Slovakia: Social partner's involvement in unemployment benefit regimes

  • Observatory: EurWORK
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  • Published on: 20 joulukuu 2012



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Unemployment benefit system consists of unemployment insurance and social assistance. Amendments to the legislation in 2003-2004 made changes in institutional organisation of employment services. They transferred the funding of the benefits to unemployment fund in the Social Insurance Agency, decreased the amount of unemployment benefits and shortened the entitlement period as well. Changes in the legislation made rules for the entitlement to social benefits stricter, too. Social partners were mainly involved in unemployment benefit system in the development phase via tripartite consultations and commenting rounds concerning standard preparation of legislation. In other phases, social partners are factually not involved in unemployment.

1. The characteristics of the UB system in the country

Table 1: Types of Unemployment Benefit and Social Assistance programmes
 

Benefits

Main qualifying conditions

Funding

Unemployment Insurance (UI)

earnings-related

involuntary unemployment - employment record - actively looking for work

contributions from employer and, sometimes, also employees, often topped by government payments

Unemployment Assistance (UA)

social minimum, partly means-tested

unemployment insurance expired or not eligible for it - (often) a short employment record - actively looking for work

contributions from employer and employee and/or government payments

Social Assistance (SA)

social minimum, comprehensively means-tested

unemployment insurance expired or not eligible for it - (for most categories of claimants) actively looking for work

taxes

1.1. Recent changes/transformations of the UB system in your country:

1.1.1. In the last 10 years, has the country’s UB regime been modified? Have new forms of interventions been introduced?

If yes, , please specify what has been changed / which innovations have been introduced, focusing more on the most recent/ most relevant transformations of the UB system:

  • Regarding the UI:

Implementation of the Act No. 461 /2003 Coll. of Laws on social insurance, made fundamental transformation of previous UB system. Changes were aimed at increasing the efficiency of the unemployment benefit system through tightening eligibility criteria, decreasing the amount of unemployment benefit and shortening the duration of its provision. Implementation of Act No. 453/2004 Coll. of Laws on state administration bodies in the area of social affairs, family and employment services and Act No. 5/2004 Coll. of Laws on employment services, created the legal framework for establishment of new institutions in the area of labour market and social affairs and new employment services. These changes created completely new conditions for the provision of UB in the country.

  • Regarding the UA:

UA does not exist in the country.

  • Regarding the SA (if relevant):

In case of material need, citizens could get a relatively satisfactory income by receiving social benefits. Implementation of the Act No. 599/2003 on aid in material need fundamentally changed the previous SA system. New legislation introduced stricter conditions for receiving social benefits and reduced the eligible amounts of money too. People in material need also were more motivated to participate in activation works.

1.1.2. For each of these changes/innovations indicate:

  • date of introduction:
  • who took the initiative (government, unions, employers’ associations, other organisations):
  • the content of the change / of the new programme:
  • the aim pursued:

Changes in UI were initiated by the government and entered into effect on 1 January 2004 by implementation of the Act No. 461 /2003 Coll. of Laws, on social insurance, as amended. The law implemented a new concept of unemployment benefit which is managed and provided by Social Insurance Agency (SP). UB is considered as one of the benefits provided by SP upon contributions to unemployment insurance fund. Entitlement period to UB was shortened and also the amount of the UB was modified and reduced. Previously, UB was considered as a "support in unemployment" and was provided by National Labour Office (NUP). UB was paid from Employment Fund, which was independent of social insurance and of the state administration, too. Above changes needed amendments to existing employment bodies, which were supported by the adoption of the Act No. 453/2003 Coll. of Laws on state administration bodies in the area of social affairs, family and employment services. The law entered into effect in January 2004, when the NUP was substituted by Central Office of Labour, Social Affairs and Family (ÚPSVAR), which operates as an organisation of the state administration. In December 2003, the Parliament adopted the Act No. 5/2004 Coll. of Laws on employment services, which entered into effect in February 2004. These changes were aimed at increasing the effectiveness of passive labour market policy in terms of higher motivation of unemployed to soon returning into the labour market and at the reduction of passive labour market policy expenditures.

