employers and companies that are not members of employing organisations that participate in the national collective agreements are not bound by them. The same terms and requirements apply accordingly to business, sectoral and occupational agreements.

Minimum wage

The bill also introduces a new system of setting the national minimum wage. From 1 April 2013, the national minimum wage will be defined by law, using a mechanism that will be specified in the first trimester of 2013 by an act of the Council of Ministers.

Until the end of the period of economic adjustment and in the context of the implementation of the second memorandum (Law 4046/2012 and amendments thereof) it will be possible for workers to be given a ‘length of service’ increase to their minimum salary. Employees aged over 25 are entitled to a 5% allowance for every three-year period of service. They can receive increases for a maximum of six three-year terms, or 18 years’ or more service.

Rises are also provided for three-year terms and minimum salaries (€510.95) for workers under the age of 25. This monthly bonus for service is the only one that remains from the previous salary bonus system set by national collective agreements, and it is valid only for services completed by 14 February 2012. As of 14 February 2012, and until unemployment drops to under 10%, the validity of all provisions that provide for salary bonuses is suspended, including those for length of service, whether set out in acts, laws, collective agreements, arbitration rulings or any other regulations

Changes to working hours

The new provisions abolish regulations limiting commercial shop opening hours. It will now be possible to use a split working-hour system in shops that are open around the clock. The only restriction to working hours is the guarantee of a minimum three-hour midday rest break.

The new measures change working hours for shop employees. The previous regulations established a 40-hour five-day week. This has now been abolished, since there is now no specific collective agreement that covers shop workers. General rules for Greek workers allow for a six-day working week.

Time limits on obligatory rest have also changed, reduced to 11 continuous hours instead of 12 in every 24 hours. This regulation will also apply to shift work.

In addition, the distribution of annual leave has changed. It can now be divided into more than two holiday periods, one of which must be a single period of 10 or 12 days for those employed on a five-day or six-day working week. Other periods of leave can be granted at the employer’s discretion, depending on the workload and without the need for prior approval by the Labour Inspectorate.

Notice and severance pay

Shorter periods of notice for terminating an employment contract have now been established under the new measures. The maximum notice period is reduced from six to four months. This cuts the legal severance pay by 50%.

Two separate measures have been introduced for employees with more than 16 years of service:

a limit has been set on severance pay, which will be calculated only for the part of their salary up to €2,000 for those employees with more than 16 years of experience;

length of service shall be capped at 1 November 2012, the date the law came into force, and no further months will be taken into consideration for the purposes of calculating severance pay in case of redundancy.

Abolition of extra contributions

The new rules reduce ‘non-wage’ costs for employers. The payment of contributions by the employers to social policy organisations, such as the Workers’ Social Fund (OEE) and the Workers’ Housing Organization (OEK) has been abolished. This cuts employers’ costs by 0.75% in relation to OEK, and 0.35% in relation to OEE. The corresponding contributions by workers – 1% and 0.35% – will remain. This regulation was included in the previous memorandum, and will be retroactively applied as of 1 November 2012.

Labour Inspectorate changes

The rules on the procedures undertaken by the Labour Inspectorate have been simplified in an effort to reduce the administrative burden on companies. It means changes in the period in which employers are obliged to notify the Labour Inspectorate of changes in working hours, which will now be no more than two working days after the change is carried out. Notification of overtime can now be given before or on the day that the work is required – and, in exceptional cases, one day after it is carried out.

Future measures that will affect workers include the raising of the retirement age, the introduction of an availability system in local government bodies and the public sector, and the abolition of certain public sector holiday and leave benefits. Pensioners face further reductions in pensions.

Social partner reaction

GSEE and ADEDY have described the new measures as inefficient, harsh and unfair and that the sacrifices they require of workers would be pointless because they will not help the country emerge from its economic crisis, and are instead more likely to lead to a violent internal devaluation.

The employers’ organisations representing small and medium enterprises, the National Confederation of Greek Commerce (ESEE) and the General Confederation of GreekSmall Businesses and Trades (GSEVEE), were also opposed to a continuous reduction in salaries and the abolition of collective agreements. Their view was that a deeper recession and further unemployment was being caused by the reduction of salaries, not by labour costs.

They called for the definition of the minimum wage to be the exclusive responsibility of social partners, and to be set by a collective agreement. They also suggested other solutions such as the freezing of salaries.

The employers were also concerned that the measures would cause unrest in the labour force, causing further disruption to economic recovery.

However, another employers’ organisation, the Hellenic Federation of Enterprises (SEV), has quietly agreed with the new measures without making any official statement. SEV also distanced itself from the other employee groups by not participating in social partners’ talks on new labour developments.

Government position

According to the Minister of Labour, Yiannis Vroutsis, the new measures preserve the level of the minimum wage (at €586 in gross earnings), and the three-yearly length-of-service increments. He has said the procedure of collective agreements is also protected, despite the anticipated new mechanism to define minimum wage by law.

Overall, he says, the new bill is a government success given that it has secured the disbursement of the bailout loan, and is the result of tough negotiations with the Troika.

Commentary

For the first time in 30 years, these changes take the right to determine the minimum wage through collective agreements from the key social partners in Greece, and hand it to the government.

Furthermore, business flexibility is increased at the expense of workers, and employers benefit from the reduction of labour costs brought about by the new measures.

Workers will have to cope with reduced income, increased job insecurity and unemployment.

The measures will further exacerbate the financial situation and greatly affect labour peace.

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