Hungary: Annual Review – 2011

  • Observatory: EurWORK
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  • Published on: 28 November 2012



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There is a new political regime emerging in Hungary since the authoritarian centre-right Hungarian Civic Union (FIDESZ-KDNP) coalition has won the national elections with 2/3 majority in May 2010 and local election in October 2010. However aims and tools of building this new regime are still not clear enough. It seems to be a hectic reform making without independent impact studies, social dialogue and legal guarantees. Although these measurements can also be a well thought, complex but poorly communicated programme’s major steps. Many decisions have been made during this year, which have been hardly criticised by the opposite parties, the trade unions, civil organisations, the EU and the international press. Many changes have been codified during this year suddenly changed in the last minutes and in several cases revised or specified after passing the parliament and other suspended to take effect from 1 January 2012 or later on in 2012.

1. Political and economic developments

Please give very brief details of:

  • The government (s) in office during 2011

Fidesz-KDNP is the governing coalition led by Prime Minister Viktor Orbán since the national elections in May 2010. The coalition has a two-third majority in the Parliament.

  • Any general or significant regional/local elections held in 2011

There were no significant elections held this year – only some interim election in local communities

  • Any other significant political events which took place in 2011

The EU presidency has determined the first six months of the Hungarian politics focusing on four main topics: growth and employment for preserving the European social model; stronger Europe; citizen friendly Union; enlargement and neighbourhood policy. The main achievements have been the Danube, the Roma (HU1107011I), and the integrated Energy strategies, latter seem to be too abstract and lacking financial background.

The Hungarian presidency has a little lost its credibility due to the new media regulation (HU1012011I), getting under the national and international press’ skin. Main critical points were the lack of independence of journalists, the power concentration of media board and regulations doubted to restrict the freedom of reporting.

The government has approved a new Constitution, a new strike law, a new Labour Code (HU1111011I) and a newly modified taxation system (HU1011011I), thus restricting civic and labour rights and obligations to balance the national debts; aiming to improve economical and national credibility. From 1 January 2011, Hungary has got a flat rate personal income tax system with a 16 percent flat-rate personal income tax. Later the year the government revised this taxation by introducing several (crisis) taxes for higher incomes. The introduction of the flat rate tax resulted, that people with low incomes have a decreased net income, while the higher incomes have got higher net earnings.

The government has approved the new regulations of parliament elections, changing it to a single-round election system, cutting the number of the member of the parliament from 386 to 200, tracing the constituencies and bounding their modification to two-third majority votes.

The Hungarian government will no longer have to consult unions on setting the minimum wage as of 1 January 2012. It is changing the tripartite interest reconciliation system, with a new body, the National Economic and Social Council (NGTT) replacing the National Interest Reconciliation Council (OÉT). The NGTT will include representatives of employers, workers, chambers of commerce, and churches, but it can only propose changes. Unions and employer organisations object this (HU1107021I).

  • Any forthcoming national or important regional/local elections or significant political events

The new constitution passed the parliament in 2011 and came into force on 1 January 2012, sharply criticized by European and international level but also by the opposition in the parliament, Trade Unions, media and civil society.

  • Any major economic developments which are likely to impact upon employment and industrial relations.

The economic crises and national and households’ debts have lead to a difficult situation in Hungary. The permanently changing regulation, and the insecure national economy and politics are making the business and decision makings for both employers and employees difficult and uncertain (HU1202031I and HU1104011I).

If a new government took office during the year, briefly summarise the implications for policy on employment and industrial relations.

2. Legislative developments

Please give brief details of important legislative developments with implications for industrial relations and working conditions, where these are not covered in other sections of your response. For example, this might include new or amended legislation on issues such as employment rights, working time, pay and conditions of employment, termination of contract, equality, social security (with implications for the employment relationship), training, new forms of work, the labour market, health and safety etc.