Previously, social benefit was regulated by Act No. 195/1998 on social care benefits. SA system allowed, e.g. a big family with three or more children to receive in total an income close to 50% of the national average income per capita. Changes in legislation were initiated by the government and entered into effect by implementation of the Act No. 599/2003 on aid on material need on 1 January 2004. New legislation significantly changed the previous SA. It introduced a multicomponent system of SA and radically reduced the previous amount of incomes received through social benefits (to about 25% of the average income per capita). Changes also better motivated unemployed people to work, instead of living from the social benefits only – the amount of "activation" component of social benefit was increased. Changes were also aimed at the reduction of public expenditures in social care.

The potentially threatened social groups criticized the reform and organised serious protests in mid February 2004 to stop the implementation of the new legislation. Upon these protests, the government implemented changes in the legislation but it did not change the principles adopted for the reform in social policy. It only adjusted some limits and ceilings to make the new system more feasible and less severe for the vulnerable social groups.

1.1.3. For each of these changes / innovations please indicate from the main SP who was in favour or supported and who was against or resisted to it, and why:

In relation to the Act No. 5/2004 on employment services, social partners supported the government in shifting the implementation labour market policies from passive measures (UB) to preventive and active measures. There was a general consensus of social partners that enforcement of preventive strategies on the grounds of early identification of needs of unemployed persons prevents the arising of long-term unemployment, which was one of the most important problems in the labour market. Nevertheless, trade unions raised objections to the abolishment of the NUP and the transfer of the independent Unemployment Fund to the Social Insurance Agency, where UB was handled through unemployment insurance system. Trade unions argued that this change is a kind "nationalisation" of public employment fund. They also criticised shortening the entitlement period to UB, which was previously differentiated by the age of job seeker, to universal six month period. Unionists pointed out that, the reduction of UB significantly decreases the standard of living of unemployed and particularly aged job seekers have little chance to find job in the national labour market where the unemployment rate was about 18-19% and vacant jobs were rarely available.

Trade unions also had comments when the government made changes in legislation concerning the aid in material need, which made conditions for receiving SA stricter. They argued that thousands of people live in material need in the country and receiving social benefit was the only source of their income. Significant reduction of social benefits could lead to social tensions, mass protests and even riots. The potentially threatened social groups really organised protest actions in mid February 2004. In regions with high concentration of Roma population, they organized protests requiring stopping the implementation of the new rules for the provision of social benefits.

1.2. The main characteristics of the UB system as it is now

1.2.1. Unemployment Insurance.

The unemployment benefit system is divided into two parts. One part deals with unemployment benefit which is based on an insurance system and funded by contributions. The second part comprises active labour market policy measures which are funded since 2004 by the state. Part of the participation agenda is composed of measures to assist persons in material need. The government has tightened the conditions for provision of assistance to these persons (social assistance), usually long-term unemployed people. It is trying to encourage unemployed people to improve their qualifications, thereby increasing their employability. One of the conditions of receiving ‘activation benefit’, which is part of the social assistance benefit, is either undertaking a training course or performing public jobs which are useful for the municipality.

  • Coverage:

All economically dependent workers, which became unemployed without their own origination, fulfil eligibility criteria and are registered at the employment office as job seekers, can receive UI. Self-employed are not covered by UI.

  • Eligibility:

Job seekers registered at the employment office are beneficiaries in order to receive UI if they paid contributions to unemployment insurance at least for two years in the last three years before registered as job seeker. When job seekers work upon fixed-term employment contract, they are entitled to UI if they paid unemployment insurance for at least two years within four years-period before entering the unemployment register at the employment office. In January 2012, about 408,000 job seekers were registered by the employment offices. As jobseekers receive unemployment benefit for 6 months only, at high long-term unemployment (job seekers are in the registry from one to four and even more years) in Slovakia, rather small part of them receives the benefit.

  • Duration:

Unemployment benefit system equally entitles job seekers to receive UI for six-month period.

  • Replacement rates:

The amount of the UI is calculated as 50% of the base of assess, which is calculated per day from the amount of the contributions paid by individual job seeker to the unemployment insurance fund. The maximum level of the base of assess can not be higher than three times of the average wage in the economy calculated per day (the general level of the bases of assess).

  • Financing:

Compulsory unemployment insurance is funded by employers as well as employees. Each of them contributes to unemployment fund 1% of the gross wage of individual employee. In case of voluntary unemployment insurance the person pays 2% of his or her gross wage.

