EMCC European Monitoring Centre on Change

Slovakia: ERM Comparative Analytical Report on ‘Public policy and support for restructuring in SMEs’

  • Observatory: EMCC
  • Topic:
  • Published on: 13 May 2013



About
Country:
Slovakia
Author:
Ludovit Cziria
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

To support the development of SMEs the government established, with the EU support, the National Agency for the Development of SMEs, which coordinates public policy support to SMEs. The support is based on different development programmes particularly aimed at fostering business development, innovation and training in SMEs. During the crisis, higher support was provided to SMEs, mainly through maintaining employment and provision of more convenient micro-loans. The instrument Counselling and training for SMEs also can be mentioned as an effective instrument supporting the development of SMEs in Slovakia during the economic crisis.

QUESTIONNAIRE

Part 1: Overall policy context

1.1. Has there been public or policy debate on the specific challenges for SMEs and/or their employees in restructuring before the global recession of 2008/09? Please specify, for example:• If so, since when (e.g. up to 3 years before, 3-10 years before, longer), at which level (national, regional, sectoral, all of them) and in which form (‘real’ policy debate mirrored in policy documents or rather public debate mirrored in media, or both)?

The Slovak government considers the development of SMEs as an important factor for the economic growth of the country and usually each government had the issue of SMEs in its agenda. Due to the high unemployment rate in the country employers stressed in public debates the option and the need to increase employment through development of SMEs.

To support the development of SMEs, the government established, with EU support, the National Agency for the Development of SMEs (NADSME) in 1993. Public support to development of SMEs is based on different development programmes and activities particularly aimed at fostering business development, innovation and training in SMEs. In order to support development of SMEs, also job creation in SMEs was fostered. Which policy areas (for example, SME policy, entrepreneurship policy, employment policy, social policy, regional policy etc.) were involved? Particularly: Does SME policy specifically deal with restructuring? Does ‘restructuring policy’ specifically deal with SME issues?

SME policy includes various measures and tools. Most of them are primarily aimed at the creation of better conditions for entrepreneurship of SMEs, including the increase of their competitiveness. Implementation of specific programmes and activities supporting the development of SMEs had also regional policy dimension through involvement and participation of regional development agencies in the implementation of specific programmes for SMEs.

SME policy did, however, not deal with restructuring in particular. ‘Restructuring policy’ is long-term focussed on the support provided to investors (usually foreign ones), which create new jobs in the country.

• Did the public and policy discussions deal with restructuring as such or were specific types or phases of restructuring covered?

The public and policy discussions did not deal explicitly with specific phases of restructuring, that is, anticipation and managing restructuring in particular. Implemented measures concerned anticipation of country wide restructuring and supported managing restructuring in enterprises as well. Public and policy discussions were neither focussed on specific types of restructuring. They usually concerned internal restructuring and business expansion, which were directly linked to cuts in existing jobs or creating new jobs in the economy respectively.

• Which were the issues/contents that have been discussed? Which specific characteristics of SMEs in restructuring were considered in this context? Was the specific case of SMEs as subcontractors a topic for discussions?

Regarding anticipation of restructuring, state aid used to be provided to investors creating new jobs, preferably in regions with high unemployment rates. It also included support to building industrial parks, established mainly in these regions. During the economic crisis, the availability of business infrastructure played important role for the business expansion.

Some other measures supported management of restructuring. For instance, the Guarantee Fund of which application is aimed at better protection of employees´ rights to wages in insolvent enterprises. Its application also played important role during recent economic crisis when numbers of enterprises bankrupted.

• Did the discussions rather deal with the enterprise perspective or with the employee perspective or both?

The increase of employment and the reduction of high unemployment are long-term topical issues in the country. Discussions about SMEs usually dealt with enterprise perspective. Because the employment and high unemployment were long-term topical issues in the country, these discussions were often linked to the development of employment as well.

1.2. Did the global economic and financial crisis of 2008/09 cause any change in focus of the above (for example, increased/decreased focus on SMEs and their employees in restructuring, change in policy areas or issues covered)?

During the economic crisis, there was only a slight change in policy areas and issues covered. The government adopted two packages of anti-crisis measures in October 2008 and March 2009. Many of these measures were aimed at the support to employers to assist them in maintaining employment during the economic decline. During the crisis, higher support was provided to SMEs through provision of more convenient micro-loans and maintaining employment there.

