Employers list labour law obstacles to business activity

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In early 2006, the Polish Confederation of Private Employers Lewiatan (PKPP Lewiatan) published a document listing what it sees as obstacles to the development of business activity in Poland. Many of these obstacles relate to labour relations, and especially to the regulations governing matters such as working time, annual leave, collective agreements, health and safety, and temporary agency work.

At the beginning of 2006, the Polish Confederation of Private Employers Lewiatan (Polska Konfederacja Pracodawców Prywatnych Lewiatan, PKPP Lewiatan) published a document entitled Black list of obstacles, which catalogues impediments seen as significantly hampering business activity in Poland. The obstacles are categorised in four groups:

• fiscal and financial barriers. such as a too narrow application of zero-rate VAT, unclear rules of VAT exemptions, an overly wide range of excise tax, difficulties faced by small and medium-sized enterprises (SMEs) in gaining investment capital and excessive charges connected with obtaining all kinds of exemptions, permits, licences or register entries;

• barriers to construction investments;

• barriers in using structural funds; and

• barriers related to labour relations in the broad sense (special attention is devoted to this category). The authors list 36 different business impediments in this area, half of them stemming from the Labour Code.

The obstacles identified by PKPP Lewiatan in the labour relations are are summarised below.

Impediments resulting from the Labour Code

The Labour Code regulations that PKPP Lewiatan believes impede business development concern four main problems: working time; employees’ rights to leave; collective agreements; and health and safety precautions.

Working time

Employers believe that the current regulations provide little flexibility in working hours, and therefore they propose a relaxation of the current restrictions on working on Sundays and holidays (limited to the most socially useful jobs) and enabling employers to introduce individual working time accounts for workers. Moreover, PKPP Lewiatan favours the abolition of the notion of the 'working day' and greater freedom for overtime work. However, it seems that lifting these barriers would be extremely difficult. During talks on the current Labour Code (PL0311108F), trade unions advocated shorter working time and wanted to restore the previous, more favourable for workers, system of calculating overtime hours.

Right to leave

PKPP Lewiatan criticises the current system whereby 31 March is the strict deadline for employers and employees to decide on using up untaken annual leave entitlement from the previous year. It suggests that the parties should be able to agree on using the overdue holiday up until the end of the following calendar year.

Collective agreements

In the opinion of PKPP Lewiatan, there is a need for legal regulation of situations in which an employer and trade unions are unable to reach agreement with respect to the employer’s internal rules after a collective agreement is terminated. From the practical point of view, an employer cannot issue regulations with respect to pay without the consent of trade unions, although it is legally bound to issue such regulations. Briefly, employers want to be able to set pay regulations against the opinion of trade unions, if necessary. This proposal alarms trade unions. Union representatives maintain that in many cases employers have won the consent of unions to lower pay increases, because the situation of the company required it. However, once the hard times were over, it was impossible to make the employer reinstate the pay to the previous level, although it would have been feasible for the employer, the unions argue.

Health and safety regulations

PKPP Lewiatan states that the implementation of some regulations based on EU Directives on health and safety at work has shown that the implementation of the new regulations is often difficult and, more importantly, requires increased expenditure. These costs are borne entirely by employers and are especially hard to bear by SMEs. Therefore, employers believe that certain health and safety requirements should be examined, so as to adjust them better to the needs and the status of specific enterprises.

Other issues

Other obstacles identified by PKPP Lewiatan as resulting from Labour Code regulations include:

• excessive employer’s obligations regarding employment contracts;

• the fact that employment contracts cannot be effectively terminated or revoked if an employee is absent; and

• 'irrational' regulations that define employee’s maternity or parenthood rights.

Employment of temporary agency workers

The authors of the PKPP Lewiatan report devote much attention to the regulations on the employment of temporary agency workers (PL0308103N). They want to revoke the current rule preventing employers that have previously made collective redundancies from using the services of agency workers. The also want to abolish the 12-month limit on the amount of time a temporary agency worker may work in one enterprise during any three-year period, because after this deadline expires the workers concerned are offered stable positions only in exceptional cases. If the total abolition of this limit proves impossible, the employers have an alternative proposal, which is to maintain the 12-month time limit on agency workers working in one company, but within a shorter reference period of two years.

Other impediments

For some time now, employers have been raising the question of the so-called tax wedge, ie high non-wage labour costs, which may constitute up to 44%-47% of the gross pay. In the opinion of PKPP Lewiatan, a reduction of labour costs would greatly promote the creation of new jobs.

Furthermore, the employers express doubts about current strike regulations (PL0207103F). They claim that too many strike actions and protests are illegal. For this reason they call for greater precision in formulating the definition of illegal strikes, and they claim the right to organise defensive lock-outs (PL0510105F) in case a strike is illegal.

Finally, PKPP Lewiatan perceives some impediments in current 'bridge pensions' (for people who, given the demands of their jobs, are unable to remain at work until they attain the regular retirement age) and specifically recent draft legislation on the issue, which is seem to carry two serious threats. First, the proposed regulation is seen an expression of the government’s perceived tendency to charge employers with part of the costs that the state budget has to bear in this respect. Second, the draft is seen as covering too large a group of employees, as the criteria for qualification for a bridge pension are very comprehensive. The employers suggest the draft regulations should be corrected and adjusted.

Commentary

The PKPP Lewiatan list of business impediments in Poland is a long one, perhaps out of proportion to the dynamic business development Poland is witnessing. The employers' inventory of problems and proposals for change provide an ideal image of a 100% enterprise-friendly environment. The authors of the report devote much attention to labour relations. The abolition of the impediments cited would significantly decrease the operating costs of enterprises and make employment and dismissal procedures more flexible. However, the fulfilment of all the wishes presented in the report would have another important effect. It would strengthen greatly the already strong position of employers in relation to employees. Employers should realise that sometimes the things that constitute impediment to them are basic rights of employees. (Rafał Towalski, Institute of Public Affairs [Instytut Spraw Publicznych, ISP] and Warsaw School of Economics [Szkoła Główna Handlowa, SGH])