In November 2007, all six private sector trade union confederations organised a mass rally in Ljubljana. They demanded higher pay, a fairer distribution of high company profits in light of strong GDP growth, rising inflation and living costs. In January 2008, a compromise seemed to be reached when social partners concluded a tentative agreement on an extraordinary pay adjustment. However, when legal experts from both sides began to draft the collective agreement, disagreements erupted anew.
All six private sector trade union confederations organised a mass demonstration demanding higher pay in Ljubljana on 17 November 2007. Public sector trade unions, organisations representing pensioners and students, and many other groups also took part in the rally. The rally, in which up to 70,000 people participated, was organised after several negotiation rounds with the employers concerning changes to the private sector, intersectoral collective agreement on the pay adjustment method, the refund of work-related expenses and the annual leave bonus (CAMPA) (SI0607039I) had failed to make any progress. The CAMPA which was concluded on 23 June 2006 covers about 40,000 mainly private sector workers who are not covered by an adequate sectoral collective agreement. At the same time, collective bargaining at sectoral level had also reached deadlock in a number of other sectors, such as in the catering and tourism sector (SI0709019I).
Background to conflict
The trade unions demanded higher pay and a fairer distribution of high company profits in the face of strong gross domestic product (GDP) growth, high inflation and rising living costs.
According to the Statistical Office of the Republic of Slovenia (Statistični urad Republike Slovenije, SURS), in the first nine months of 2007, GDP increased by 6.5% compared with the same period of 2006.
However, in 2007, inflation – as measured by the consumer price index – increased by 5.6% over the year. The largest increase over the past year was recorded in the prices of food and non-alcoholic beverages, which rose on average by 12.9%.
The trade unions highlighted that, despite the gradual lowering of the payroll tax (SI0505302F) and reduced tax on profits, employers did not want to raise workers’ pay accordingly by renegotiating the sectoral collective agreements. The trade unions, thus, threatened to organise a general strike if no compromise is reached with the employers.
The Minister of Labour, Family and Social Affairs, Marjeta Cotman, and the Minister of Defence, Karl Erjavec, also joined the rally and supported the trade unions’ demands stating that these were legitimate claims. Ms Cotman added that well-paid workers were more motivated workers and that productivity could not be based on low wages. She considered that the sectors and companies which are performing well could easily increase wages. Moreover, she argued that pay policy needs to be re-examined, in order to ensure that the starting pay is not lower than the statutory minimum wage (SI0608019I).
The new President of the Republic, Danilo Türk, who was elected on 11 November 2007, also attended the rally in Ljubljana. He indicated that low pay is a serious problem stressing that some workers live on only €300 or €400 a month and that their protest is justified.
The representative of the European Trade Union Confederation (ETUC), Roberto Treu, also supported the demands of the Slovenian trade unions for higher pay emphasising that the time was ripe for profit growth to be reflected in pay growth.
Trade union demands
Initially, the trade unions put forward the following demands:
- an immediate pay rise of 3.5% because of the rising inflation;
- a pay rise for workers with the lowest pay, who are the group of workers most affected by the high inflation; therefore, the trade unions demanded an increase in all basic pay and not only the starting pay which is the lowest possible basic pay determined by sectoral collective agreements;
- the basic pay rise should be agreed in sectoral collective agreements;
- the pay of all workers should be adjusted for inflation by February 2008 and not in August 2008;
- the pay rise should also take into account productivity growth in different sectors of the economy;
- the adoption of legislation on employee financial participation, such as profit-sharing schemes (SI0412303F; see the Slovenian contribution to the EIRO comparative study on Employee financial participation in the new Member States).
In terms of the trade union collective bargaining strategy, the sectoral collective agreements play a key role since the trade unions have a much stronger negotiating power at sectoral level than at company level. They thus demanded that the pay rise should be agreed in sectoral collective agreements; nonetheless, the trade unions were prepared to take into account any specific situation in individual companies in difficulty.
Furthermore, the trade unions emphasised that their demands were in line with the Social Agreement 2007–2009 (SI0708029I) which determines the private sector pay policy. As the inflation was much higher than expected, they raised their initial demands concerning pay increases.
Employer standpoints
The employers, on the other hand, were only prepared to increase the starting pay and refused to negotiate sectoral collective agreements, in order to raise pay levels in line with inflation and productivity growth. They highlighted that any pay rise would further increase the inflation rate and that they were prepared to accept collective bargaining only at company level. Their opinion was that companies in difficulty, such as those operating at a loss, would not be able to pay as much as determined by sectoral collective agreements.
No resolution of conflict
Not surprisingly, the trade unions did not accept the employers’ arguments which were in sharp contrast with their demands and collective bargaining strategy. They also stated that the employers’ positions were contrary to what has been laid down in the Social Agreement 2007–2009. However, the trade unions underlined that they were prepared to take into account any specific situation of companies in difficulty when negotiating the sectoral collective agreements.
