Hungary: Debate on extension of working time reference period

In order to help combat Hungary’s labour shortage and to balance the working time of employees in companies where periods of productivity can often fluctuate, changes to the Labour Code by the Parliamentary Committee on Economics have been recently introduced, allowing employers to ‘bank’ working time so that it can be offset against quiet periods. However, the change has not been well received.

Background

Economic actors, social partners and the government all agree that Hungary’s labour shortage has now reached a level that threatens the country’s economic growth. The sectors hit most by the shortage have been lobbying for legislative changes to enable them to use their workforce in a more even and flexible way in a fluctuating market. The use of overtime and flexitime are potentially effective ways for employers to tackle the current labour shortage.

Act 1 of the 2012 Labour Code takes advantage of most of the options provided for by EU Directive 2003/88/EC on working time. Importantly, in the current context, an employer may schedule working time in a maximum reference period of four months (or 16 weeks), thus meeting the EU limit of 48 hours per week over a longer time period. In special cases, such as continuous operations, shift work, seasonal work and so-called ‘stand-by jobs’, employers can unilaterally adopt a reference period of up to 6 months or 26 weeks. The Labour Code also stipulates that an employer and trade unions can agree on a longer reference period (a maximum 12 months or 52 weeks) in their collective agreement. Sectors facing considerable fluctuation in their market orders could thus plan an effective use of their available workforce.

While collective agreements are still not widespread in Hungary (the extension of the reference period is far from common) the maximum 12-month reference period is too short for sectors with long production cycles and which are subject to global market fluctuations – as the justification of the bill states.

Proposed amendments to Labour Code

The Parliamentary Committee on Economics initiated the amendment of the Labour Code on 11 April 2017, without informing the social partners or any public discussion. In Hungary, a parliamentary committee has the same right to table a bill as the government itself and this has become common practice. However, while the government is legally obliged to initiate consultation and a public discussion in such cases, a parliamentary committee is not. The bill, according to its general justification (PDF), intends:

to protect workers, ensure they maintain their jobs in an ever-changing economic environment and provide them with stable and regular earnings and, with that, to provide for the employers permanently adequate working capacity and make production predictable and easy to plan

It says the way to achieve this goal is ‘to synchronise the actual working time and the operating time better’.

The bill, among other things, proposes that the reference period be extended from the current 12 months to 3 years by collective agreement, allowing the ‘scheduling of the used and unused working time within that period’. However, the rule that (on average) in 12 months the weekly working time (including overtime) may not exceed 48 hours, would remain unchanged. Thus the real issue is not to increase the maximum average annual working time, but to make it possible – in case of high temporary production decline – to bank the unused ordinary working time for subsequent years, thus avoiding overtime in peak periods and paying additional bonuses.

According to the media, the automotive sector, for example, would have preferred the longer reference period due to the long-term ups and downs in the global market. As the chair of the parliamentary committee argued in the plenary session of parliament, a longer reference period would be a more worker-friendly arrangement in order to accommodate market fluctuation, rather than dismissing workers when production and customer orders are low.

According to the bill, hourly paid workers should receive fixed monthly wages within the reference period, irrespective of the actual hours worked. Only the implementation of a collective agreement could stipulate a different arrangement. This measure is intended to stabilise regular workers’ income, although the reliable administering of working hours has been questioned by legal practitioners who were interviewed by correspondents for this article, after a number of working time court cases.

The bill included several other modifications such as expanding the definition of ‘a working day’, providing only one rest/holiday per month in certain job categories, allowing workers to give their consent ‘voluntarily’ to the modification of the working time schedule by an employer at short notice.

Social partner reactions

Trade unions have not only attacked the bill, but the way that it was submitted to parliament. According to the Federation of Chemical, Energy and General Workers’ Union (VDSZ), the bill clearly favours multinational companies to the detriment of workers and their wages, particularly in industrial businesses. The union estimates that an average worker’s overtime without extra remuneration may rise by up to 400 hours per year, if the amendments are approved.

The Hungarian Metalworkers’ Federation (VSAS) and the automotive trade unions strongly oppose the proposed amendments. The reference period of one year is already an available option and, as they have argued, it is applied by an increasing number of employers although it may be a burden for workers. Currently, rest/holiday periods are often scheduled without taking into consideration the provisions of the Labour Code, which allows 10 to 21 days of uninterrupted work periods.

Three national trade union confederations who are most concerned by the proposal have demanded that the Permanent Consultative Forum of the Competitive Sector and Government (VKF) should be urgently convened, a view that has been supported by the government.

However, employers have been slower and more cautious in formulating their views about the bill. Dávid Ferenc, Secretary General of National Association of Entrepreneurs and Employers (VOSZ) stated that the planned modifications would negatively affect workers and proposed developing a sectoral response to the specific constraints of a given sector. VOSZ and the government have also stressed that the bill had not been properly prepared and discussed. The proposed amendments have been publicly criticised by several ministers.

On 25 April 2017, preceding the VKF session, the major national trade unions were invited to meet the parliamentary committee that tabled the bill. Trade unions have expressed their disagreement with the modifications of the amendment, which they believe would make workers even more vulnerable to exploitation. They have not only attacked the three-year reference period, but also the planned option that an employer could modify the working time schedule four days prior to commencing work, which they believe is easy to implement in the case of vulnerable workers.

Members of the committee, having heard the arguments and strong opposition of trade unions, cast 11 votes for the withdrawal of the bill, with 1 abstention. Committee members representing the ruling political party have called upon the government to discuss the working time regulation with the social partners. These discussions have as yet not taken place, and it would appear that no other proposal is in the pipeline.

Commentary

The intention of the bill was to respond to a pressing problem – the shortage of workers in the automobile industry, which has weakened performance and possible further investment. The problem has put employers in direct competition on wage differences with more favourable pay options offered by neighbouring Slovakia. This has created an exodus of skilled Hungarian workers, not only to Slovakia, but also other, ‘old’ EU Member States.

Taking into consideration the longer-term production cycles and substantial fluctuation in market orders in the automotive industry, the bill offered a special arrangement, which would allow employers to fulfil production peaks with their present workforce. It ensured a longer time-frame within which working time ups and downs could be levelled, reducing the need for extra paid overtime. The initiators of the bill had thought that company collective agreements could provide a suitable framework for introducing the arrangement, along with concessions that trade unions might ask for. However, right from the start, trade unions opposed the planned modification. Since employers, in general, have been comfortable with the current 12-month reference period, national employer organisations have not had much involvement in the debate.

The bill was removed from the parliamentary agenda within two weeks. Despite that, the issue of more flexible working time arrangements is expected to come up again, since the government has not ‘completely’ rejected the motion and is still committed to developing car manufacturing in the country. Spring 2018, after the general parliamentary elections, could be a suitable time for this.

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