SP involvement: Yes.

  1. who are the organisations involved and at which level do they operate?

National level trade unions, represented by Confederation of Trade Unions (KOZ SR) and employer organisations, represented by Federation of Employers Associations (AZZZ SR) and national Union of Employers (RUZ SR).

  1. why are these organisations involved (legitimacy)? Is it because they are representative?

Social partners were involved in the phase of the preparation of above quoted new legislation on social insurance and employment services through regular tripartite concertation with the government in Economic and Social Concertation Council (RHSD). In the implementation phase they are not involved.

1.2.2. Unemployment Assistance. Are forms of UA present? If yes, please indicate their general characteristics with specific attention to:

UA does not exist in the country.

1.2.3. Social Assistance. Are SA programmes with a direct relationship with the UB system and/or SP involvement present? If yes, please highlight the factors underlying such a relationship.

SA programmes are not in direct link with the UB system. Entitlement to social benefit concerns any person, who is in material need regardless whether he or she is unemployed and registered as job seeker. Nevertheless, about 90% of long-term unemployed live from social benefits. According to the Act 599/2003 on aid in material need, individual person and together considered person/s, are considered to be in material need when their income is lower than the subsistence minimum, they are not able to increase it and do not own any asset applicable to increase their income. The amount of monthly social benefit is calculated for individual person or couple living together with or without children - the number of children is taken into account, too. The actual value of social benefit can be modified by the government as of 1 September of the calendar year. In 2010, the average volume of social benefit was about €124 per month. The number of receivers was more than 185,000 but in total about 360,000 persons lived from social benefits. About 62% of receivers were single persons without children, mainly in age of 25-26 years.

Social benefits are funded from taxes and are paid from the state budget through respective local or district office of employment, social affairs and family. Present social benefit system is a multicomponent one. It consists of basic payment and additional payments, e.g. for health care, housing, work activation. Social benefit is provided in the form of money, material or in combination of both forms. Its duration is not restricted and depends on the material need of the receiver. Social partners, (KOZ SR, AZZZ SR and RUZ SR) were involved in the development phase in preparation of the law on aid in material need through cross-sectoral commenting rounds managed by the government as well as through tripartite concertation with the government in RHSD. They are also involved in the updating of the value of social benefit through cross-sectoral commenting rounds. Updating is up to the government and it is usually linked to changes in the level of subsistence minimum in the country.

2. SP involvement in the UB regime

2.1. The development phase

2.1.1. In your country, did SP participate in the development phase of UB programmes over the last decade?

Social partners were involved in the development phase of UB in the preparation of above mentioned legislation on social insurance.

2.1.2. If yes, please provide detailed information on the SP involvement in the development phase of UB regimes with respect to the following dimensions, distinguishing between UI and UA and reporting any important changes during the decade.

  • Who did take the initiative of involving SP in the design process?

There does not exist UA in the country. SP were involved in the preparation of new legislation regulating the unemployment benefit system – UI.

  • Which are the forms of such kind of SP involvement?

Participation of social partners was institutionalised via national level tripartite social dialogue and standard cross-sector commenting rounds organised by the government to proposals in legislation.

  • In which way is/was their involvement in the policy design process legitimated/accepted?

The role of social partners was advisory and they could prepare their statements to the proposed legislation through standard cross-sectoral commenting and via tripartite social dialogue in RHSD. After the abolition of RHSD in 2004, new tripartite bodies were established. Presently it is the Economic and Social Council (HSP).

  • How frequent is/was such involvement?

Involvement of social partners was regular and depended on the number of needed consultation rounds - usually one-two rounds took place.

  • At what levels does/did such involvement occur?

Involvement of social partners took place at the national level.

  • Which are/were the effects of such involvement?

The role of social partners in tripartite social dialogue was consultative. They were allowed to prepare their stand points/statements to proposed articles of prepared legislation on social insurance. Disapproval of social partners had no impact on the decision of the government, which usually prepare the legislation. When social partners did not agree with the proposed legislation or with some of its individual provisions, social partners´ view/position was attached to the bid on social insurance when was discussed in the Parliament.

