Overtime - an economic necessity

A study from the University of Latvia reveals that the number of employees who work overtime in Latvia is increasing. About 15% of employees declared that they worked overtime. During 2004, the issue of overtime work was raised several times. This article provides information about the regulation of overtime work in legislation, forms of overtime work and payment. It is worth indicating that because employees willingly agree to overtime work, they are less concerned about possible breaches of their employment rights.

Legal background

Labour relations are regulated by the Satversme (Constitution) of the Republic of Latvia, international laws binding on Latvia, the Labour Law and other legislative acts, as well as collective agreements and internal regulations. The Labour Law and other legislative acts that stipulate legal labour relations are binding on all employers and employees when their mutual relations are established under the employment contract.

The Labour Law defines regular working time, part-time hours and overtime work. The employee’s regular daily working time (working time within a period of 24 hours) should not exceed eight hours. The regular weekly working time is 40 hours. If the daily hours in any of the weekdays are shorter than the regular working time, it can be prolonged on some other weekday, but not for more than one hour without exceeding the regular weekly working time. For separate categories of employees, the regular working time cannot exceed seven hours.

The Labour Law defines overtime work as 'work performed by an employee in addition to regular working time' (Section 136). Overtime work is permitted if the employee and the employer have agreed to this in writing. In addition, working hours that exceed the permitted added-up working time under the law - 56 hours a week and 160 hours within a period of four weeks - is considered to be overtime work.

The employer is entitled to employ the employee during overtime hours without their written agreement in exceptional cases defined by the law. If in such cases overtime work continues for more than six days in succession, the employer needs a permit by the State Labour Inspectorate (Valsts Darba inspekcija, VDI) for further overtime work, except for cases when repetition of similar work is not expected.

Overtime work should not exceed 48 hours within a four-week period and 144 hours within a four-month period. Overtime is not permitted for certain categories of workers: persons under 18 years of age; pregnant women and women following birth for a period of up to one year; and breastfeeding women.

Section 68 of the Law establishes that for overtime work the employee receives a supplement of not less than 100% of their hourly or daily wage, but if piece-work pay has been agreed upon, they shall receive a supplement of not less than 100% of the piece-work rate for the amount of work done. A greater supplement for overtime work may be allowed for under the terms of the collective agreement or the employment contract.

Legal and illegal overtime work

In reality, overtime work exists also in an illegal form, when employees work longer than regular hours and this is not considered to be overtime work.

Extension of overtime work is only partly reflected in statistics, while it is often picked up in surveys. A recent study, Conditions of work and employment in the new member states: interaction and socio-economic influence, carried out within an ILO and EC project framework by an associate professor at the University of Latvia, Mihails Hazans, shows that the current working week in Latvia is longer than in other countries of the European Union, a fact that is also reflected in the official statistics. Systematic overtime work (40% of the total number of overtime hours) is most commonly seen in commerce and construction. In the majority of cases, overtime work is unpaid and usually those working in small companies, new employees, specialists and unqualified workers agree to it, as well as employees in companies not bound by collective agreements or those with employment contracts signed for a specified period. At least 15% of employees employed in all sectors systematically work 50 hours per week instead of the regular hours, and the number of those working overtime is on the increase.

There are several reasons why overtime work is so widespread. Legal overtime work ensures a high income. Workers agree to overtime work for one employer to avoid the need to search for additional work.

Regarding illegal overtime work, the employed agree to this for several reasons. The most frequently cited reason is to try and help the employer to survive and maintain jobs. The rhetoric about strengthening the new independent state and its economy is still topical. Sometimes the work is exciting and people voluntarily work over and above the regular hours without asking for remuneration. For example, entrepreneur and manager surveys show that such persons systematically spend more than 50 hours a week at work.

Employers use the tolerant employee attitude towards overtime work to their advantage and do not offer payment. In places with higher rates of unemployment, employees are not in a position to refuse overtime work, for fear that they would lose their job. Illegal overtime work is also carried on in public institutions. Work has to be done, but in most cases, the public institutions’ budgets do not provide for payment for overtime work.

