Reform in public sector threatens job security

New legislation passed in July 2006 has aided the government in its attempt to streamline public administration and to reduce the budget deficit. In effect, the amendments will make the dismissal of public service employees easier and cheaper for the employer, while at the same time providing greater support to laid-off employees. Although the trade unions initially criticised the government’s measures, an agreement was eventually reached about the implementation of the reforms in public administration.

The government has announced major job cuts and reform of the public sector, and implementation has already begun at central governmental units (HU0607059I, HU0611019I). The four different laws regulating employment relationships in the public sector have been amended in an attempt to streamline public administration.

Changes in employment status of public sector employees

The most significant elements of the new law passed by the parliament on 24 July 2006 are as follows:

• Employment of civil servants and public service employees can be terminated if the parliament or government, or any higher public administration body, orders staff reduction measures to be implemented at a given office or service unit.

• Employment relationships in top managerial positions may be terminated if there is no possibility for further employment of the civil servant/public service employee in another position, or if they decline another position offered by the employer. A significant aspect of this change is that, from now on, any job can be offered to the employee regardless of their educational attainment.

• Severance pay should be paid on the last day of the notice period, except if the employee has in the meantime found a full-time or part-time job elsewhere in the public sector. In such instances, the employee will not be entitled to receive a salary for the rest of the notice period or to receive severance pay; however, their service time at the previous workplace will be taken into account in the amount of severance pay given in case of dismissal from the new place of work. Previously, the employee received the severance pay in one lump sum, regardless of whether they had secured employment within the notice period.

• In the case of professional and contracted personnel of armed forces and the Hungarian Army, the rules of dismissal and severance pay will change in a similar fashion; they are to be accompanied by the obligation to dismiss the employee if they become eligible for any type of pension, such as old age, early or disability pension.

• These regulations are to be applied even in the case of employees working at state budget institutions, although their employment is regulated by the Labour Code following the amendment of legislation of 2001.

Proceedings of negotiations

The government package has been extensively discussed at the National Interest Reconciliation Council (Országos Érdekegyezteto Tanács, OÉT). However, the government did not make changes to the reforms in view of Hungary’s convergence programme on meeting the Maastricht criteria for joining the euro-zone, which is due for submission to the EU (HU0609029I).

At the Interest Reconciliation Council of Public Servants (Köztisztviseloi Érdekegyezteto Tanács, KÉT), the trade unions claimed that the current measures still adhered to the previous pattern of an ‘across the board’ reduction of staff, based on an automatic, percentage-based cut. In an agreement finally concluded on 5 July 2006, a restructuring strategy was decided upon, which protects employees who are in a disadvantaged position in the labour market, for example, single parents or employees close to retirement age. Their dismissal has to be especially justified, while benefits such as discount railway tickets, or state-guarantee for property loans cannot be withdrawn until their expiry, even after the dismissal of the employee.

The government consulted with the trade unions as well as local government associations at the National Public Service Interest Reconciliation Council (Országos Közszolgálati Érdekegyezteto Tanács, OKÉT). Proposals to amend the public sector laws were generally accepted by the social partners; however, it was emphasised that frequent changes to the rules and job cuts run counter to the promotion of quality of work. The parties involved interpreted the current amendments as being motivated by cost cuts, which do not in themselves constitute reform of the sector.

Commentary

As a result of the recent amendments, job security in the public sector has largely deteriorated, contrary to the initial objective of the laws on the status of public employees. When these laws were originally passed in 1992, the legislation aimed at providing public employees with a secure, civil servant style employment. Although the measures strive to ensure employment security for younger employees, it is no longer appropriate to refer to comfortable civil service type jobs in the Hungarian public sector.

Berki Erzsébet and László Neumann, Institute of Political Science, Hungarian Academy of Sciences