Project seeks to strengthen autonomous social dialogue at sector level

A project launched in June 2002 with the financial support of the EU's PHARE programme seeks to create an institutional structure for sectoral social dialogue in Hungary - an element virtually absent from the country's industrial relations system at present. The project, which includes support from a Danish expert team, aims to establish bipartite sector committees in 18 industries to provide appropriate fora for consultation on sectoral policies, facilitate collective bargaining and prepare the Hungarian social partners to play an effective role in the EU-level sectoral social dialogue.

Although the Hungarian industrial relations system which took shape in the 1990s formally includes three layers of national, sectoral and company-level institutions, the sector level is widely known to be the weakest of them - social dialogue and bargaining practices at sector level are fairly underdeveloped. In 2001, only 6% of employees were covered by voluntary sectoral collective agreements, and extension procedures (applying sectoral agreements to employers and employees not belonging to signatory organisations) increased coverage by only 2.1 percentage points (TN0212102S). Moreover, the contents of sectoral agreements are rather poor and the guarantees of implementation are doubtful (TN0207102F). Previous governments have established various sectoral consultation fora, which formally work with the sectoral Ministries, but neither employers nor trade unions have been satisfied with the contents and results of these negotiations.

As the Hungarian structure is in sharp contrast with the established structures of industrial relations in the majority of the EU Member States, not surprisingly, during EU accession negotiations the European Commission criticised Hungary several times for the weakness of the social dialogue between trade unions and employers' associations. The Commission urged the promotion of an autonomous social dialogue at the sectoral level. For example, its May 1998 Communication on Adapting and promoting social dialogue at Community level (EU9806110F) encouraged candidate countries to start preparations in the field of social dialogue, stating that domestic social dialogue structures and activities are a prerequisite for the social partners’ effective involvement in the European framework.

Pressed by the Commission's criticism, the Hungarian government stepped up joint efforts with the EU, under the latter's PHARE programme of assistance to candidate countries, to remedy the deficiencies of sectoral institutions. First, a plan was drafted together with the social partners within the framework of the tripartite National Labour Council (Országos Munkaügyi Tanács, OMT). OMT set up a tripartite 'operative committee' for decision-making on and implementation of a PHARE project on strengthening autonomous social dialogueat sector level. This committee designed a project to set up bipartite joint committees in Hungary, following the model of European-level sectoral social dialogue committees (EU0201236F). The operative committee suggested selecting 18 industries to set up joint committees in two waves. The first wave would include: textiles, leather and garments; catering and tourism; chemicals; electricity, gas, steam and hot water; machine-building; rail transport; bakeries, sugar and canning; post and telecommunications; and education. The second wave would consist of: the wholesale and retail trade; agriculture; metalworking; construction; road transportation; water supply and other community services; air transportation; health care; and culture and arts.

The project received EUR 2 million of PHARE contributions, and the Danish Labour Market Authority was selected as 'twinning partner' (foreign advisor in the PHARE terminology). The project runs until the end of 2003.

Goals and methods of the project

The fundamental objective of the project is to create an institutional structure at the sector (industrial branch, or sub-branch) level to enable the social partners to maintain effective consultation and engage in collective bargaining, as well as to prepare the Hungarian social partners to play an effective role in the EU level sectoral social dialogue when the accession of the country becomes a reality. Consultation means both bipartite talks between the social partners and talks with the government on industrial policies and other issues with sectoral relevance. The ways of achieving this overall goal were set out in the 'twinning covenant' signed by the Hungarian government and the Danish Labour Market Authority as follows:

  • to deepen knowledge on sectoral social dialogue, 'mapping' studies should be conducted in the 18 candidate sectors, and summarised in three comprehensive studies. The research findings should be discussed at an opening seminar with the participation of the social partners as well as the twinning partners concerned;
  • the operative committee should make study trips to various EU Member States in order to prepare an 'inspiration paper' on the possible ways of organising bipartite sectoral social dialogue in the Hungarian context;
  • potential members of the sector joint committees should be trained to acquire consultation and negotiation skills, and then the 18 sector committees should be established with a mandate of consultation between the social partners and of promoting collective bargaining;
  • supporting secretariats should be established for the sector committees, and their staff should be trained;
  • know-how should be transferred from the European social dialogue in order to enable the Hungarian sector committees to take part in European-level sectoral social dialogue committees; and
  • the government’s administrative capacity should be increased in the field of supporting autonomous sectoral social dialogue. The government is supposed to develop its monitoring activities.

Launch of the project

The mapping studies were completed as early as in February 2002. The project officially started on 1 June 2002, when the Danish advisor’s secondment to Hungary began. The opening seminar was held in September and the study tours were conducted in October. The first draft of the 'inspiration paper' was prepared by the government and presented to the social partners in November.

When the National Interest Reconciliation Council (Országos Érdekegyeztető Tanács, OÉT) was re-established in July 2002 (HU0209101N), the new government confirmed its commitment to carrying out the project, recognised the operative committee as a subcommittee of OÉT, and promised additional funding for the project and the social partners. The Minister of Employment and Labour stressed on several occasions that he was personally committed to the project, and keen to extend the sectoral collective agreements to be concluded in the would-be sector committees.

