Social partners agree on Labour Fund management

Workers’ and employers’ organisations in Poland have put forward a joint proposal to change the way the country’s Labour Fund is managed. Originally intended to help pay for labour market initiatives, such as apprenticeships and getting the unemployed back to work, the fund is financed wholly by contributions from employers. However, a significant portion of the fund’s resources was frozen by the Ministry of Finance in 2011 in an attempt to stabilise public finances.

Background

Employers make contributions to Poland’s Labour Fund calculated on the basis of their employees’ wages. The fund is regulated by the 2004 Act on employment promotion and labour market institutions (PL0405105F) and is intended to help finance Poland’s public employment services, including paying for measures to help the unemployed back to work. Among such initiatives are subsidised employment for disadvantaged people in the labour market, apprenticeships, training and the provision of additional work equipment or subsidies for people starting up a new business. The fund also finances special programmes for unemployed people whose situation in the labour market is particularly difficult. Under the Act, the Ministry of Labour and Social Policy allocates the fund’s resources.

Freezing of funds

Funds for public employment services were significantly cut in Poland’s 2011 budget. Funding for vocational activation was reduced by more than a half, from PLN 7 billion to PLN 3.2 billion (€1.7 billion to €0.78 billion as of 28 November 2012).

In January 2011, media reports described confusion among public employment agencies which led to some not applying for funding for measures to counteract unemployment, because they did not know how much money they were entitled to.

At the same time, around PLN 5 billion (€1.2 billion) of the Labour Fund’s resources were frozen, with the Ministry of Finance taking control of the fund to reduce the country’s budget deficit. This continued in 2012.

Meanwhile, Poland’s unemployment rate has been increasing because of the global financial crisis, rising from an average of 9.5% in the second half of 2008 to around 12.5% in 2011.

In July 2012, following the request of the Minister of Labour and Social Policy, Wladyslaw Kosiniak Kamysz, a decision was made to unlock PLN 500 million (€121 million) from the Labour Fund. The money was allocated for fighting unemployment at the poviat level – the second local authority level in Poland – where it has proved most effective.

Social partners’ initiative

Social partners jointly prepared a proposal for changes in the Labour Fund. They formed an autonomous working group to put together proposals on how the fund should be managed, operating within Poland’s Tripartite Commission.

On 21 September 2012, they presented the results of their work during a meeting of the Tripartite Commission Team for Economic Policy and the Labour Market. They proposed establishing a board to manage the fund made up of representatives of the social dialogue organisations and the Ministry of Labour and Social Policy.

This board would draw up plans annually for funding active forms of counteracting unemployment, for setting the level of expenditure on public employment services, and for providing opinions on and approving the annual financial plan prepared by the Minister of Labour. The board would also evaluate the effectiveness of the public employment services’ activities.

Barriers to the new board

The establishment of the board may, however, be difficult. The members of the Tripartite Commission have been instructed by Radoslaw Mleczko, Deputy Minister of Labour, that the Labour Fund is only a separate bank account, not a legal entity. Within the existing legal framework, it would therefore not be possible to establish such a board.

It should be noted that the agreement among employers’ and employees’ representatives is an important event. Commentators emphasise that the last time common solutions were agreed was during work on the anti-crisis package in early 2009.

The frozen resources of the Labour Fund currently amount to more than PLN 6 billion (€1.46 billion). The social partners agree that Labour Fund monies should not be withheld.

Representatives of the Solidarity trade union (NSZZ Solidarność) have talked about the need to use the Labour Fund for its intended purpose. A spokesperson for the Polish Confederation of Private Employers (PKPP Lewiatan) has also commented that the fund should not be used to stabilise the state budget and should instead be a tool for boosting the economy.

The President of the Confederation of Polish Employers (Pracodawcy RP), Andrzej Malinowski, says that if the government does not adopt the new proposals for the management of the Labour Fund, they will be sent to the parliament as a member’s bill.

Commentary

The fact that employers’ organisations and trade unions have agreed on this matter should be viewed as a positive development. The management of Labour Fund resources by social partners is a solution which would reflect best European practice and which, if implemented properly, could bring significant benefits to the Polish labour market.

At the same time, the fear of further deterioration in the country’s economy and the government’s need to find budget savings make it hard to be optimistic about the fate of the proposed changes.

Maciej Pańków, Institute of Public Affairs