Adopted anti-crisis measures concerned restructuring in terms of maintaining employment in enterprises impacted by the economic crisis. Nevertheless, these measures were particularly not designed for SMEs. To alleviate the impact of the economic crisis on employment, the so called ‘flexikonto’ was adopted, too. Flexikonto is based on flexible use of an annual working time account of an individual employee. Similarly, short-time working (STW) was implemented in companies suffering from temporary economic decline, which had impact on actual labour demand. But these measures were not targeted at SMEs in particular. Nevertheless, the above mentioned flexikonto and STW were also implemented in SMEs. Flexikonto allowed maintaining employment through implementation of flexible use of annual working time account of individual employees. Its implementation has to be consulted and agreed with employee representatives. Also STW was implemented in companies suffering from temporary decrease in the labour demand. Employers concerned provided to employees paid time-off for at least 60% of their average wages. Employers who used STW instead of dismissing redundant employees received state allowance partly covering employers´ contributions to compulsory insurance funds. The support was limited to 60 calendar days in the year.

Besides, special support was provided to employers, including SMEs. For instance, employers who created new jobs for long-term unemployed received a state subsidy amounting from 15% to 30% of the value of the average wage in the country, or up to 50% of the wage cost related to the hired job-seeker during a twelve-month period. Registered job seekers who set up their own business as self-employer received a subsidy to cover compulsory health insurance payments during 22 month and later on also social insurance payments for four month. Unemployed in social need who found themselves a low paid job received allowances amounting to 22% and 11% of the average wage in the economy for twelve and 22 months, respectively. The compulsory contribution to the reserve Solidarity Fund of Social Insurance Agency paid by self-employers was temporary reduced from 4.75% to 2.0% of the tax assessment base.

1.3. Are social partners or employers’ and employees’ organisations involved in public and policy debate on restructuring in SMEs?• If so, which (types of) organisations and at which levels?

Representatives of employer and trade union organisations were involved in policy debate with the government regarding the improvement of general conditions for entrepreneurship and business expansion, including creation of new jobs in Slovakia. Consultations usually take place in the tripartite Economic and Social Council (HSR) – previously the RHSP and RHSD. Nevertheless, these debates did not specifically target problems related to restructuring in SMEs in particular.

• What are their opinions, perspectives, recommendations?

Representatives of trade unions usually put attention to sufficient protection of employees during restructuring in companies, for example, dismissal procedures, severance pay, support in finding new jobs for them. Trade unions are usually less present in SMEs and they do not deal with restructuring in SMEs in particular. Trade unions also blamed some employers that they are making obstacles for the presence of trade unions in SMEs. While trade unions focus on social security issues, employers demand higher employment flexibility during the restructuring. For instance, they demand a shorter notice period, reduction of costs of employers related to dismissals of employees.

• Did they succeed in convincing governments or public authorities at various levels of their viewpoints?

At the time of the recent economic crisis, consultations between the government and the Confederation of Trade Unions (KOZ SR) led to the conclusion of the Memorandum on Cooperation in Solving Impacts of Financial and Economic Crises upon the Slovak Society in February 2009. The Memorandum expressed, inter alia, joint efforts of the government and trade unions in the adoption and implementation of measures aimed at alleviating the impacts of the financial and economic crises upon citizens, employers and business environment in the Slovak Republic. Representatives of trade unions promised to take into account the level of labour productivity when bargaining on the increase of wages and salaries. Trade unions also promised to utilise social dialogue at all levels as a decisive tool for retaining social peace during the economic crises. Trade unions also promised to provide objective information about measures adopted by the government in their organisational structures and among unionists and provide feedback to the government about the application of adopted measures in practice. Though representatives of employers did not join the Memorandum, its content provided a basis for reaching consensus also with employers in combating the impacts of the economic crisis. In line with demands of employers, the previous government coalition adopted changes in the Labour Code in 2011, which increased employment flexibility. For instance, dismissed employees can decide either to receive redundancy payment or to be employed during the notice period. These measures can be utilised during the restructuring in SMEs.

Part 2: Support instruments

2.1. Please provide an overall assessment about how accessible and suitable public and social partner based restructuring support for companies in general are for SMEs or their employees.• Do SMEs and/or their employees generally have access to the available instruments and are these suitable for their specific needs in restructuring?

Instruments suitable for specific needs of enterprises in anticipation and managing restructuring are usually available to all companies, including SMEs. Nevertheless, there are some specific instruments which were designed for SMEs, including small and micro-firms and are applicable to them in particular. These instruments are suitable for specific needs of SMEs in anticipation and managing restructuring, too.

• Are there specific (types of) instruments (for example, targeting specific types or phases of restructuring, offered at specific administrative levels) that are more/less accessible and suitable for SMEs and/or their employees that for larger firms? If so, why?

