SEV criticises new draft bill on employment
In late November 2000, Federation of Greek Industries (SEV) commented on the government's recently issued draft bill on employment, which contains a number of measures reforming aspects of industrial relations such as overtime, working time flexibility and social insurance contributions. The employers' organisation criticises many aspects of the proposals, which it believes will increase labour costs and prevent the harmonious operation of enterprises, and thus reduce the country's competitiveness without reducing unemployment.
In November 2000, the Minister of Labour and Social Security communicated to the employers' organisations, the trade unions and the Economic and Social Committee (OKE) a new draft bill on "regulations regarding employment and other provisions", following initial proposals issued earlier in the year (GR0007178F).The new draft bill, apart from provisions relating solely to employment issues, seeks to make changes to the existing legislative framework on industrial relations (GR0012192F). In particular, it provides for changes involving: overtime and "overtime exceeding maximum working hours"; working time arrangements; reduction of social insurance contributions; part-time workers' pay; and collective redundancies.
On 29 November 2000, the Federation of Greek Industries (SEV) made a series of observations on the draft bill. SEV's main points on the government proposals, especially those on industrial relations, are set out below.
In SEV's view, the draft bill is characterised by the following:
- an increase in the cost of labour and the cost of running an enterprises, factors which have a direct impact on competitiveness and as a consequence prevent support for employment. Under present conditions, flexibility is restricted in work organisation and the operation of enterprises. The bill will further increase labour costs through its abolition of overtime, general increase in pay for overtime exceeding maximum working hours and provision for flexible working time arrangements aimed at reducing average weekly working hours from 40 to 38;
- the whole draft bill is animated by a limitation of the role of the social partners and an increased role of the state, in contrast to the spirit and the letter of the conclusions of the March 2000 Lisbon European Council (EU0004241F) which gave priority to this role, as well as to the practice of all the other Member States of the European Union;
- provision for an unacceptable intervention by the Account for Employment and Vocational Training (LAEK) - the body which manages employers' and workers' contributions for employment and vocational training - whose financing and management belongs exclusively to the social partners, and a departure from LAEK's goals in a period when issues of training and employment are major objectives;
- the absence of an integrated treatment of matters regarding employment, inasmuch as there is no provision for measures to improve and support education and training. An example of SEV's preferred approach is the creation of the National Vocational Training Agency, with tripartite participation on an equal footing of the state and the social partners, as announced in Greece's National Action Plan for employment 2000 (GR0006177F); and
- finally, the absence of an integrated regulation of the agreements between the social partners contained in the 2000-1 National General Collective Agreement (GR0006175N). In particular, the government has failed to act to implement the exemption from taxation on severance pay of up to GRD 10 million paid to workers upon termination of contracts of employment. This measure, which is contained in the 2000-1 National General Collective Agreement, would create vacancies by encouraging certain categories of workers who meet the conditions for retirement to exit the labour market.
Overtime exceeding maximum working hours
In SEV's view, the regulations contained in the draft bill will bring about an immediate rise of 3.5%-8% in labour costs and less flexibility in running businesses. In practice, it will be impossible to achieve an increase in employment, and the opposite may happen, due to higher labour costs and the negative impact they have on competitiveness. The industrial sector in particular needs to use overtime and overtime exceeding maximum working hours (which are limited by the draft bill) to meet the needs that arise during the production process and maintenance operations. It is therefore often impossible to replace overtime exceeding maximum working hours with new recruitment, because of the large number of organisational factors and the high proportion of specialised staff (70%) used in industry.
As SEV sees it, a serious defect in the draft bill is its total departure from the manner in which the matter of working time was treated in the EU working time Directive (93/104/EC). That Directive set an upper limit of 48 hours on the working week, including overtime exceeding maximum working hours. It also included several alternative solutions with regard to the issue of working time flexibility arrangements. Passage of the relevant articles as they stand in the draft bill would mean non-implementation of the Community regulation in Greece, claims SEV.
Specifically, the five hours of weekly overtime currently allowed will be abolished by the bill, and the three remaining hours of "special" overtime allowed by the bill will attract a pay premium of 25%-50%, plus an increase in social insurance contributions. In addition, the cost of illegal overtime exceeding maximum working hours is increased by 50%. Apart from increasing costs, says SEV, this regulation will hinder the operation of industrial enterprises which are in need of extra hours above and beyond 40 per week, in order to meet the demands of production and maintenance. Exceeding standard working hours from time to time is inherent in the way industry operates. In addition, the necessary deregulation of the working day and the ability of enterprises to implement an average working week of 48 working hours including overtime exceeding maximum working hours – as determined by the EU working time Directive and Presidential Decree 88/99 – will no longer be feasible, due to the unacceptably low limit to be placed on overtime exceeding maximum working hours in industry. Specifically, there is no increase in the upper limit on such overtime, which stands at 15 hours every six months, and which in this case provides the possibility of only 1.6 hours of additional employment per week.
