Government amends law to allow for higher minimum wage

As social partners did not agree on the minimum wage for 2009, the Slovakian Ministry of Labour, Social Affairs and Family proposed to increase it by SKK 590 (€19.66) a month. Employers rejected the proposal, claiming that it was too high. However, the government wished for an even higher minimum wage, but existing legislation did not allow for it. Therefore, the law was amended and the minimum wage will now amount to SKK 8,900 (€295.40) from 1 January 2009.

Social partners disagree on new minimum wage

Trade union representatives demanded an increase in the minimum wage from SKK 8,100 (€269 as at 18 December 2008) to SKK 8,900 (€295.40) a month. The unions argued that the difference between the existing minimum wage level and the level of social benefits was so small that it did not motivate people to work. However, employers refused to accept the trade unions’ demand. According to the National Union of Employers (Republiková únia zamestnávateľov, RÚZ SR), such a minimum wage level would be higher than the performance of the Slovakian economy actually allows.

As the social partners failed to agree on a new minimum wage level within the deadline set by law (15 July of the calendar year), the Ministry of Labour, Social Affairs and Family (Ministerstvo práce, sociálnych vecí a rodiny Slovenskej republiky, MPSVR SR) proposed to increase the minimum wage to SKK 8,690 (€288) a month for full-time employees. This proposal reflected the increase in average gross nominal monthly wages in Slovakia in the previous year. According to the data of the Slovakian Statistical Office (Štatistický úrad Slovenskej republiky, ŠÚ SR), this amounted to a 7.2% increase. It is worth noting that the last minimum wage increase was 6.6%. The employers, however, also rejected the ministry’s proposal.

Government decides on even higher minimum wage

After MPSVR SR submitted its proposal to the government, the country’s Prime Minister, Robert Fico, expressed his dissatisfaction with the proposed minimum wage level. In his view, SKK 8,690 (€288) seemed to be too low and did not reflect properly the real income demands of people. Nevertheless, Act No. 663/2007 on the minimum wage – in force since February 2008 – did not allow for a higher minimum wage than that suggested by MPSVR SR.

Prime Minister Fico announced that, if current legislation did not allow for a higher minimum wage, the government would not hesitate to change the law. Thus, at the beginning of September 2008, the government approved amendments to the law on minimum wages, and submitted the bill to the parliament. The parliament adopted the bill on 11 September 2008 and the President of Slovakia, Ivan Gašparovič, signed the new law soon after.

Previously, the increase in the minimum wage calculated according to the law was considered as its maximum possible level. Now, according to adopted amendments to the above act, that level is considered as the minimum increase. This implies that the government can increase the minimum wage to an even higher level which better corresponds with governmental policy. Consequently, MPSVR SR amended its former proposal and recommended increasing the minimum wage to SKK 8,900 (€295.40), in accordance with trade union demands.

Although the new minimum wage will enter into effect from 1 January 2009, trade union officials can take it into consideration earlier during negotiations for collective agreements for 2009. However, employers remain opposed to this minimum wage level. According to their representatives, the government has accepted the trade unions’ demands despite the fact that they were strongly rejected by employers during previous tripartite consultations.

Commentary

Employers have criticised the approach of the government, which has changed the legislation in order to allow for more scope in setting the minimum wage without considering the opinions of the social partners. The minimum wage directly affects about 2% of employees in the economy; however, a high minimum wage raises the barrier for low qualified employees to enter the labour market. The new minimum wage will increase the operational costs of employers, which will also have to pay higher contributions to compulsory insurance funds. Nevertheless, according to the Minister of Labour, Social Affairs and Family, Viera Tomanová, the change in the law was inevitable because, without its adoption, a lower minimum wage would harm the lowest paid workers.

Ludovit Cziria, Institute for Labour and Family Research

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