Greece: Changes to wage-setting mechanisms in the context of the crisis and the EU’s new economic governance regime

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

Following Greece's accession to the Financial Stability Mechanism, significant changes are taking place in the country's system of collective bargaining. Since 2012 there is a considerable gap as regards the renewal of a large number of sector-level and occupational collective agreements, while the number of collective agreements at enterprise level is rapidly increasing. In 2012 only two national occupational collective agreements were signed, in stark contrast with 2011 and 2010, when they amounted to to 28 and 67 respectively. On the other hand, in 2012 there is a huge increase in the number of enterprise-level collective employment agreements concluded: in 2012, 976 enterprise-level agreements were filed with the Ministry of Labour, against 179 in 2011 and 238 in 2010.

Section 1: Mapping changes in wage setting mechanisms in the private sector

For each aspect of wage setting mechanisms indicated below, please indicate:

1.1 whether there has been any recent change (since mid-2008). If there have been changes in many sectors, report the most prominent examples. 1.2 in which year any such change(s) occurred. Report for the most prominent examples if there have been changes in many sectors. 1.3 If any changes, briefly summarise the change(s) which have taken place and illustrate with prominent examples.

a) main level(s) of collective bargaining over wages (collective wage setting), where a main level under single-tier bargaining is one that accounts for at least one-fifth of employees covered by collective bargaining or under multi-tier bargaining is a level that accounts for a non-trivial element of collectively agreed pay

Following Greece's accession to the Financial Stability Mechanism, significant changes are taking place in the country's system of collective bargaining.

According to the study “Collective bargaining in Greece in the years 2011 and 2012 - trends, breakthroughs and prospects” by H. Ioannou and K. Papadimitriou, OMED, April 2013, the main characteristics of the radical changes that emerge mainly from the data of the period after 2011 are:

a) the rapid decentralisation of collective bargaining towards the level of enterprises;

b) the simultaneous decline of the degree of labour market coverage by regulations deriving from sector-level and occupational collective employment agreements.

More specifically:

Since 2012 there is a considerable gap as regards the renewal of a large number of sector-level and occupational CEAs, while the number of CEAs at enterprise level is rapidly increasing.

During the period 1992 – 2011, the pay and working terms in the Greek labour market were regulated by nearly 100 sector-level and 90 occupational collective employment agreements, which were renewed at regular intervals (usually on an annual basis or every two or three years).

In 2012, the bargaining in the hotels sector appears to continue (6 local CEAs). A continuation of sector-level local bargaining is being recorded in the mass media sector with a total of 4 CEAs in 2012.

Furthermore, in 2012 only two national occupational CEAs are signed, in stark contrast with 2011, when the CEAs amounted to 28 and, of course, with 2010, when 67 CEAs were signed.

We are thus led to a remarkably smaller / lower degree of coverage by CEAs.

On the other hand, in 2012 there is an explosive increase in the number of the enterprise-level collective employment agreements concluded, whose number was multiplied. In 2012, 976 enterprise-level CEAs were filed with the Ministry of Labour, against 179 in 2011 and 238 in 2010.

The proliferation of enterprise-level CEAs and the reduction of sector-level and occupational CEAs are connected with the change of the legal framework.

Law 1876/1990 on “Free collective bargaining and other provisions” prescribes that, if the employment relationship is regulated by more than one operative collective employment agreements, the most favourable for the employee shall apply. The sector-level, enterprise-level and national or local occupational collective agreements may not contain working terms that are less favourable to employees than those set out in National General Collective Employment Agreements (EGSSE).

Article 37 of Law 4024/27.10.2011 about “Retirement regulations, uniform pay scale - rank scale, labour reserve and other provisions for the implementation of the Medium-term Budgetary Strategy Framework 2012-2015” provides for the possibility of concluding collective employment agreements at enterprise level, which set wages to a lower level than that provided for by sector-level and occupational agreements, with the regulations of the EGSSE that is in force each time being the threshold.