During the year there were the decisions taken and the legislation changed. 213 bills have been adopted during 2011 many of them affecting the world of work. Most of the regulations are coming into force from the 1 January 2012 or during 2012;

The National Interest Reconciliation Council, Országos Érdekegyeztetõ Tanács OÉT has been abolished (HU1107021I);

The Labour Code has been amended (HU1111011I);

The rights to strike have been cut (HU1202051I);

The Constitution has been changed;

The taxation system has been fully restructured (earlier this year: HU1011011I, and now from the 1 January 2012 there were further changes and kinds of taxes introduced);

Wage and Tax Monitoring Committee has been set up (HU1104011I);

The food vouchers system has been restricted, and issuing of these vouchers became state monopoly by the 1 January 2012. The food vouchers have been tax-fee allowances and significant parts of the employees’ incomes; the new system is highly under critics by the Union of Commerce, because the main multinational retail companies have cancelled, that their employees participate from the new voucher system, as only some Hungarian companies taking part in the system where the vouchers can be cashed in by the beneficiaries;

The pension system has been centralised (HU1012011I), and the early retirement has been abolished even for retired people. If they are under the age of 60 years, they got redirected to the labour market. Early retired receive health care but the allowance will be taxable;

The men of military age must be registered;

The capital’s hospitals became nationalised, which will be followed by the nationalization of the counties’, later on the cities’ hospitals, so that all hospital workers will be employed by the state and financed by the state’s budget;

The smoking ban got strengthened this year: at public transport stops, at work places, at pubs and bars it is not allowed any longer to smoke, which influences also consuption and business, not only health and behaviour;

The higher education system has been changed (HU1202021I) The Hungarian government is battling with students over a new higher education law passed at the end of 2011 that slashes the number of state-funded courses. The government believes that Hungary’s future depends on professionals in science and technology and views qualifications in social sciences, law and economics as being of little value on the labour market. It hopes the new law will halt the brain-drain, while critics believe it will drive students to seek education abroad. It is also planed, to let the state granted students sign a contract, in which they agree not to work abroad for double the time of their education in Hungary ;

The vocational education has been changed to follow the European directive concerning dual systems from the only schoolar system, through this change the practical skills must be developed and a cooperation between educational istitutions and employer organisations must be increased, according to the argumentation of its introduction.;

The so called "chips tax" on food containing high sugar, salt, carbohydrates and caffeine came into force in September. The government expects the tax to generate revenue of HUF 20-30 Billion (EUR 65-70 Million) in 2012. Stake holders in the food industry said that they had not been informed and involved into the process of changes to the tax even if it will have impact on both consumption and employment.

3. Organisation and role of the social partners

Please provide brief details of any major changes in the organisation and role of the social partners in your country during 2011. This might include trade union or employers’ organisation mergers, changes to social dialogue structures, or changes in membership levels and representativeness.

In 2011 the government has made all efforts to restrict social dialogue and bargaining rights, and the trade unions to keep or regain these masking themselves to clowns (in June), or moving 50 000 people (in October) to the streets of Budapest.

The right to strike has been shortened by the 1 January 2011.

The main institution of national reconciliation system has been changed to a professional, advisory board (NGTT), where not only the social partners (TUs, WCs, EOs and the state’s representatives) are taking part, but other non-profit organisations’ representatives, and other professionals too.

The authoritarian centre-right government is changing collective rights determined in the Labour Code, which is doubted to be in line with the European Social Charta and restrict collective bargaining rights (HU1111011I). It included proposals to restrict the collective ability of trade unions.

There were no major changes in the social partners’ organization.

The trade unions are continuously fragmented: in a country with 10 million inhabitants, there are six competing trade union associations (SZEF, Liga, MSZOSZ, MOSZ, ASZSZ, and ÉSZT). The trade union density has been slightly decreased in 2011 to now around 14% country-wide.

4. Developments in collective bargaining and social dialogue

Please give details of the number of collective agreements negotiated in 2011 by level (e.g. national, sectoral, company), compared with numbers of agreements negotiated in 2010. Outline any trends/shifts between levels of bargaining, or changes in bargaining coverage.