As found in the abovementioned study, 40% of the surveyed employees working 50 and more hours per week admitted that they carry it out reluctantly and under coercion, while an equal number of respondents admitted that they would agree to work overtime even for the regular payment.

In response to the findings of the study, the Minister for Welfare, Dagnija Staíe, urged employees to be more assertive about claiming their rights. If employees do not demand compliance with the law, no one learns about the illegal overtime work and employers are not punished for the violation. However, since Latvia joined the European Union and it is possible to find work outside Latvia, workers have become more demanding towards the employers in Latvia. At the beginning of 2005, employers reacted to this trend by proposing a 50% reduction of the supplements for overtime work, but trade unions rejected this suggestion. Employers maintained that reduction of the remuneration for overtime work would facilitate competitive labour costs and allow for combating illegal employment. Trade unions, in their turn, refer to offending the interests of the employed and remind employers that Latvia has the lowest minimum wages and average wages of all EU countries, while the price level in several groups of goods and services essential for living is rapidly approaching EU levels.

Forms of overtime work

Overtime work is usually mentioned in relation to being employed by one employer. Through the liberalisation of labour relations, the employee can simultaneously work for several employers and therefore there is an issue about overtime work in relation to the total working hours of the employee. For example, if the employee works for two employers and the working hours under the contract with one employer is from seven in the morning to four in the afternoon (including the break) and with the other employer from five in the afternoon to nine in the evening (part-time hours), neither of the employers have employed the employee overtime, but the total employment time exceeds regular working time. It can be said that nowadays overtime work has acquired different guises and that the Labour Law does not adequately protect a person from being subject to overtime work.

The previously applicable Labour Law stipulated that employment for one (main) employer constituted the principal work. It was necessary to have the agreement of the main employer before entering into labour relations with another employer. The current Labour Law does not define the notion of principal work, but the law determines supplementary work (Section 91), stating that the employee is entitled to enter into an employment contract with several employers unless this runs counter to the employment contract or the collective agreement.

Section 92 of the Labour Law stipulates that performance of supplementary work may be restricted by the employer but only 'in so far as this is justified by substantiated and protected interests of the employer, especially if such supplementary work negatively affects or may affect proper performance of employee obligations'. But the employer may not know that the employee has supplementary work, as the Labour Law does not require the employee to produce approval of other employers when applying for supplementary work.

The Labour Law only stipulates that if persons under 18 years of age are employed with several employers, the working hours should add up. It is not explicitly stated in the law, but logically the aim of adding up is to ensure that the employee does not exceed the regular working time stipulated for their category. Yet it is not possible to comply with this if mutual agreement between the employers is not provided for.

The notion of overtime work is further distorted by the application of the added-up working time system. There have been some cases when the employee agrees to work according to the added-up working time principle, but the employer organises the work so that the most intensive working period is arranged at the beginning of the term under contract. In such case of employment, daily work exceeding regular hours is not considered as overtime work because the employer has agreed to compensate this with free time during further periods under the contract. If the employee cannot cope with the intensive working regime and resigns, they do not receive any remuneration for the overtime hours worked.

Furthermore, there are jobs where overtime work is almost inevitable, for example, in the state police. In such workplaces, it is not possible, either financially or organisationally, to comply with the Labour Law provisions concerning overtime work . At the beginning of 2005 the police obtained the right to establish their own trade union that would take care of adherence to the social rights of police officers, also by applying labour relations instruments, for example, collective agreements. The issue of overtime work for the police is one of the toughest issues of such collective negotiation.

Commentary

Employers stress that Latvia has the highest rate of supplementary pay for overtime work of all the EU countries. However, given that basic salaries are low, workers do not receive full compensation for the additional efforts of working overtime. Illegal overtime employment (without being paid any remuneration, not even the regular salary) and the new (quasi) overtime work forms (having supplementary work or according to the added-up working time principle) are especially risky. Illegal overtime work and quasi overtime work are the key causes of exhaustion among employees, the main negative consequence of overtime, followed by a high rate of accidents at work, professional diseases and other risks. (Raita Karnite, Institute of Economics, Latvian Academy of Sciences)