On 9 January 2008, the social partners agreed to find a compromise solution by 25 January 2008 and that a one-off pay rise will be carried out with the monthly pay for January 2008. Nonetheless, the main issues of disagreement remained between the employers and trade unions. In the case of no compromise being reached, the trade unions intended to organise a general strike on 6 February 2008.
The trade union demand to adopt the legislation on profit-sharing by employees was fulfilled: on 4 December 2007, the Ministry of the Economy (Ministrstvo za gospodarstvo, MG) prepared a draft Law on Financial Participation of Workers (LFPW), which was then discussed by the Economic and Social Council of Slovenia (Ekonomsko socialni svet Slovenije, ESSS) (SI0207103F). On 20 December 2007, the government adopted the draft LFPW and submitted it to the parliamentary procedure.
On 25 January 2008, it seemed that a compromise was reached when the social partners concluded a tentative Agreement on extraordinary pay adjustment in 2007 due to the unexpectedly high inflation in 2007 (AEPA). As a result, the trade unions cancelled the general strike which was planned to go ahead on 6 February 2008.
However, when legal experts from both sides began to draft a collective agreement on the basis of the tentative agreement reached on 25 January, disagreements erupted anew. The employers changed their minds and demanded a rise in the overall pay, including extra payments, instead of just an increase in basic pay. Increasing the overall pay would be much less favourable for workers. The trade unions rejected the employers’ proposal and demanded the rise in basic pay as it had been initially agreed. Therefore, a general strike in the private sector is still highly probable.
Commentary
At the same time as proceedings in the private sector, the public sector trade unions intended to organise a general strike in the public sector on 30 January 2008 if no compromise had been reached on the sector’s pay rise. As they reached an agreement with the government, they cancelled the strike. Unfortunately, this positive outcome in the public sector did not influence the negotiations in the private sector.
Reasons for increasing all basic pay levels
The starting pay, which is meant to be a safeguard for basic pay, is the lowest possible basic pay determined by sectoral collective agreements. All collective agreements for the private sector lay down pay categories of jobs – usually nine – on the basis of their requirements, so that differences in pay relate to differences in job requirements. Job requirements are determined on the basis of the level of education required to perform a certain job. These nine categories are known as ‘tariff classes’. The starting pay is determined for each tariff class. The first tariff class which applies to simple tasks or work represents those jobs which do not even require a completed primary education and have the lowest starting pay. The ninth tariff class which applies to exceptionally important and high-demanding work represents those jobs which require doctoral degrees as a rule. In each company, the various jobs are classified into these nine tariff classes.
The basic pay is a part of the pay that is determined by an employment contract. In other words, pay determined by an employment contract is composed of basic pay, part of the pay for job performance and extra payments (Article 126 of the Law on Labour Relations (LLR) (SI0206101N). A constituent element of the pay is the remuneration for business performance, if laid down by a collective agreement or employment contract.
The problem of the pay scales determined by the sectoral collective agreements in the private sector is that the statutory minimum wage (SI0608019I) is higher than the first three or four lowest rates of the starting pay which, for this reason, are useless as a safeguard for basic pay. Therefore, the trade unions demanded a rise in all basic pay. An increase in the starting pay only would mean no real pay rise for workers with the lowest pay rates, who represent the group of workers most affected by the currently rising inflation. These workers would continue to get the statutory minimum wage, despite an increase in the starting pay, which remains below the level of the statutory minimum wage.
Provisions of AEPA
Basic pay rise
The AEPA determines that the social partners will conclude a collective agreement on a one-off basic pay adjustment, which will be binding for all employers in the private sector.
Employers must raise the basic pay by 4.7% for January 2008. Together with extra payments, this pay rise will compensate for the 5.6% inflation in 2007. However, the companies which in 2007 already raised the basic pay by 4.7% or more are not obliged to further increase pay levels. The companies which in 2007 raised the basic pay by less than 4.7% must increase pay levels by the difference between the actual rise and the 4.7% threshold. It is worthwhile noting that many companies increased the pay by around 2% in August 2007.
Some companies, however, are functioning at a loss, and the trade unions and the management in other companies estimate that a certain pay rise would endanger a large number of workplaces. These companies are allowed to postpone the basic pay rise by six months in agreement with the trade unions represented in the company.
Regarding the pay increase, the social partners are to incorporate a provision on productivity growth into the sectoral collective agreements.
Minimum wage rise
The social partners agreed to immediately raise the national gross minimum wage. Since August 2007, it stood at a monthly figure of €538.53 (TN0704029S) and was increased by a further €20 on 1 January 2008. Together with the Ministry of Labour, Family and Social Affairs (Ministrstvo za delo, družino in socialne zadeve, MDDSZ), the social partners will speed up the negotiations on the additional rise of the national gross minimum wage, for which they intend to propose an increase of €35. Consequently, the method of adjustment of the minimum wage determined by the Law on the Determination of Minimum Wage (LDMW) (SI0608019I) must also be changed.
Štefan Skledar, Institute of Macroeconomic Analysis and Development