In Hungary, there are only a few sector-wide collective agreements at either company (11%) or multi-employer level (2%) and the minority of the employees are covered by collective agreements (23%) (Budapest, 2010, J. Neumann- I. Grajczjár-A. Tóth, 229-230. pp.) . There is no available sectoral or national study based on statistically or qualitatively valid research on collective bargaining or agreements. Until 2010 at the National Council for the Reconciliation of Interests (OÉT) the government agrees with employers and unions on a nominal overall gross wage increase. In 2011 the government has stop consulting unions and employers on minimum wage, and the National Economic and Social Council (NGTT) can only make recommendations (HU1107021I)

  • To what extent are there derogations from collective agreements? Describe any trends in terms of derogations.

The collective agreements for the public Media, for the public transportation in Budapest (BKV) and the sectoral bakery agreement have been abolished in 2011with reference to restructuring (Media) and financial problems (BKV). In the bakery sector it has been difficult also in former years to renegotiate the agreement. Bakery employers are not really interested. Even the former agreement could only be signed after bigger concessions in wages by the Union.

  • If there have been any major bipartite or tripartite initiatives at national level, please provide details. (Do not include initiatives which deal specifically with the economic situation as these should be covered in question 5)

No such initiatives

A major change is that the government does not negotiate collectively with the social partners in the OÉT; it meets the representatives of the trade unions and the employer associations one by one.

  • Other conditions of employment (these might include training and skills, job security, occupational pensions, equal opportunities and diversity issues)

Information on developments in pay and working time in the course of 2011 is being collected in the Annual Updates on working time and pay, and therefore does not need to be reported here.

5. Responses to the economic situation

With regard to the current economic situation, please give brief details of:

  • cross-sectoral and sectoral level initiatives, the responses of the social partners in your country, with a focus on any bipartite or tripartite initiatives to tackle any economic problems;

There were no such initiatives; the bipartite or tripartite initiatives have apparently lost power, prestige and role during the last two years.

  • government responses to the economic situation with an impact on industrial relations and on labour law;

The government has introduced extraordinary taxes, increasing employers’ expenses and has changed the Labour Code (HU1111011I). The aims of these regulations should be the rationalisation of state budget. The government takes decision, introduces law and regulations also as a response to the consequences of the crisis, like :

  • a flat rate personal income tax system (16%)– compensation system, monitoring committee – than introducing a higher VAT (27%) from 1 January 2012;
  • crisis taxes from the bank sector in one hand – tax allowances to the bank sector on the other hand;
  • centralizing pension system, pulling private pension for savings – recovering private pension funds;
  • decision to introduce a new Labour Code – adopting some changes in the existing Labour Code;
  • creating many part time job opportunities for unemployed, disabled, cutting thousands of employees at public services;
  • obligation to work for unemployed people to receive unemployment benefits;
  • creating online administrative systems with high criteria systems
  • and any significant effects of the economic situation on the industrial relations system.

There is no social dialogue between the states and the social partners’ representatives which conducted to demonstrations and appeals to the Constitutional Court

(see in question 7)

If initiatives have been reported in an earlier Annual Review, please provide an update.

6 Developments in working conditions

Please report the most important developments in the field of working conditions and quality of work and employment during 2011 in your country. The following topics should be taken into consideration:

The given situation in Hungary does not offer job security but the opposite, especially in the public sector and public services are jobs threatened, the right to strike got cut. The number of company liquidations (16,5% more than in the last year) and dissolution (168% in comparison to the data in 2010) has risen significantly. Even though 40 thousand new companies have been registered in the first 10 months of 2011, which does not seem reasonable, and could be interpreted as increasing number of “phantom” companies. Anyhow these tendencies do not strengthen employability and job security.

The government agreed with employers and unions, at a meeting of the National Interest Reconciliation Council (OÉT) late in 2010, on a nominal overall 4%–6% gross wage increase from 2011 to help Hungarian workers keep up with inflation and economic challenges.

