Hungary: Developments in working life – Q1 2016

Industrial action and protests in various sectors, wage bargaining in the competitive sector, difficult bargaining at company level, and a European Court of Justice ruling on Hungary’s cafeteria regulations are the main topics of interest in this article. This country update reports on the latest developments in working life in Hungary in the first quarter of 2016.

Strikes, protests and demonstrations

There were protests in many sectors in the first quarter of 2016. These included:

  • mass demonstrations by teachers and their supporters;
  • strike threats by workers at Hungarian Railways, Budapest Transport and VOLÁNBUSZ Transport Company, and strikes by the Trade Union of Public Collections and Public Culture Workers (KKDSZ), and by workers of the Miskolc transport company;
  • street demonstrations announced by representatives of health care workers, public servants and social sector workers;
  • a street blockade by taxi drivers against Uber drivers;
  • acts of civil disobedience in and around schools, including the ‘I won’t be in school’ campaign and the one-hour long ‘free class’.

Protests in the education sector

Checked shirts became a symbol of dissatisfaction and opposition in continuing protests by teachers, students and parents against government education policy after a former minister made disparaging remarks about untidy teachers ‘in checked shirts’ being a poor role model for young people.

Protests by education staff had a wider scope than just wages. Protesters called for the government to increase public spending on education to 6% of GDP, and the focus has seldom been on their own low salaries. Instead there have been demands for a profound reconsideration of the education system and fundamental changes, such as a radical decrease in the burden placed on children and teachers by badly executed educational reforms and sub-standard facilities. Campaigners also want the government to restore autonomy to schools and abolish the central administrative body, the Klebelsberg Institution Maintenance Centre (KLIK), which was established just two years ago.

Recent street protests on the education issue have been well supported. According to a poll, more than two-thirds of Hungarians agree with the teachers’ demands and nearly two-thirds believe a strike by teachers would be acceptable. Although it is too early to predict where the current protests will lead, they have already had a mobilising effect on society and have brought together many dissatisfied groups.

It is unusual for an issue to gain this kind of popular support in Hungary. The assumption of those not directly affected has tended to be that little is likely to change, and so the opposition of protesters and strikers has slowly faded away. However, on this issue teachers and their trade unions seem determined and they have promised to continue with their protests for as long as society supports their actions. 

Wage bargaining in the competitive sector

In Hungary, the first quarter of the year is always the time for wage bargaining in the competitive sector. Despite the overall good performance of the economy, this quarter’s wage negotiations were very difficult and led to only modest wage rises. For the first time since the introduction of the annual national recommendations on average wage increases, social partners and the government could not reach a full consensus. More strikingly, the recommendation, which was eventually issued with a majority support, does not include any figures or range of recommended wage increases.

Annual wage recommendations, by their very nature, cannot be considered as strong instruments of wage formation. However, they have had a proven impact on wage levels over the years. Social partners and the government no longer seem committed to balanced and moderated wage increases, and instead tend to leave much more room for market forces and the bargaining power of the social partners. This is a rather discouraging message for workers at the lower end of the wage scale or who are in a weaker bargaining position for other reasons. As a result, the wage gap between professions, positions and regions can only be expected to widen further.

Bargaining at company level

Bargaining was also difficult at company level. Two major employers, Hungarian Railways and Budapest Transport eventually agreed on wage increases and higher cafeteria payments, amidst strike threats and the probability of joint industrial action in the transport sector.

Cafeteria regulation

A recent ruling by the European Court of Justice has determined that the cafeteria system in Hungary is contrary to EU law on several points. Cafeteria in Hungary is a flexible non-cash benefit scheme for employees, with a list of possible benefits ranging from travel passes to Internet subscriptions, some of which have tax benefits. EU case law has determined that an employer is required to account for VAT on retail vouchers supplied to employees as part of a flexible remuneration scheme. As a result, major changes are expected to be made to the cafeteria system, which may affect the personal income tax system as a whole.

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