Latvia: Latest working life developments – Q2 2017
Restrictions on extended working hours and tax reforms in the healthcare sector, strike action by family doctors, and social partner discussions on the national minimum wage are the main topics of interest in this article. This country update reports on the latest developments in working life in Latvia in the second quarter of 2017.
Healthcare sector under stress
Recent concerns in the healthcare sector arose due to ineffective discussions between workers’ representatives and the government about financing transformation of the so-called ‘prolonged normal working time’ and increasing wages, a situation that has increased the number of reported incidences of stress in the sector.
Prolonged normal working time was established during the financial crisis by several amendments in Section 53.1 of the Medical Treatment Law, applicable to medical practitioners. The law allows extended working time over and above the normal working hours specified by labour law, which are of 7 to 8 hours per day, or 40 hours per week.
In compliance with the amendments (adopted on 8 June 2017 and valid since 1 July 2017) prolonged normal working time cannot exceed 55 hours per week, and pay for those hours that exceed normal working time – as prescribed by labour law – is calculated as the hourly wage multiplied by 1.1.
Following advice from the unions, midwives and nurses stopped all overtime unless it was at double pay, as prescribed by labour laws. Due to these overtime restrictions, some workers left state institutions for private ones, or for other jobs. This added to the current shortage of medical workers with hospitals unable to provide some scheduled healthcare services.
Tax reform back on the agenda
The basic concepts of the tax reform were approved by the government on 9 May 2017, on the basis of consensus among social partners, but without a clear decision about how to increase financing in the healthcare sector. Healthcare workers’ protests and difficulties in providing healthcare services have forced the government to find solutions. In order to ease the situation and quell the growing number of protests, the government has promised to gradually reduce the use of prolonged normal working time and to find additional funding for the coming years.
It was decided that the provision of healthcare services should be linked to tax payments. With this in mind, the government has put forward a number of proposals:
- the introduction of a fixed general payment for healthcare of €20 per person
- an increase in social contributions by one percentage point
- transferring one percentage point of the current social contribution to healthcare insurance
- increasing value added tax (VAT) by one percentage point
- introducing differentiated personal income tax.
However, employers have refused to support the tax reform, saying that the new proposals conflict with the government’s promises that it would reduce the wage tax burden by tax reform – the main reason why social partners had agreed with the basic ideas of the tax reform.
Family doctors take strike action
While the government tried to put together workable proposals, 600 family doctors – led by the Latvian Family Physicians Association (LGAA) – decided to take open-ended strike action, starting on 3 July. (The strike was recognised as legal, conforming as it did to all legal requirements.) In order to continue to provide healthcare services, the government invited young resident graduate doctors to replace the family doctors; some, not wanting to be seen as strike-breakers, rejected the request, while others accepted.
The family doctors had three key demands:
- an increase in the capitation payment by 30% for the next three years from the current value of €1.25 to €1.63 in 2018, €2.11 in 2019 and €2.75 in 2020 (capitation payment is a fixed sum that is granted to general practitioners calculated on the number of registered patients in their practice);
- to increase tariffs on procedures carried out by family doctors so that the amount of payment in 2018 will be, in total, 45% more than in 2017;
- to increase pay for nurses and doctors’ assistants by 30% for the next three years.
Social partners start discussions on the national minimum wage
The first proposals on the national minimum wage appeared in connection with the tax reform. The government proposed increasing the national minimum wage from €380 in 2017 to €420 in 2018.
In the third quarter of 2017, significant events are expected to be issues related to the doctors’ strike and the adoption, in the Latvian parliament, of legislation backing the tax reform. The government will also start preparations for the 2018 budget and decisions about the minimum wage, social benefits and wage taxes should become clearer, with the financing of healthcare a crucial issue. As the government continues to put forward new proposals, none currently provide for the financial sustainability of the healthcare sector. A similar situation on pay in the education sector could also develop.