According to this agreement, minimum wages were to be increased by 6.1% (HUF 78000) and guaranteed minimum pay by 5% (HUF 94000). At a subsequent OÉT meeting, social partners agreed that employees, whose pay dropped after the introduction of the new flat-rate 16% personal income tax, should be compensated. (HU1104011I)

Table: Average earnings and hours spent at work in Hungary
 

Average earnings net, HUF (EUR)/ head/ month

Average hours spent at work, hours/ head/ month

2010

132 604 (EUR 442)

145,8

2011    
1st Q

139 634 (EUR 465)

148,9

2nd Q

141 058 (EUR 470)

147,5

3rd Q

137 544 (EUR 458)

142,7

Source: HCSO (http://statinfo.ksh.hu/Statinfo/haViewer.jsp)

The Hungarian government introduced incentives to increase the employment rate and help both state and companies save money. Specifically, say some unions, the government wants to cut red tape and the costs of hiring and dismissing workers, thus putting employers’ interests and state budgets before the rights of workers. (HU1106021I) Many of these changes have been codified in the new Labour Code amended in 2011 (HU1111011I).

However the number (461800, of which 48% female) and rate (10,6%) of unemployed is still very high in Hungary in the first 3 quarter. The unemployment subvention has been reduced to 3 months. The new amount of jobseeker's allowance in the first month is 90 % of the last earnings, in the second month 80%, in the third month 70%.

From May 2011 the German and Austrian market has opened its labour market for the countries joining the Union in 2004. However the migration has not risen significantly as it was forecasted. Exception is only the high qualified and young doctors (HU1201011I). According to the Doctors Association around 100 doctors are leaving the country every month.

From July 2011 a new career model, the so called Career Bridge Programme (http://www.nki.gov.hu/szemelyuegyi-tanacsadas/473-elindult-a-karrier-hid-program) is being introduced for the public employees. In 2011 the government has taken the decision to reduce a high number of public employees. The programme intends to secure job and a great career possibility for them in the private sectors; for this very reason provides them with consultation and training opportunities.

From 1 August begun the public work program from HUF 20 billion state subvention; mostly Roma people received daily eight hours job for four months, mostly in the afforestation.

  • health and well-being of workers – including health problems, risk exposure, impact of changes in work organisation, and violence, harassment and discriminations;

The smoking ban got strengthened this year: at public transport stops, at work places, at pubs and bars it is not allowed any longer to smoke (the latter is only due from 1 January 2012, but the decision was taken in 2011.

  • developing skills and competences – including qualifications, skills and competences, career prospects and training opportunities

As mentioned above (page 3) the vocational education has been changed to follow the European directive concerning dual systems from the only schoolar system (4-5 years at school and than at the labour market without direct link or practice), through this change the practical skills are aimed to be developped and the transition from educational istitutions to a company/employment is aimed to be facilitated.

From September has begun the dual education system in 28 professions. The students work from the first year in workshops and after 3 years they become graduated in their profession.

On 21 November the Government approved the bill about the development of vocational training and state contribution system.

The government has adopted the public education act, valid for all public schools and kindergartens; children must go to kindergarten from the age of 3 years, the compulsory school age has been reduced by 2 years (from the age of 18 to the age of 16); and includes the model of teachers’ career.

  • work-life balance – including issues such as working time, time management at work and social infrastructures.

The duration of maternity leave has risen to 3 years; mothers returning to work can receive concerned subvention only if they do not work more than 30 hours a week. From 2011 women can go to retirement after 40 working years including time spent at work and child-care duties.

From 1 July 2011 the 1 July became an additional holiday for the employees of health services.

The government has adopted the bill about the elimination of the possibility of early retirement.

7. Industrial action

Please give brief details of strikes and other industrial action during 2011, including:

  • statistics on the number of strikes, workers involved and working days lost (absolute number and per 1,000 workers) for as much of 2011 as is available (please indicate briefly what types of action are or are not included in these figures – e.g. are only strikes with a minimum number of workers or days lost included, or is only “official” action included?), and how this compares with previous years; and

There are no such statistics available.

