Slovenia: Guarded praise for effects of reform on youth employment

The number of young people with permanent employment contracts has risen following labour market reforms in 2013. The social partners have given the news a guarded welcome but say the reforms have not gone far enough; unions want greater protection of workers’ rights, while employers want lower labour costs.​

High levels of temporary employment among the young

Labour market conditions in Slovenia deteriorated between 2007 and 2014. The employment rate fell for workers of all ages, but especially among young people. Until Slovenia introduced labour market reforms in 2013, it was among the OECD countries that offered the strongest protection to workers on indefinite contracts, according to the OECD (2.17 MB PDF). Employers were not obliged to pay any direct costs when terminating fixed-term contracts, however, which led to a high share of temporary employment, especially among young people. In 2014, for example, half of employees aged 15–29 years were in temporary employment (Table 1).

Table 1: Share of temporary employment in Slovenia in different age groups, 2006–2014

Age group

15–24 years

15–29 years

25–74 years

Year

2006

2014

2006

2014

2006

2014

% in temporary employment

64%

72%

46%

50%

12%

13%

Source: Eurostat 2015

Labour market reforms

The age segmentation of the labour market has been a pressing problem for many years in Slovenia. The 2014 Development report (in Slovenian 1.3 MB PDF) noted that more young people are in temporary employment in Slovenia than in any other EU country. In 2014, 72% of employees aged 15–24 years in Slovenia had temporary jobs, compared with an EU average of 43% for this age group.

The main aim of the 2013 labour reforms was to increase labour market flexibility by:  

  • simplifying the administrative procedures associated with hiring and firing;
  • shortening the notice period;
  • reducing the costs of ending permanent contracts by cutting severance pay.

The reforms aimed to decrease segmentation in the labour market by:

  • reducing the difference in the cost of permanent and fixed-term employment;
  • simplifying procedures for terminating a permanent employment;
  • limiting consecutive renewal of fixed-term contracts.

The reforms also set time limits on fixed-term contracts and introduced better regulation of agency work to increase protection of workers’ rights. This included capping the proportion of agency workers staffing any one company at a maximum of 25%.

Impact of the reforms

In May 2015, the Ministry of Labour, Family, Social Affairs and Equal Opportunities (MDDSZ) and the Institute of Macroeconomic Analysis and Development (UMAR) published a second report on the impact of the reforms on the labour market (in Slovenian, 928 KB PDF). Comparisons with 2012 figures demonstrate the success of the labour market reforms. Newly concluded employment contracts have increased by 14.9%, youth employment by 12.6%, and employment of older people by 24%. 

In 2013, employers concluded 4% more employment contracts (102,491) than in 2012 and, in 2014, 10% more (112,956) than in 2013. The number of permanent contracts also rose year-on-year, by 28.5% (28,428) in 2013 and then by 5.4% (29,960) in 2014 .

The highest increase of permanent employment occurred in the 15–29 age group. Their share of permanent employment contracts in 2014 increased by 78% compared with 2012 (from 4,748 to 8,446) because of new measures promoting youth employment (the Law on Intervention Measures in the Labour Market). This finding indicates that more flexible labour regulations have encouraged employers to employ young workers on indefinite contracts. 

However, a high proportion of young workers continue to have temporary contracts. Of all new employment contracts among the young, just under three-quarters were fixed-term contracts (72% in 2013; 73% in 2014). This could be a result of the continuing economic recovery and employers’ resulting caution.

Figure 1: Share of permanent employment among all new employment, by age group

Source: Development Report 2015

Rise in agency work

The findings of the report also show a fall in student work, thought to be due to new regulations reducing the differences in labour costs associated with student work compared to regular employment. The report also finds an increase in agency work. The share of agency workers employed for a fixed period of time fell sharply immediately after the reforms from 74% in 2012 to 29% in 2013. Then, coinciding with an improved economy, the share rose again in 2014 to 52%.

Reaction of government

Two years after the labour market reforms, Peter Pogačar, Secretary of State for Labour, Family, Social Affairs and Equal Opportunities, said the reforms had been a success, lowering segmentation, increasing labour market flexibility, and reducing the discrepancies between indefinite and fixed-term contracts. He asserted, ‘This is a positive step, as the duality of the labour market reduces the ability of companies to adapt to shocks and unfairly distributes the load of adaptation, especially for the most vulnerable groups.'

The minister added that trend of increasing permanent employment was especially noticeable among the young, who often work in precarious forms of employment such as part-time or fixed-term employment. The European Commission evaluated the results of the two-year process positively. The MDDSZ sees further challenges in the area of self-employment, also among young, which shows some indications of precariousness. 

Social partners' responses

Jakob Počivavšek, executive secretary of the trade union confederation Pergam, agreed that the reforms have had some positive effects, especially on the higher share of young people with permanent contracts and the consequent decrease in labour market segmentation. However, he argued that this issue was less important because the problem of youth employment is more closely linked to precarious work and the fewer opportunities young people have to enter the labour market because they lack knowledge and experience and because there is an absence of measures to aid their employment.

Mr. Počivavšek criticised the high use of agency workers, despite the new quotas, and the lack of any real protection for economically dependent workers. He said Pergam did not support rapid changes in the labour market and sees the challenge as one of reducing the share of precarious work in order to protect economically dependent people.

Goran Lukič, a representative of the Association of Free Trade Unions of Slovenia (ZSSS), acknowledged that the reforms had had a positive impact on youth employment, but he stressed that employers are still trying to evade labour laws and reduce labour costs. While the number of young people in permanent employment had increased, one year after the labour market reform, unions had noticed an increase in student work and self-employment. Some young people reported that they had been forced to become self-employed by employers if they wished to continue working for them.

The Chamber of Commerce and Industry of Slovenia (GZS) regards the reforms as effective but believes they have not gone far enough and hopes for faster changes to the labour market to overcome high long-term unemployment, boost the economy and create new jobs. Employer organisations want a tax reform that would reduce labour costs for employers.

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