For SEV it is clear that neither the needs of production nor emergency needs (repair of damage, temporary or specialised emergency work, etc), for which overtime exceeding maximum working hours is primarily used, can be met in this way. In most cases, the 15 hours of such overtime permitted each six months are not enough to create jobs.
As far as flexible working time arrangements are concerned, SEV believes that the draft bill does not take account of the fact that the working time flexibility system which has been in force for two years (under the terms of Law 2639/98 and Presidential Decree 88/99 ratifying Directive 93/104/EC) has not been implemented in practice in the private sector. This is because there have been no agreements between employers and workers on the issue, despite the fact that enterprises operate on the basis of a 40-hour week and workers are paid a premium of 100% for illegal overtime. The new regulations make the option of flexibility less attractive to enterprises and workers because it introduces three new important obligations:
- working time flexibility applies to only 138 working hours per year. This is a serious constraint on any real flexibility in the organisation of working time;
- when working time flexibility arrangements are implemented, "special" overtime is forbidden, and only legal overtime exceeding maximum working hours is permitted, in accordance with existing provisions. In other words, when implementing flexibility in industry, weekly working hours may be exceeded by only 1.6 hours per week; and
- the standard working week is reduced from the present 40 hours to 38 hours, and this increases labour costs. Furthermore, SEV states that increasing the pay premium for illegal overtime fails to make flexible working time arrangements attractive even to workers, and as a result the possibility of agreements becomes even more remote.
Among the draft bill's serious drawbacks, for SEV, is the ability of trade union organisations and federations from outside the enterprise to conclude or refuse to conclude agreements on specialised issues in the enterprise such as working time organisation. The mediation and arbitration role given by the draft bill to the Mediation and Arbitration Service (OMED) where no agreement can be reached on working time arrangements, is also seen as largely inappropriate. The OMED should have auxiliary competence only up to the stage of mediation and only on demand from the enterprise, SEV states.
Social insurance contributions
The draft bill reduces employers' social insurance contributions by two percentage points on the pay of employees earning up to GRD 200,000 per month. In SEV's view, many EU and international studies have shown that reduction of non-wage costs can act positively to increase employment. This is also confirmed by the guidelines contained in National Action Plans for employment, based on the EU Employment Guidelines. In view of the fact that Greece has one of the EU's highest rates of social insurance contributions and other indirect expenditures, SEV perceives the proposed reduction as being too low. A more important consideration for the employers is the fact that this regulation does not apply to the competitive part of the economy, inasmuch as the average monthly pay in industry, according to data from the National Statistical Service of Greece (ESYE) is GRD 274,000 for blue-collar workers and GRD 430,000 for white-collar workers. Under collective agreements in important sectors of industry, minimum wages now exceed GRD 200,000.
Part-time workers' pay
With regard to the draft bill's provisions on increased pay for part-time workers, SEV believes that there is no real need for the planned 7.5% increase in labour costs for part-timers working fewer than four hours per day. At the same time, the draft bill contains no pension arrangements for part-timers working under four hours per day, and this category of employees is in danger of remaining outside pension schemes. SEV proposes regulation of the minimum conditions for retirement benefits for part-time workers working under four hours a day, so that they can receive pensions.
With regard to the draft bill's introduction of a monthly pre-retirement benefit for older employees, SEV considers this state intervention in the afffairs of LAEK, which is funded and administered exclusively by the social partners, to be ill-considered and unacceptable. The content of the regulation runs counter to the trends emerging in the EU which are leading to a longer rather than shorter working life, it is claimed. The issue should be examined in the context of the current dialogue on reform of the insurance system (GR0008179N). Apart from the new measure's social purpose, SEV believes that it diverts the LAEK from its goals, and burdens it further with the social insurance contributions of the employees concerned at an estimated rate of 33% for the whole time the pre-retirement benefit is paid. This clause could be replaced by a regulation reorganising the LAEK in line with joint recommendations from employers' and workers' representatives, aimed at rendering it independent from the administrative machinery of the Manpower Employment Organisation (OAED), which is seen as uneconomical and bureaucratic. This the LAEK could become flexible, independent and effective, and the workers and unemployed people for whom it was established could benefit from this.
SEV has formulated a range of objections and criticisms of the draft bill, which it believes contains regulations that will increase labour costs and prevent the harmonious operation of enterprises, and thus reduce the country's competitiveness without reducing unemployment. With regard to the procedure to be followed in this area, SEV states its preference for social dialogue, a practice adopted in the 1990s which has led to a series of states of equilibrium with the trade unions permitting the smooth, rapid resolution of many disputes arising between enterprises and workers. SEV believes that the fight against unemployment should be supported by a large number of structural interventions in the labour market, by a radical reorganisation of education and vocational training policies and by integrated employment policies. In SEV's view, these are issues that cannot be addressed through individual legislative regulations or administrative measures. (Eva Soumeli, INE/GSEE-ADEDY)