There were no instruments designed for specific phases of restructuring in SMEs. Respective instruments are designed specifically to support operation and development of SMEs as such. For instance, the Programme for the development of SMEs - Micro loan programme is available only for SMEs with less than 50 employees. The Programme of education, training and counselling for selected groups of people interested in entrepreneurship is available for employees in SMEs, school leavers and jobseekers. These instruments consider the specific conditions of SMEs, which usually run their business under limited financial resources and are aimed at maintaining their operation and development in a competitive global market. Implementation of these instruments also played important role during the economic recession in 2009-2010. Some instruments related to the anticipation of restructuring, for example provision of state aid, are offered at specific administrative levels - according to the specific situation in the country and in regional labour markets (the level of unemployment rate). Nevertheless, these instruments are usually provided rather to larger companies, which create hundreds of new jobs through business development in regions with a high unemployment rate.

2.2. Do there exist specific public or social partner based support instruments explicitly targeting at SMEs and/or their employees in restructuring? Please specify, for example:• If so, by whom are they offered (public vs. social partners/employers’/employees’ organisations) and at which administrative levels (national, regional)?

As mentioned above, specific instruments explicitly targeting at SMEs do exist. They are usually offered by the government through its specific agencies, mainly the National Agency for the Development of SMEs (NADSME). NADSME also coordinates and assesses activities of regional agencies supporting SMEs, for example the Regional Consultation and Information Centres (RPIC), First Contact Centres (CPK) and Business and Technology Incubators (PI/TI).

• Are the activities of different support service providers coordinated? If so, how and how well does this work?

Activities related to the provision of support services to SMEs are coordinated by NADSME, which coordinates the implementation of development projects in SMEs, for instance, through the provision of non-returnable loans and calls for tenders for measures within the Operational Programme competitiveness and economic growth. Through regional bodies RPIC, CPK and PI/TI, it also coordinates other supporting activities related to SMEs. For instance, the implementation of the Programme of education, training and counselling for selected groups of people interested in entrepreneurship, the Programme for the development of SMEs - Micro loan programme, the Counselling and training services for SMEs – de minimis scheme and Support to SMEs through network of incubators and implementation of ‘research-based spin-off method’. According to NADSME, SMEs are interested in available supporting instruments and they consider the coordination is properly functioning.

• Which phases of restructuring do they target?

The above mentioned instruments and activities are explicitly not targeted to anticipation and/or managing restructuring in particular. Nevertheless, according to their nature, instruments and activities are suitable to both phases of restructuring. For instance, the Counselling and training services for SMEs can be used in the anticipation phase when a new business unit is established as well as in the managing phase when restructuring is implemented in existing SMEs.

• Which types of restructuring do they target?

Instruments and activities supporting SMEs are neither targeted to specific types of restructuring and they can be used in most types of restructuring. Nevertheless, they are usually used for business expansion and internal restructuring.

• Do they target SMEs in general, or specific size classes, sectors, regions, legal forms, roles (for example, as subcontractors) etc.? Do they target employees of SMEs in restructuring?

In general, most of the supporting instruments and activities target SMEs as such and there are no specifications according to size classes and legal forms. However, in some few cases these instruments are available to specific sizes of SME, for example the Programme for the development of SMEs - Micro loan programme is available only for SMEs with less than 50 employees. Among regions, according to the unemployment rate, for example, the sum of subsidy provided to registered job seekers who decide to start their own business as self-employed and to employers who employ a registered job seeker is differentiated, too. SMEs in some sectors, for example fishery, freight road transport and selected agriculture products, can not apply for the de minimis scheme. Some other supporting activities also target individual employees in SMEs. Training activities include, for example management, marketing, finance.

• What type of support do they provide? What specific challenges for SMEs in restructuring do they address?

Above described activities provide different support to SMEs. They include, for example direct financial support to individual SMEs through different types of loans like micro-loans and de minimis scheme. These activities also include the provision of subsidised education, training and counselling services and support to implement/disseminate research outcomes.

• Is there some information about how well they are known among SMEs and their advisors and about how they are generally assessed by the SME sector? What are their strengths and weaknesses? Are there recommendations for improvement?

Information about available instruments and activities supporting SMEs is available free on the web site of the Ministry of Economy (MH SR) and on the web site of the NADSME in particular. According to the survey made by NADSME (Annual Report for 2010), individual supporting programmes and activities were available in all regions of the country and existing regional bodies like RPIC, CPK and PI/TI were involved in their implementation. According to NADSME monitoring, interviewed receivers of subsidised counselling and education services assessed these services as very effective for their activities.

