Slovenia: Latest developments in working life Q1 2019

A social agreement for a renewal of the wage system, a general collective agreement for the economy, and new legislation to reduce the tax burden on labour are the main topics of interest in this article. This country update reports on the latest developments in working life in Slovenia in the first quarter of 2019.

Chamber proposes social agreement for wage system renewal

In March 2019, the Chamber of Commerce and Industry of Slovenia presented a proposal to trade unions for a social agreement on renewing the wage system and wage growth in 2019–2025. ^[1] The proposal foresees a 24% increase in the average gross wage by 2025, with wage growth lagging behind productivity growth.

The current wage system is deemed to be outdated, complicated and non-transparent. The proposal envisages that employees should not receive a lower salary in the aftermath of the agreement and the wage bill should not increase either. The ratio between the minimum and average wage should decrease, and wage growth in the public sector is likely to lag behind the growth in the private sector. The lowest basic salary of the first tariff class is expected to increase to the minimum wage amount and should include all allowances, except those for night work and working on Sundays or during public holidays. Labour costs will no longer be automatically adjusted, but subject to an agreement between social partners.

The proposal also predicts an increase in education and training funding for older employees, and an increase in research and development expenditure. It foresees the reduction in VAT rates by one percentage point up to 2025 and the elimination of a lunch break from the definition of working time.

The trade unions responded to the proposal with little enthusiasm.

Unions submit draft collective agreement for the economy

In March, the Chamber of Commerce and Industry received a proposal from six trade unions for a new general collective agreement for the economy. The agreement had been under development for 13 years, since the previous one expired. The trade unions claim that the coverage of collective agreements fell during this time, from 100% of employees in the private sector covered to about 70%. They also say that there are fewer collective agreements now and the status of employees differs significantly: while some are covered by collective agreements, others have minimal rights under the Employment Relationships Act. Also, while law and the general collective agreement for public sector activities govern relations in the public sector, in the private sector it is not clear what the price of work for a given profession is.

The Chamber of Commerce and Industry’s first response to the proposal was that it was not a real starting point for negotiations. ^[2]

Tax burden on labour to reduce

At the beginning of March 2019, the Ministry of Finance proposed nine tax changes. Six of these relate to reducing the tax burden on labour. Among the most important changes is a higher general tax deduction on wages, which would increase the income of the majority of employees. ^[3]

At the end of March, the government adopted the first set of tax legislation changes and raised the threshold for the exemption of annual leave allowance from personal income tax and social contributions. The measure will be applied this year, but only for annual leave allowance up to the average national monthly wage. ^[4] Additional tax relief is also planned for the thirteenth salary. Social partners agreed at the Economic and Social Council that this measure on holiday allowance should be implemented as soon as possible, whereas the other tax changes will be subject to negotiations.

Public sector agreement leads to higher prices in some sectors

The new government successfully signed a public sector wage agreement at the end of 2018, averting the civil servant strikes that had previously been announced. ^[5] However, this resulted in higher prices for social services in retirement homes and kindergartens at the beginning of 2019. ^[6]

Prices in retirement homes were adjusted early in the year, with additional adjustments available if labour costs go up by more than 1.5% since the previous adjustment.

The increase of public sector wages could also result in higher supplementary health insurance premiums and more expensive in-home support services over the next few months.

Tackling the ageing population issue

At the end of February, the European Commission recommended that the Slovenian government strengthen investments and resolve challenges related to the ageing population (healthcare, long-term care and the pension system). Social partners emphasised the upcoming legislation changes regarding fiscal policy, pension and disability insurance, labour market regulation and social agreements. They also requested having a more active role as social partners in the development of European Semester documents and stressed the need for changes in the labour market, adult education, competitiveness and social transfers.

• Economic and Social Council of Slovenia: Srečanje socialnih partnerjev članov ekonomsko-socialnega sveta s predstavništvom evropske komisije