New law fixes minimum wage

Since 1995, the minimum wage in Slovenia was based on tripartite agreements on minimum wage increases which were subsequently implemented by law. In future, the minimum wage will be fiixed by the Law on the Determination of Minimum Wage, which establishes the method of adjustment of the minimum wage and the amount of the minimum wage for 2006.

Slovenia has had a form of statutory minimum wage since 1995, whereby tripartite agreements on increases in the minimum wage were subsequently implemented by law (SI0405102F). The last minimum wage was determined by the tripartite private sector pay policy agreement for 2004–2005 (SI0405103F). On 23 June 2006, the social partners concluded a new private sector collective agreement on pay policy for 2006–2007 (SI0607039I), which does not include the minimum wage.

Meanwhile, the Ministry of Labour, Family and Social Affairs (Ministrstvo za delo, družino in socialne zadeve, MDDSZ) prepared the draft Law on the Determination of Minimum Wage (LDMW). On 19 June 2006, the social partners examined this draft during the 148th session of the Economic and Social Council of Slovenia (Ekonomsko socialni svet Slovenije, ESSS) (SI0207103F). Following this session, the draft law was modified to integrate some of the social partners’ comments. Subsequently, the government approved this draft version and submitted it to parliament for adoption.

Minimum wage for 2006–2007

The draft LDMW concerns the gross monthly minimum wage, which applies to all employees working full time in the economy, covering all public and private sectors and occupations. The draft law sets out the method of adjustment of the minimum wage as well as the amount of the minimum wage for 2006.

The new legislation stipulates that the minimum wage will be increased annually on 1 August in line with forecast rises in consumer prices, which the government adopts as a basis for the preparation of the national budget. As a result, the minister of labour will determine the amount of the minimum wage on the basis of forecast inflation; this will then be published in the Official Gazette of the Republic of Slovenia.

From 1 August 2006, the existing gross monthly minimum wage of SIT 122,600 (€511.60) will be increased by 2%, amounting to SIT 125,052 (€522) for the period 1 August 2006 to 31 July 2007. This increase takes into account pay increases agreed in the collective agreements for the public and private sector, as well as the expected rise in consumer prices.

Comparison with EU Member States

Currently, about 12,000 to 13,000 full-time employees are paid the minimum wage in Slovenia, representing a between 2.3% and 3.4% of all workers covered by collective agreements. This figure fluctuates on a yearly basis, and it should be noted that in Slovenia almost all workers are covered by collective agreements. In comparison with other EU Member States and acceding countries with existing minimum wage legislation, the percentage of workers earning the minimum wage is relatively low. For example, the percentage of workers earning the minimum wage in France was 13.4% (including part-time workers) in 2003, while in Romania, the proportion was 12.2%.

At sectoral level, about 4% of all Slovenian workers in manufacturing receive the minimum wage. In the textiles sector, however, it is more than 20%. This sector has a predominantly female workforce and the highest level of minimum wage earners: therefore, it can be assumed that the proportion of women earning the minimum wage is higher than that of men. Unfortunately, no precise figure is available because it is impossible to give a breakdown of the data by sex.

The Eurostat publication on ‘Minimum wages 2005 – Major differences between EU Member States’ (Statistics in focus, 7/2005 (280Kb PDF)) distinguishes three groups of countries with distinct levels of minimum wages. According to Eurostat, Slovenia is in the second group of countries, with minimum wages ranging between €437 and €668 on 1 January 2005; more specifically, the rates identified in this group include €437 in Portugal, €490 in Slovenia, €557 in Malta, €599 in Spain and €668 in Greece.

When expressing the minimum wage in purchasing power standards (PPS) rather than euros, the ranking of the countries is relatively similar. The minimum wage in PPS for this group ranged between 582 and 855: 582 in Portugal, 599 in Turkey, 696 in Spain, 703 in Slovenia, 848 in Malta and 855 in Greece.

Looking at the minimum wage as a proportion of average monthly gross earnings in industry and services, the minimum wage level stood at 55% of the average gross monthly earnings in Malta, and at about 46% and 36% in Slovenia and Spain, respectively, in 2003.

Social partner demands

For some time, trade unions have been demanding that a framework law should regulate the minimum wage on a permanent basis. According to the trade union demands, such a law should establish the method of adjustment of the minimum wage, the amount of the minimum wage in a given year, and that the level of adjustment should be fixed annually in a tripartite consultation process. This would rule out discussions on whether the minimum pay is necessary, which inevitably arise every second year under the current system. The government and the social partners agreed already in the tripartite social agreement for 2003–2005 (267Kb PDF) (SI0307101F) that they would prepare a proposal for such a law.

However, the modified draft LDMW takes only some of these demands into account. For instance, it does not stipulate that the percentage of the adjustment should be established in a tripartite agreement by, for example, submitting it to the ESSS for approval. Excluding such a consultation process is contrary to the current practice and not in the spirit of the ILO 1970 Minimum Wage Fixing Convention No.131.

With regard to the definition of the minimum wage, it is understood that the worker is entitled to this wage regardless of the expected results of their work. However, while employers sought to introduce the notion of performance-related pay in relation to the minimum wage level, both trade unions and MDDSZ rejected this proposal.

Commentary

Slovenia is planning to adopt the euro soon. It seems that the adjustment of the minimum wage and other pay is sufficiently restrictive to help prevent any significant rises in inflation.

Štefan Skledar, Institute of Macroeconomic Analysis and Development (IMAD)

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