EMCC European Monitoring Centre on Change

Hungarian government

Company/Organisation:
Hungarian government

Geographic Location

Country: Hungary
Location of affected unit(s): Countrywide

Company

Sector: Public administration and defence
Public administration and defence; compulsory social security
84 - Public administration and defence; compulsory social security
Number Employed: 7500

Employment Effects

Announcement Date: 01-06-2006
Planned Job Reductions min: 12500
Planned Job Reductions max: 12500
Type of Restructuring: Internal restructuring
Foreseen End Date: 31-12-2008
Direct Dismissals: 12500

Additional Information

The re-elected MSZP-SZDSZ (Hungarian Socialist Party - Alliance of Free Democrats) coalition government launched a wide-ranging project in mid-2006 to streamline the entire public administration system, which forms part of the efforts of the Government to reduce state expenditures and to restore the budgetary balance (‘austerity package’). All ministries are affected by the reorganisation. One third of the 7,300-7,500 strong ministry workforce and related institutions is expected to be laid off in the next two years (in average 200-220 employees per ministry). The most affected jobs involve support activities such as IT, finance, accounting, human resources, which will be concentrated into a new support services centre, where much smaller workforce will carry out these tasks at much lower expenditures. By the end of June, 94 employees out of 320 were laid off at the Ministry of Health, some 200 people will be dismissed at the Ministry of Foreign Affairs, 285 at the Ministry of Environmental Protection and Water Management, 127 employees from the Ministry of Finance and half of the 800-strong workforce will be laid off from the Ministry of Economy and Transportation. Apart from dismissals, major restructuring and merging of public institutions, companies and foundations is expected. The number of state budget institutions, for instance, will be reduced from 823 to 598 and 249 companies and foundations will remain out of 305 which are run by the state and are financed from the state budget. As many as 12,500 jobs will be cut in the public sphere as a result of the restructuring and merging of institutions. Although direct expenses related to the restructuring are expected to be higher in the first year (due to compensation for the dismissed employees), the government expects to save HUF 10-20 billion (on salaries and material expenditures, etc.) in the medium term and HUF 1-2 billion in the long term, as a result of the mergers among the ministries. In total, the government expects to save HUF 50 billion as a result of the restructuring. Since the expenditures in the public administration include salaries of local government officials as well as other public servants working in education, health care and other areas of public administration, a saving of several billions of HUF makes only 1-2% of the total sum spent on wages and benefits in the public administration. By the end of September 2006, the dismissal of 1,767 public employees was registered at the Budapest Employment Office, while 1400 employees were laid off from public administration institutions in the countryside. Those dismissed include tax advisors, teachers, economists, agricultural engineers and automechanics. So far, only few of those laid off have filed a request for support in reemployment at employment offices or private employment agencies. The government covers professional, language, IT training programmes for dismissed public administration employees as well as training in job search up to HUF 350,000. There are plans to provide loans for them as well as to support setting up an enterprise or buying shares in a company. In January 2007 dismissals began in the Central Data Registry and Election Office (Központi Adatnyilvántartó és Választási Hivatal) which has gone under the direction of the Office of the Prime Minister. As many as 150 people, 26% of the workforce, will be laid off from this body in the course of 2007. Dismissals here began later than at other public institutions since only now did funds become available for the restructuring. Meanwhile the planned restructuring of public administration is under way and by the end of January 2007, as many as 3,000 public employees will have been dismissed. Until the end of 2006 only 13 redundant public employees used the fund of HUF 350,000 provided for laid-off public employees to finance training. Employment agencies did not note change in the intensity of redundant public employees' job search either. The director of an employment agency claimed that the skills and experience of public servants do not meet labour market demands and make it difficult for them to find new jobs.