Lessons of the mapping studies

The mapping studies, prepared by the social partners, have shown the obstacles to sectoral collective bargaining in Hungary. At the sector level, both trade unions and employers are very poorly organised. Resources and experts are missing on both sides. Unions have practically no strike leverage at sector level, and they cannot force employers to accept their demands. In turn, most of the employers’ organisations are not authorised by their members to conclude a collective agreement, and once an agreement is reached, opt-outs by member companies are quite common. Moreover, in many subsectors the employers’ associations and unions are not counterparts as they tend to represent different parts of the given industry. A special problem of employers’ associations is that their membership is confined typically to the most important companies, but they are far from covering the majority of employers. Small and medium-sized enterprises (SMEs) especially are rarely represented by these sectoral organisations. Existing collective agreements are frequently unable to lay down common rules for the whole industry, due to the widely diverging financial position of companies and to the fairly uneven regional wage and employment disparities. Companies are keen to maintain their leverage over working conditions, and not ready to accept tight regulation of wages and working time by sectoral agreements. The studies have also found a mismatch between industries defined by rigid statistical classification and the organisational structures and initiatives of social partners. Some of the studies have highlighted that, while the Labour Code (HU0210101F) opens the possibility to conclude sector-level agreements, it does not provide effective legal means to facilitate the conclusion of such agreements. Other papers have pointed out a need for more stringent regulations concerning the representativeness of social partners at this level.

The background papers, however, have highlighted that both employers’ associations and unions are keen on having sector committees. Both partners consider them an opportunity to consolidate their own internal structure, engage in mutually useful negotiations with each other, and finally to have a regular consultation opportunity with the relevant governmental organisations over a number of issues.

The opening seminar

At the opening seminar in September 2002, both trade unions and employers supported the project’s objectives. Both sides, however, reiterated their somewhat diverging expectations of the results of the project. Employers focused on strengthening their lobbying capacities through consultations with Ministries, while trade unions clearly stated that they were looking forward to having meaningful collective bargaining and that sectoral agreements concluded needed to be extended. Surprisingly, the employers’ side also supported the idea of more sector-level collective agreements. Basically, employers’ organisations consider sectoral agreements to be useful regulatory means for creating conditions of fair competition. Nonetheless, they also expressed their reservations. The representative of the Confederation of Hungarian Employers and Industrialists (Munkaadók és Gyáriparosok Országos Szövetsége, MGYOSZ), the largest employers' confederation, warned that the evolution of more stringent sectoral agreements would inevitably change the role of collective bargaining at company level. He also stressed that sectoral agreements with real regulatory power would be feasible only in certain sub-branches of the economy, in which the structure of companies had already been consolidated.

The domestic and international experts invited to the meeting stressed that in the course of the project's implementation, 'tailor-made' solutions fitting into the Hungarian context should be developed. The practices of European-level sectoral social dialogue or those of any of the Member States can not be copied, even if they were successful in their own environment.

Negotiations to define detailed rules of operation

Existing conceptual differences between government, employer and union approaches have surfaced in the preparatory work for the 'inspiration paper' which is supposed to define the detailed rules of the operation of the sector committees and outline the necessary legal changes in order to insert the new institution into the existing system of industrial relations. The government’s first draft offered an open-ended structure with three different models for the sector committees, from which social partners can choose according to their preferences and needs. In the first model, the sector committee is a consultative forum. The second model assumes that social partners engage in collective bargaining as well, and the voluntary agreements they conclude could be extended by the Minister on the joint request of the social partners, according to the procedure specified by the Labour Code. The third model empowers sectoral committees to conclude collective agreements with mandatory power in the given industry. The paper proposes different representativeness criteria for each of the models: the more powers a model has, the stricter the criteria that apply. As sectoral representativeness is not regulated by the Labour Code, a tripartite ad hoc team was set up to work out alternative proposals based on measurable criteria for both employers' organisations and trade unions. The proposal also tried to determine the two sides' joint coverage as the scope of the potential agreements to be signed in the committees. The proposal is currently being debated by the social partners. Allegedly, there are major differences concerning the different models and the attached representativeness criteria.

Commentary

The PHARE project is addressing one of the severest shortcomings of the Hungarian industrial relations structure, the lack of proper social dialogue at the sectoral level. The project has mobilised employers’ organisations and trade unions across industries. Beyond the contributions to mapping studies and negotiations directly related to the project, genuine bipartite contacts have been more vigorous since the project began.

The 'inspiration paper' prepared by the Ministry of Labour and Employment (Foglalkoztatáspolitikai és Munkaügyi Minisztérium, FMM), however, went beyond addressing the lack of sector-level institutions. By offering three models of operation, it put on the negotiating table the unions’ proposals concerning the development of sector committees into genuine bargaining committees setting wages, terms and conditions of employment. While the first two models basically seem to be manageable with minor changes to the current legal environment, the third model would represent a genuine shift from the current liberal regulation concept. It would practically establish the institutional framework of a sector-level wage determination regime, similar to the sectoral wage determination committees (bérmegállapító bizottság) of the pre-communist period in Hungary, or to current practices of certain EU Member States.

Still, there are many open questions to be decided. Unions would very much like to convert the sectoral committees into a bargaining forum. The government has also expressed its support for strengthening sector-level regulation. However, given the lack of support from the employers’ side, the adoption of the all-encompassing third model across the planned 18 committees is practically ruled out. No doubt, the negotiations over the forthcoming period and the experiences of the first committees will shape the future of the Hungarian industrial relations system. (László Neumann and András Tóth, Institute of Political Science, Hungarian Academy of Science)

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