Slovakia: Latest working life developments – Q4 2016

The conclusion of three multi-employer collective agreements for public employees and a reduction in the costs and rise in the income of the social security system are the main topics of interest in this article. This country update reports on the latest developments in working life in Slovakia in the fourth quarter of 2016.

New collective agreements for public sector employees

Higher salaries for civil servants, public sector workers, firemen and rescue workers were agreed in the multi-employer collective agreements concluded for 2017. After several rounds of collective bargaining, representatives of the government and trade unions concluded the multi-employer collective agreement for civil servants for 2017 (PDF) and the multi-employer collective agreement for public servants for 2017 (PDF) on 1 December 2016. On 22 December 2016, a separate multi-employer collective agreement for fire and rescue brigades for 2017 was concluded.

This means that the salary rates of these employees increased across the board by 4% from 1 January 2017. Although the government adopted on 14 December 2016 decrees regulating public employees’ salaries in 2017, these do not cover teaching and professional employees and university teachers (their salaries increased from 1 September 2016). Unlike previous agreements, no changes were made to the standard weekly working time (now at 37.5 hours), five or six weeks’ basic paid holiday or any other provisions.

Negotiations with the government were tough because the trade unions demanded much more than the government could deliver, such as a 10% increase in salary rates, shorter working time and longer paid holidays. However, the social partners finally agreed with the government on supplementary conditions defined in the memorandum on adjustment of salaries of civil and public servants (PDF). The memorandum was signed on 1 December 2016 and is effective until 31 December 2018.

This does not cover all employees in the education sector (separate negotiations are currently underway). According to the memorandum, employees’ salaries will increase by a further 2% from 1 September to 31 December 2017 and from 1 September to 31 December 2018. From 1 January 2018, the salary rates of civil servants and public servants will increase by a further 4%. The trade union representatives promised that they would not demand other wage increases during the collective bargaining of public sector employees for 2018.

Financial consolidation of social protection schemes

Reforms to the social protection system in Slovakia continue in order to reduce its cost and to adapt to the increasingly ageing population. Between 1 January and 31 December 2017, the retirement age will increase from 62 years to 62 years and 76 days. This measure, which was approved by the government on 19 September 2016, aims to slow the rate of people claiming state pensions. According to statistics from the Social Insurance Agency, the number of people receiving retirement pensions rose from 957,633 to 1,048,842 between 31 December 2011 and 31 December 2016. The measure also increased the contributions to the second saving pillar in the pension system, by increasing contributions to the capitalisation fund from 4.0% to 4.25% in 2017.

It is expected that the amount of contributions to social and health insurance will increase as the ceiling of the assessment base increases; amendments to the laws on this were adopted by Parliament on 11 October and 30 November 2016. The assessment base for paying health insurance contributions will be the whole income of insured people (previously it was a maximum of five times the average wage). The maximum monthly assessment base for paying social insurance contributions (covering sickness, old age, disability, unemployment; plus employers’ contributions to the reserve solidarity fund) is increasing from five times to seven times the average monthly wage in the economy. However, for those claiming sickness insurance, maternity benefits or income compensations, the amendments to laws adopted on 11 October 2016 increased their maximum benefit paid, as of 1 January 2017, from one and half times to twice the national average wage.

Commentary

As expected, negotiations on higher salaries for some employees in the education sector will continue in 2017. Consolidation of the financial sustainability of existing pension schemes will continue with a further rise in the retirement age and by strengthening the capitalisation pillar to the detriment of the pay-as-you go pillar.