Latvia: Latest working life developments – Q3 2016
The drafting of the State budget (including discussions on the minimum wage), civil service reforms, an agreement on the State revenue system and debates on social insurance are the main topics of interest in this article. This country update reports on the latest developments in working life in Latvia in the third quarter of 2016.
Preparation of the State budget
In Q3 2016, the government started preparing the State budget for 2017, which will increase the minimum monthly wage by €20 to €380. The national level social partner on the trade union side, the Free Trade Union Confederation of Latvia (LBAS), supported the increase, but insisted that the minimum amount of non-taxable personal income should also be increased to at least the pre-crisis amount of €130 per month. It also proposed that differentiated non-taxable income (introduced in 2016) should be abolished. LBAS said that, despite planned increases, the minimum wage in Latvia was the lowest in the Baltic states.
Reforms in public administration
Employers continued to call for a leaner, more efficient and goal-oriented public administration system. The Latvian Employers’ Confederation (LDDK), together with the Latvian Chamber of Commerce and Industry (LTRK), has repeatedly sought reforms to the system. The State Revenue Service (VID) has been earmarked for a pilot reform project. Finance Minister Dana Reizniece-Ozola made substantial personnel changes to the VID at the beginning of 2016, which led to the resignation of the service’s head, Inara Petersone.
The first condition for successful change – according to a report published in Q3 – is to ensure that salary levels, especially for key positions, are in line with those in the private sector. A study from SIA Fontes Management Consulting showed that 90% of those employed in the public administration system were paid substantially less than those working in the private sector. The biggest gaps were experienced by senior experts, IT professionals and high-level managers. The Fontes report called for an increase in salaries across the board for public administration employees in 2017, not just for the head of VID.
Social partners sign cooperation agreement
On 9 August, some social partners, their cooperation partners and the government signed a cooperation agreement. It expressed a strong commitment to create an effective State revenue service. This agreement, defined as a common vision on joint actions, cooperation and the principles of social dialogue, envisages that the government will not only reform the public administration system, but also provide for better economic development and create a stable and transparent tax policy. The agreement was signed by the Prime Minister, the presidents of the Latvian Chamber of Commerce and Industry (LTRK), the Latvian Confederation of Employers (LDDK), the Latvian Association of Local and Regional Governments (LPS) and the Latvian Academy of Sciences.
The social partners agreed that the government, in collaboration with the social partners, should produce a tax policy for 2017–2021 by 1 April 2017; it should remain in place until 2020. The social partners asked that the only changes implemented in 2017 be those agreed with the social partners within the National Tripartite Cooperation Council (NTSP). These include:
- tax regulations in the taxi sector;
- expansion of the use of reverse value-added tax (VAT);
- tax relief for meals provided by companies;
- wages tax relief for enterprises where collective agreements are signed;
- revision of solidarity tax and the tax regime for start-ups.
Legislation changes and debates
The main legislation on industrial relations remains unchanged. The government introduced compensation for workers who have suffered impaired health while on active service in the internal security services. It also introduced a minimum social insurance payment (calculated at a rate of 75% of the State statutory minimum wage in 2017 and using the minimum wage from 2018).
The government also adopted several regulations on the use of EU Structural Funds for:
- reducing early departure from education;
- integrating education and working environments;
- facilitating employability and the employment of older people.
Several regulations, on the social guarantees of asylum seekers, were adopted on 12 July 2016 and came into force on 20 July. Previously, refugees staying at the Accommodation Centre for Asylum Seekers at Mucenieki near Riga, managed by the Office of Citizenship and Migration Affairs (PMLP), each received a daily allowance of €2.15 to cover expenses for food and other daily needs. The new regulation increases this payment to €3. The government also adopted regulations on the information that should be included in the register of asylum seekers and its use, and rules on the identity documents of refugees.
Social partners participated in preparing the manner in which the implementation of the Youth Guarantee programme will be assessed, and the structure of the national study on this issue.
On 16 September 2016, the European Pillar of Social Rights was discussed at an event organised by the Representation of the European Commission in Latvia and the European Economic and Social Committee. On 10 November 2016 the Ministry of Welfare will hold another debate on the subject.