  • any particularly large or significant strikes/lockouts or other disputes;

In 2011 the Hungarian trade unions have protested several times against the government on political level; they have been fighting against decisions, or draft bills, applying for a wider society’s attention. It seems that the political left wings and liberal parties have lost trust; they could not move thousands of people. Trade unions felt the necessity to go for political rights against the new pension system, the media law, the strike and labour law changes. These decided or planned amendments during the year have often affected public employment - , and in the private sector the government has made advantageous positions for the employers, so that trade unions had to fight against the government as the public employer but also against the government taking decisions favouring only the employers, avoiding social dialogue.

As the right to strike was restricted (HU1202051I), some industrial disputes could not get escalated by the unions, as courts decided to late or against the strike. E.g. the electricity workers bargaining for a new collective agreement could not go on strike in summer 2011, because the court decided, that this strike would endanger the provision of customers with electricity.

Main disputes

  • 14 and 27 January: demonstration against the media law (around 7000 participants)
  • 9 April: ETUC demonstration against European austerity and for general labour rights – with 40000 participants
  • 11 April: the Law Enforcement and Administrative Workers Union demonstrated with 500 participants for a career program, for wage increase and for keeping their pension system
  • 12 Mai and 23 March: MALÉV strikes for 1-2 hours at the airport as the union could not agree with the employers on the desired wage increase.
  • 5 June: picket of the pedagogues, participation of a few hundred people for higher salaries, a balanced working time schedule and a carrier program for all pedagogues
  • 16 June: clown revolution: Some hundreds of fire-fighters and policemen demonstrated publically to raise their voices against a government decision abolishing early retirement.
  • 12 September: Autonómok, ÉSzT, MSzOSz and SzEF protested against the flat tax, the planed labour law and other decisions which are negatively influencing the decent living of employees with the participation of around 1000-1500 activists.
  • 29 September – 1 October: 70 trade union, civil and social organizations demonstrated against the draft Labour Code and for the social dialogue with around 40000 participants all over Hungary
  • 1 October: the Hungarian Solidarity Movement has emerged to strengthen social solidarity and pose an alternative for the given political regime but also as a signal for the existing confederations to cooperate better. From the start the main organisers have been mainly line younger trade union leaders, later other organisation joint to strengthen possible influence on politics. It is not yet decided whether this movement will act as social partner or as political party.
  • 3 November: Liga road blocks for the social dialogue at around 20 locations all over the country

8. Restructuring

Please give brief details of major and significant incidences of company restructuring and workforce reductions in 2011 and how they were dealt with, especially where these led to important industrial disputes or collective agreements, or had other notable industrial relations implications.

State has bought the majority of MOL, RABA stocks, it has overtaken MAL to avoid further red mud catastrophes and has centralised the local governments’ institutions (schools, hospitals, etc) and the national media with significant change in structures and functions. The government aims to rationalise these firms and institutions, to strengthen the national sense of security.

Due to the introduction of a special crisis tax for multinational companies the Bank sector announced a closure of more branches and a dismissal of hundreds of employees.

The greatest losers of these changes have been the construction (its volume has dropped by 14,3 % in the third quarter in comparison to the last years same period), the services (- 0,7%), and commercial real estate (-1,3%) sectors this year.

The greatest winner of the year where the agriculture (+29% in the third quarter in comparison to the last years same period) and the industry (+6,8%) and automotive sector like Audi and General Motors, Opel, Huawei, ZF; and IT providers like Nokia, with its suppliers like IT-Services, Sony-Ericson, Videoton (see fact sheets).

9. Other relevant developments

If there been any other significant developments affecting employment relations in 2011 that have not been mentioned above, please give brief details.

No other relevant industrial relations developments have occurred in 2011.

Ildikó Krén, Zsuzsa Rindt, Solution4.org Bt.

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