Government increases minimum wage

From 1 October 2004, the Slovak government has increased the national minimum wage by 6.9%, after the social partners failed to agree on what the rise should be. Employers´ representatives are happy with the new rate, but trade unions had demanded a greater increase.

On 22 September 2004, the government issued regulation No. 525 increasing the statutory national minimum wage from 1 October 2004, to SKK 37.40 per hour for those paid on an hourly basis and SKK 6,500 per month for those paid on a monthly basis. In determining the minimum wage, the government followed the provisions stipulated by the Act on the Minimum Wage (No. 90/1996 in the Collection of Laws, as amended). According to this Act, the government must determine the minimum wage by 1 October each year. The social partners should agree on the minimum wage increase, but in 2004 - as in previous years (SK0312101N) - they did not reach agreement in time.

A meeting of a working group including social partner representatives was held on 28 July 2004 at the Ministry of Labour, Social Affairs and Family (Ministerstvo práce, sociálnych vecí a rodiny Slovenskej republiky, MPSVR SR). The minimum wage increase is calculated by multiplying the average monthly nominal wage recorded for the previous calendar year by a 'coefficient of adjustment' (SK0210101N), and the group discussed the Ministry's proposal for a coefficient of 0.45, which corresponds to a gross minimum wage of SKK 6,500 per month and SKK 37.40 per hour. The Federation of Employers' Associations of the Slovak Republic (Asociácia zamestnávatelských zväzov a združení Slovenskej republiky, AZZZ SR) and National Union of Employers of the Slovak Republic (Republiková únia zamestnávatelov Slovenskej republiky, RÚZ SR) (SK0408102F) were willing to accept an increase in the minimum wage to SKK 6,500 per month, but no more. The Confederation of Trade Unions of the Slovak Republic (Konfederácia odborových zväzov Slovenskej republiky, KOZ SR) demanded an increase in the minimum wage to SKK 7,190 per month. However, it was willing to negotiate on a minimum wage of between SKK 6,500 and SKK 7,190 if the coefficient of adjustment was not reduced from the previous year's level.

The members of the working group did not come to a joint decision during their meeting. However, they agreed to further discussions on: mechanisms for setting the coefficient of adjustment; regional and sectoral differentiation in the minimum wage; harmonisation of the statistics that influence and determine the minimum wage; and assessment of the minimum wage's impact on the economy.

The chair of the tripartite Economic and Social Concertation Council (Rada hospodárskej a sociálnej dohody Slovenskej republiky, RHSD SR) and Minister of Economy, Pavol Rusko, accepted trade union demands and called an exceptional tripartite meeting with only one point on the agenda - the increase in the minimum wage. However, this meeting was not quorate because of an insufficient number of government representatives. Therefore, members of RHSD SR present at the meeting agreed that further negotiations on the minimum wage increase would be held bilaterally between representatives of the employers and employees up until 20 August 2004 (the law stipulates the end of July as a final deadline for agreement on the minimum wage increase) when another tripartite meeting would be organised. However, the social partners did not come to an agreement regarding the minimum wage increase during the extended negotiation period, nor during the tripartite meeting. Therefore, the government had to determine the new minimum wage rate unilaterally, as outlined above. Both central employers' organisations agreed with the decision taken by the government.

The October 2004 increase in the minimum wage is equivalent to 6.9% (from SKK 6,080 to SKK 6,500 per month). The gross monthly minimum wage as a proportion of the gross average monthly nominal wage of all employees (as estimated by the Ministry of Finance) has decreased from 42.32% in 2003 to 42.0% in 2004. The net monthly minimum wage has increased by 10.5% (from SKK 5,095 to SKK 5,629) and represents approximately 130% of the 'subsistence minimum' valid from 1 July 2004 (SKK 4,580). The difference between the new minimum wage rate and the 'adjusted' subsistence minimum (for taxation and contributions to social insurance funds) of SKK 5,290 per adult is now SKK 1,210 per month, an increase of only SKK 8.

At present, a total of 41 items of legislation relate to the minimum wage. Therefore, every increase in the minimum wage means adjustments in areas such as the parameters for calculating social security contributions. The minimum wage also influences measures such as income threshold whereby people are assessed as being in material need . These knock-on effects contribute to employers' opposition to higher increases in the minimum wage. Some employers' representatives argue that the minimum wage should be abolished. .

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