2.2. The implementation phase

2.2.1. Distinguishing between UI and UA programmes, please describe the SP' role in accomplishing specific functions related to UB schemes (such as selecting the officials in charge of UB’ services, collecting contributions, etc).

UA programmes do not exist in the country.

2.2.2. Furthermore, please analyze such SP involvement in terms of:

  • degree and institutional relevance of their involvement:

Social partners are members of the Supervisory Board of Social Insurance Agency, which consists of 11 members. Participation of social partners in the board is mandatory. Besides the chair, three representatives of trade unions three representatives of employers, three representatives of the government and the representative of the Association of Pensioners in Slovakia are members of the board. Except the chair, members of the board are elected/approved and recalled by the Parliament.

  • incidence of their involvement in the implementation process:

Social partners are not involved in the implementation phase of UI.

The government can update the value of social benefits (SA) considering the actual subsistence minimum. In such case, SP are involved in standard cross-sector commenting of changes in SA legislation.

  • the strategic positions possibly held by SP:

According to the statute, the Supervisory Board can provide statements regarding the strategy of operation of the Social Insurance Agency and its budget. It also can consult important issues concerning the operation of the Agency and control its operation. However, there are no concrete tasks devoted to the Supervisory Board in relation to the provision of UI.

2.3. The management phase

2.3.1. In this case, distinguishing between UI and UA programmes, please describe SP’ role in terms of:

UA programmes do not exist in the country.

  • organisational commitment: are their specific sections of their organisations dedicated to the UB programmes?

Social partners in the Supervisory Board are not involved in the management phase of UI. They are neither partially nor totally responsible for the organisational asset behind the provision of UB.

  • organisational coordination among possible different levels of SP dealing with UB:

Social partners in the Supervisory Board have no right to interfere with organisational coordination among possible levels of the operation of the insurance agency dealing with UB.

  • dedicated staff (composition of SP’ personnel in charge of UB programs):

Social partners have generally no say in the Social Insurance Agency's personnel in charge, including relations to UB programmes.

  • operational autonomy (self-governing, conditioned by the state, other):

Social partners have no right to interfere with the operation of the Social Insurance Agency.

  • financial autonomy (self-sufficient, dependent by the state, other):

Funding of the Social Insurance Agency is regulated by the law on social insurance and funds used for UI are collected from contributions of employees and employers to compulsory unemployment insurance. Social partners in the Supervisory Board have no say in financial autonomy of the Agency. According to available information, there is no particular gap in resources of the Agency used for UI – only about 15% of unemployed job seekers receive unemployment benefits.

A specific aspect that NC might fruitfully build upon refers to budgetary aspects, and not just in relation with SP involvement in collecting contributions and delivering benefits. In fact, a neglected feature to be considered regards the SP management of funds they may enter into possession of and administrate in order to provide the services. In this light, recent years’ restrictive financial reforms might have affected the way SP operate, with consequences to be assessed.

2.3.2. Distinguishing between UI and UA programmes, please describe the role of SP in case they are engaged in the financial management of the UB funds.

UA programmes do not exist in the country.

Social partners in the Supervisory Board can provide statements/position papers concerning the budget of the Agency. Otherwise they are not engaged in the financial management of the UI fund.

2.3.3. Distinguishing between UI and UA programmes, please answer to the following questions:

UA programmes do not exist in the country.

  • is the SP’ role in the organisation and provision of UB programmes linked to the organisation and provision of other programmes/services?

Social partners have no formal role in organisation and provision of UB programmes linked to the organisation and provision of other programmes/services. No information is available about concrete activities of social partners in this field. Since 2004, social partners are not involved in advisory or supervisory bodies of employment offices (previous bodies were abolished by new legislation). Now, there are Committees for Employment established at regional offices of Headquarter of Employment, Social Affairs and Family (UPSVAR). Nevertheless, these committees do not deal with issues related to UI.

  • if there is some kind of organisational relationship/integration among different labour market policies and programmes, does it lead also to an administrative/operative relationship between the SP and the Public Employment Service, or with private employment agencies?

There is a link between the entitlement to provision of UI and operation of employment offices – only those unemployed are entitled to UI, which are registered in employment offices as job seekers. No links are with private employment agencies in this field.