The NADSME Report on actual situation in SMEs in 2010 states that problems in business environment persist and weaknesses are present in several fields. For instance, complex and unstable legislation, red tape and bureaucratic interventions in business, high burden of contributions to compulsory insurance funds increase the labour cost, weak link to research and low invention capacity, lacking resources for business start up, hindered access to financial resources and a fragmented framework of available support to SMEs. Better support of public administration to SMEs is needed as well. According to the European Employment Observatory Review, Self-employment, 2010 Slovakia (by Luboš Vagaè), among others increased attention should be paid to improved law enforcement and to faster and fair resolution of disputes. Entrepreneurial education and the involvement of small businesses in future skill needs identification is needed as well. The educational component in start-up support for the unemployed should also be reinforced.

Part 3: Good Practice

  • Name of the instrument in national language and English:

Counselling and training services for SMEs. (Poradenské služby a vzdelávanie malých a stredných podnikateľov). Implemented within the ‘de minimis’ scheme - according to EU Directive No. 1998/2006.

  • Justification for selecting this measure as Good Practice:

SMEs needs professional support to their effective operation but financial resources for ordering such services are often lacking there. This is a specific measure which was adopted to support SMEs during the economic crisis, in particular. The selection was consulted with representatives of NADSME.

  • Date of launch of the instrument and end date (if applicable):

The scheme was launched in December 2010 and is available till 31 December 2013.

  • Initiator/administrator (organisation):

The Ministry of Economy (MH SR) adopted the scheme.

  • Other involved actors and their roles:

NADSME is implementing it at the national level and RPICs, CPKs and PI/TIs are participating in it in regions.

  • Source of funding:

The programme is subsidised from the state budget.

  • Target group/eligibility/coverage:

SMEs, which are in compliance with EU Directive No. 800/2008.

  • Phase of restructuring targeted:

It can be used in both, anticipation and management of restructuring.

  • Type of restructuring targeted:

The instrument can be used in all types, however, preferably is used in business expansion and internal restructuring, as well as relocation.

  • Purpose/content/characteristics/description of services provided:

SMEs need professional support for their effective operation. At the same time, financial resources for ordering such services are lacking there. Therefore, the government decided to support SMEs though provision of non-refundable grants to cover (fully or partly) costs of required training and counselling services. Support can be obtained by SMEs in all sectors except of excluded sectors. For example, fishery, selected agriculture products, freight road transport.

The entrepreneur who asks for a non-refundable grant should provide information about the number of its employees, annual turnover and assets. Education, training and counselling services are provided by cooperating organisations and professional training organisations. SMEs can obtain a grant covering up to 60 days per year in the value €810 (50% of costs) for the counselling and up to €400 per day for participation of the person (managers and employees of SMEs) in the training course. For instance, on management, company restructuring, marketing, finance. A SME can obtain a maximum financial support up to € 30,000 per year. In small enterprises, 80% of justified training costs can be covered and in medium sized enterprises it is 70% of costs.

  • Outcome of the instrument (e.g. number of beneficiaries, effects):

In 2010 (the initial year), 66 consultations were provided in the extent of 166 hours. In 2011, the number of consultations provided for participating SMEs rapidly increased. The number of consultations increased to 867 in the extent of 2,931 hours in total. Consultations also contributed to the elaboration of 33 business plans and projects. In 2011, financial support in the total amount of €164,893 provided to subsidise 13 education projects for SMEs participating in the scheme.

  • Strengths/success factors of the measure:

SMEs have better access to lacking professional services supporting their business development, including restructuring during the economic crisis. The scheme is available for new SMEs operating up to three years as well as for SMEs operating for longer time.

  • Weaknesses/bottlenecks of the measure:

According to NADSME, funding of the programme is considered as its main weakness. Financial resources are usually available in the 3rd and 4th quarters of the year that shortens the implementation period of provided services for potential SMEs in the scheduled year. The shortened time period causes that services are provided under certain time pressure and quantitative aspects may overweight the quality of services.

  • Was the instrument formally monitored/evaluated? If so, please specify (by whom, how, what were the finding and how were the findings used etc.)

Yes, it is regularly monitored by regional bodies and NADSME conducts an overall assessment of the instrument's implementation annually. Monitoring is done during implementation of individual projects and after the project is finished. Results of monitoring are used by NADSME for the improvement of the instrument and making it more effective.

  • Weblink: www.nadsme.sk
  • Information sources used for filling this section:

NADSME Annual reports for 2010 and 2011

NADSME Reports on actual situation in SME in 2009 and 2010.

07K 02 05 Schéma poradenstva a vzdelávania pre malých a stredných podnikateľov

(schéma pomoci de minimis)

Individual consultations with representatives of NADSME.

Ludovit Cziria, Institute for Labour and Family Research.

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