According to the law, this possibility is recognized until the end of the period of budgetary adjustment, i.e. at least until the end of 2015.

b) mechanisms governing coordination between different levels of collective wage setting, under 2- or multi-tier arrangements (for example, rules implementing the ‘favourability principle’ under which lower levels can only improve on wage standards agreed at higher levels, or rules governing the respective of competence of levels on different aspects of wage setting)

Law 1876/1990 on “Free collective bargaining and other provisions” prescribes that, if the employment relationship is regulated by more than one operative CEAs, the one that is more favourable to the employee shall apply (favourability principle).

Law 4024/27.10.2011 (article 37) about “Retirement regulations, uniform pay scale – rank scale, labour reserve and other provisions for the application of the Medium-term Budgetary Strategy Framework 2012-2015” prescribes that throughout the implementation of the Medium-term Budgetary Strategy Framework (2012-2015 at least) the enterprise-level CEA shall prevail in case of coincidence with a sector-level CEA, but may not contain working terms less favourable to the workers than those of the National General Collective Employment Agreement. Thus, the enterprises-level CEAs become, at least until 2015, the more powerful and invulnerable collective employment regulations.

The institution of special enterprise -level CEAs that had been established by article 13 of Law 3899/2010 on “Urgent measures for the implementation of the programme to support the Greek Economy” was abolished by article 37, paragraph 2, of Law 4024/2011. By means of the institution of special enterprise-level CEAs the favourability principle was entirely abolished (GR1005019I).

c) formal and informal practices of coordination across bargaining units at the same level, such as pattern setting arrangements and/or which settlement sets the pattern, either between sectors (under multi-employer bargaining) or between companies (under single-employer bargaining)

Does not exist officially and no relevant informal practice has been recorded.

d) the relationship between wage setting in the private and public sectors, for example over which (if any) sector establishes a pattern or benchmark for the other

The fourth update of the first Memorandum (2.7.2011) states that the wages of public utility (DEKO) employees shall be in harmony with the new public-sector pay scale, while the wages in the public sector shall be in harmony with private-sector wages, in order for a reduction of the total wage cost to be achieved.

e) extension mechanisms

According to law 1876/1990 on “Free Collective Bargaining and other provisions”, the Minister of Labour may adopt a decree extending and declaring generally mandatory for all the workers of a sector or profession a CEA, which already binds employers employing 51% of the sector's or profession's workers. Such extension may be requested also by a competent trade-union organisation of workers or employers by submitting an application to the Minister of Labour.

According to law 4024/27.10.2011 about “Retirement regulations, uniform pay scale - rank scale, labour reserve and other provisions for the implementation of the Medium-term Budgetary Strategy Framework 2012-2015”, the extension shall be henceforth in effect from the date of publication of the Minister's decree in the Government Gazette, not from the date of issue of the relevant decree, as was the case under the regime that was formerly in force.

In addition, according to law 4024/2011, the provisions regarding the extension of the application of the CEAs by ministerial decree are suspended; therefore, a CEA cannot be declared generally mandatory by decree of the Minister of Labour throughout the period of implementation of the Medium-term Budgetary Strategy Framework (2012-2015).

f) number and nature of opening clauses in sector and multi-sector agreements

Not relevant.

g) opt-out clauses in sector and multi-sector agreements

Not relevant.

h) duration of agreements

Law 1876/1990 on “Free Collective Bargaining and other provisions” prescribed that the CEAs are concluded for a fixed or indefinite period. Any CEA providing for a term of validity of more than one year is considered as having indefinite duration. The term of the CEA cannot be less than one year. The validity of the CEA expires after the lapse of one year or by termination by any of the Contracting Parties.

Act of Cabinet of Ministers (PYS) No. 6/28.2.2012 about the “Regulation of issues regarding the application of paragraph 6, article 1 of Law 4046/2012” prescribes that:

The term of validity of a CEA cannot be less than one year and cannot exceed three years. The term of the CEA shall end upon the lapse of the time that was agreed (three years maximum) or by termination by any of the Contracting Parties.

The CEAs that on 14.2.2012 were already in force for 24 months or more expire on 14.2.2013.