Another link between provision of UI to job seekers and activities of employment offices is that in order to assist job seekers in finding new job, employment offices provide assistance to job seekers in preparation of their Individual Personal Development Plan and in improving their employability through training and re-qualification.

  • if yes, did this lead to mergers, networks or coalitions building among the SP and public and/or private organizations (eventually at the local level)?

Those links did not result in such activities, so far.

2.4. The monitoring phase

2.4.1. SP involvement in monitoring/evaluating the UB performance

Are the SP involved in the monitoring and evaluation of the UB system?

If yes, distinguishing between UI and UA,

UA programmes do not exist in the country.

  • Which aspects of UI/UA functioning are put under evaluation?

Social partners are not involved in monitoring. They are only partially involved in evaluation of the UB system.

  • Who is in charge of such monitoring/evaluation?

Members of the Supervisory Board of Social Insurance Agency.

  • How and when the monitoring process take place?

Social partners in the Supervisory Board have the right to approve the Annual Report of Social Insurance Agency, where also information about the operation of the Agency in the field of UI is available.

  • Which is the output (a report, other) of such process and which the possible outcome?
  • The approval of the Annual Report of the Agency.
  • How extensive and relevant is the SP’ role in the assessment process?

The role of social partners in the assessment process is limited to the approval of Annual Reports of the Social Insurance Agency.

2.4.2. monitoring the SP involvement in the UB system

Is the SP role within the UB system subject to evaluation and monitoring?

If yes, distinguishing between UI and UA,

UA programmes do not exist in the country.

  • Which aspects of their performance are evaluated/monitored?

No information is available about monitoring social partners´ involvement in the UB system.

  • In which way (by whom, in which occasion, with which frequency) is the SP performance evaluated

In general, activities/performance of members of the Supervisory Board of the Agency can be monitored and assessed by the Parliament, which is also entitled to approve and recall members of the Board.

  • Which are the consequences, if any, of positive/negative evaluations?

Representatives of social partners, who failed in their functioning, should leave the Board when the Parliament recalls them.

3. Final observations

3.1. Public debates and policy discussion:

There are no public debate and policy discussion related to changes in existing UB system. There is some policy discussion on social assistance. In order to increase the effectiveness of the provision of social benefits, the Ministry of Labour, Social Affairs and Family (MPSVR SR) is dealing with changes in the forms in which social benefits are provided to receivers. MPSVR SR intends to implement electronic pay cards though which some receivers will have access to social benefits. It is assumed that implementation of e-pay cards would increase the control over the actual use of social benefits and would reduce their misuse. Works on this project are, however, not yet accomplished. According to the World Bank, which analysed the present system of social benefits in Slovakia and prepared a report for the MPSVR SR, changes in the system are essential and the World Bank suggests to put attention to the reduction of social benefits for richer persons, which are not so much reliant on them.

3.2. Research:

There are no particular researches and academic contributions treating SP involvement in the UB regime in Slovakia. According to some academics, present UB system is egalitarian because does not take into account inputs of individual persons to the unemployment insurance. Total amount of contribution of individual job seeker to the unemployment insurance is adequately not taken into account at calculation of UI - it is provided equally for six month.

3.3. Other issues:

No other issues related to involvement of social partners in the UB system can be mentioned.

4. Commentary

4.1. Assessments and comments:

Present system of UB system is not favourable to young unemployed, who have short or even not any practical work experience. In January 2012, about 36% of young people in age up to 25 years were unemployed. Those people usually worked for a short period or did not work at all, and did not pay required contributions to insurance fund to be entitled to UI. Therefore, many young people are not entitled to UI. About 62% of single persons without children receive social benefit and most of them are young people of age 25-26 years. The UI is provided for six month and receivers are motivated to enter/return back to labour market. On the contrary, social benefit can be provided to persons in material need for unlimited time that does not motivate them to work.

4.2. Perceived strengths and weaknesses:

Social partners are involved in the UB regime only in the development phase through tripartite social dialogue on new legislation on SI. In SA system, SP are involved in through Supervisory Board of Social Insurance Agency. Nevertheless, this does not provide SP sufficient space to participate in implementation, management and monitoring phases of the UB system. There are no examples available about so far activities of social partners actively involved in the UB system.

Ludovit Cziria, Institute for Labour and Family Research

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