Slovenia: Controversy over amendments to the Minimum Wage Act

The definition of the minimum wage in Slovenia was changed at the end of November 2015. From 1 January 2016, the allowances for unfavourable working time (night, Sunday and holiday work) are exempted from it and paid separately. Trade unions are pleased, but employer organisations were outraged and resigned from the social agreement for 2015–2016.

Amendment of the minimum wage

The debate about the exemption of allowances from the minimum wage began in late 2014 during negotiations on the social agreement. It was one of the most controversial issues discussed. The unions asked for allowances for work at night, on Sundays and on public holidays to be exempted from the minimum wage and paid separately. They felt this would partially redress the considerable injustice to people paid the minimum wage who work unfavourable hours yet are given no extra allowance for this, while other employees on higher wages are entitled to unfavourable working time allowances under collective agreements.

Employers rejected this demand, but the three sides agreed that all issues relating to the minimum wage would be removed from the text of the social agreement and resolved by consensus. The Minister of Labour, Anja Kopač Mrak, pointed out that the main problem with the minimum wage in Slovenia was its contribution to labour costs. She announced that the government would prepare a comprehensive tax reform during 2015 to reallocate the existing tax burden, although this did not happen. The minister also said she believed in social dialogue and intended to do everything possible to ensure the representatives of the government, employers and trade unions would together finalise the changes to the minimum wage rules.

Unilateral action by trade unions

In September 2015, seven trade union confederations unilaterally submitted to the National Assembly 11,206 certified signatures of voters asking for a discussion of the Act on Amendments and Supplements to the Minimum Wage Act, which proposed that allowances for unfavourable working time should be exempted from the minimum wage. The confederations involved were the Confederation of Public Sector Trade Unions, the Slovene Union of Trade Unions Alternativa, the Independent Confederation of New Trade Unions of Slovenia KNSS, the Union of Workers' Trade Unions of Slovenia – Solidarity, the Confederation of Trade Unions 90 of Slovenia, the Confederation of Trade Unions of Slovenia Pergam, and the Association of Free Trade Unions of Slovenia.

Employer associations immediately responded, saying this violated the newly signed social agreement and ILO Convention 131 concerning the minimum wage. They objected to the government's reaction and signalled an end to social dialogue. They also warned that, under the proposals, minimum wage earners who worked unfavourable hours and received a relatively low additional monthly payment (greater than €53 gross) would pay more personal income tax because they would no longer be entitled to a higher supplementary general tax allowance.

The government, after noting the draft law in September, wanted to consult all the social partners, but in protest at the actions of the trade union confederations, all five employer associations refused to discuss the minimum wage changes further. At the end of November 2015, the National Assembly approved amendments to the Minimum Wage Act, changing the definition of the minimum wage. From 1 January 2016, the allowances for unfavourable working hours are now to be paid separately. After the National Assembly passed the legislation, three employers’ organisations – the Slovenian Employers Association, the Chamber of Commerce and Industry of Slovenia, and the Association of Employers of Craft and Entrepreneurs – announced that they were leaving the social agreement of 2015–2016.

Changes in definition

The first change to the definition of the minimum wage in Slovenia was made in 1996, just a year after it had been introduced. In 1995, employees were entitled to the minimum wage if they worked full time and achieved their objectives. Since 1996, all employees have been entitled to at least the minimum wage if they are in full-time work, irrespective of the working conditions and the results of their work. This held until December 2015.

Since its introduction in 1995, only allowances for overtime work were exempted from Slovenia’s statutory minimum wage. Other allowances were included in it; these covered:

  • afternoon work;
  • night shifts;
  • split shifts;
  • work in the fourth shift; 
  • being on call;
  • being on standby at home.

Seniority allowances are also included in the minimum wage.

Changes to employer obligations

The Minimum Wage Act negotiations in 2010 exposed the social partners’ difficulty with defining the minimum wage. However, since the harmonisation of the law had already taken place in the deteriorating economic situation and the proposed statutory minimum wage increase, proposed under the new Act was significant (22%), the social partners did not reach consensus in this area. They held several discussion between 2011 and 2014 on possible changes to the definition but did not reach agreement. The government has been consistently in favour of introducing a fairer definition, taking into account the minimum wage regulations in 12 other EU countries. It argues that in all EU Member States except Croatia allowances for unfavourable working time are excluded from the minimum wage.

Under the new definition, all employers, including those not bound by any sectoral collective agreement, are obliged to exempt allowances for night work, Sunday work and work on public holidays from the minimum wage. They are also obliged to determine the amount of the allowances in their collective agreements or employment contracts. Employers have to be alert when calculating the salaries of workers who meet two conditions at the same time: (1) in the course of their full-time job, they engage in night work, work on Sundays, holidays or non-working days and (2) their final monthly salary excluding the allowances listed above is smaller than the minimum wage. In this case, the employer has to make up the difference to the employee (in order to reach the minimum wage amount) and then add the amount of unfavourable hours allowances the employee is entitled to.

Financial implications

According to government calculations, the changes will add around an extra €0.7 million to the total public sector wage bill to compensate unfavourable working time, which is negligible. A simple extrapolation of this calculation to the private sector shows than its annual wage bill is likely to be around €2 million higher. Altogether, in 2016, employers' costs are expected to rise (at a rough estimate) by around €3 million.

This is a much smaller effect on the national wage bill than in 2010 when, as mentioned already, the minimum wage rose by 22% for all employees. The extra pay will cover just those minimum wage earners who working unsociable hours, thought to be around 20% of all those on the national minimum wage. However, some sectors have a higher share of employees working unsociable hours and will have higher increased costs than others, such as the security industry, health and social work, trade, accommodation and catering.

Reactions

Jože Smole, director of the Slovenian Employers Association, objecting to the vote by the National Assembly, said:

For the first time in 20 years a law – which requires a higher payment from employers – was written by unions, approved by the government and adopted by the National Assembly. From now on employers will probably find out from the Official Gazette (OG) about what, when and how much they have to pay. 

He added that he would 'notify the EC and the ILO about the violation of the Convention, which provides that interventions in the minimum wage should be taken through the social dialogue of all parties'.

Goran Lukič from the Association of Free Trade Unions of Slovenia said:

We are pleased that the Parliament recognised the injustice the most vulnerable in the labour market are facing. Until now all minimum wage earners received the same pay, no matter the working conditions. After 20 years, this unequal treatment is finally being eliminated. The amendments also eliminate unequal treatment of employees within the same company; until today supplements for work in unfavourable working time was paid only to those employees whose salary exceeded the minimum wage.

Representatives of the Chamber of Commerce and Industry of Slovenia have consistently warned that a minimum wage rise could be fatal for many jobs in sectors with low added value competing in the global market. Adding that the majority of minimum wage earners who have not received any allowances until now work in private security, textiles, trade and catering, the organisation estimates that the redefinition will endanger 5%–10% of jobs in those sectors.

Commentary

The latest changes in the definition of the minimum wage and the exemption of some allowances from it were fair and necessary, particularly since this is common practice in other EU countries. However, the way it was implemented was inappropriate and undermined the trust between the social partners. When signing the social agreement last year, the partners  agreed that any amendment of the minimum wage would be achieved by consultation and mutual agreement. At the beginning of 2016, there was another disagreement about the minimum wage between the social partners, as it will stay the same as in 2015 despite last year's deflation. Employers have argued that the method of determining the minimum wage is inconsistent and opaque.

 

 

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