The CEAs that on 14.2.2012 were in force for a period of less than 24 months expire upon the lapse of three years from their date of entry into force, unless terminated earlier.

i) number of agreements

The number of sector-level and occupational CEAs decreased and the number of enterprise-level CEAs increased, cf. under letter a).

j) continuation of collective agreements beyond expiry

Law 1876/1990 on “Free Collective Bargaining and other provisions” prescribed that the regulatory terms of a CEA that expired or was terminated continue in force for a period of six months and apply also to workers who are hired during this period. After the lapse of the six-month period, the existing working terms continue in force until the individual employment relationship is terminated or modified.

Act of Cabinet of Ministers (PYS) No. 6/28.2.2012 about the “Regulation of issues regarding the application of paragraph 6, article 1 of Law 4046/2012” prescribes that:

The regulatory terms of a CEA that expired or was terminated shall continue in force for a period of three months (grace period). After the lapse of the three-month period, and provided that a new CEA has not been concluded in the meanwhile, only the regulatory terms concerning: a) the basic salary or the basic day wage and b) the seniority allowance, the allowance for dependents, the studies allowance and the dangers and contingencies allowance shall continue being in effect, on condition that these were provided for in the CEA that expired or was terminated, while any other allowance provided for therein shall immediately cease to be paid.

k) extending bargaining competence beyond trade unions to other types of workforce representative

Article 37 of Law 4024/27.10.2011 on “Retirement regulations, uniform pay scale - rank scale, labour reserve and other provisions for the implementation of the Medium-term Budgetary Strategy Framework 2012-2015” provides for the possibility of enterprise-level CEAs being concluded by associations of persons also in enterprises with fewer than 50 employees (while pursuant to law 1876/1990, a CEA may be concluded by a trade-union in an enterprise with at least 50 employees).

More specifically, Law 4024/2011 prescribes that, where there is no trade union in the enterprise (a particularly common occurrence in the vast majority of Greek enterprises) the enterprise-level CEA may be concluded by an association of persons and, if there is not any association of persons, by the respective first-level sectoral employees' organisations. The association of persons has no legal personality and is not a trade-union. In order for it to be competent to conclude an enterprise-level CEA it must consist of at least 3/5 of the workers in the enterprise.

According to the study “Collective bargaining in Greece in the years 2011 and 2012 - trends, breakthroughs and prospects” by H. Ioannou and K. Papadimitriou, OMED, April 2013, 976 enterprise-level CEAs were filed with the Ministry of Labour in 2012, against 179 in 2011 and 238 in 2010. The largest part of these enterprise-level CEAs (72.6%) is concluded by associations of persons, while just 17.4% of the enterprise-level CEAs are concluded by enterprise-level trade unions and 9.9% are concluded by the first-level local sectoral and occupational trade unions in the Shipyards Zone and one enterprise-level CEA is concluded by a Federation.

l) indexation mechanisms

No relevant provision is made.

m) minimum pay setting arrangements, including the relationship between, and respective roles of, collective bargaining and statutory mechanisms in setting minimum wages

A major shake-up of the wage-setting system in the private sector of the country that was in effect until recently is brought about by the adoption of a new system for determining the minimum salary of employees and minimum day wage of blue-collar workers.

Law 1876/1990 on “Free Collective Bargaining and other provisions” prescribed that the national minimum salary of employees and the national minimum day wage of blue-collar workers are determined by the National General Collective Employment Agreement, which is signed after free collective bargaining between the third-level organisations representing the workers and the employers of the country's private sector.

Laws 4093/12.11.2012 about the “Approval of the Medium-term Budgetary Strategy Framework 2013−2016 − Urgent Measures for the Application of Law 4046/2012 and of the Medium-term Budgetary Strategy Framework 2013−2016” and 4172/23.7.2013 about “Income taxation, urgent measures for the application of Law 4127/2013 and other provisions” establish a new system for determining the minimum salary of employees and the day wage of blue-collar workers, which entered into force on 1.4.2013, as follows:

Until the end of the period of economic adjustment (i.e. at least until the end of 2016) the statutory minimum salary of employees and the day wage of blue-collar workers are determined as follows:

(a) For employees over 25 years of age the minimum salary is set at 586.08 Euros and for blue-collar workers over 25 years of age the minimum day wage is set at 26.18 Euros.

(b) For employees under 25 years of age the minimum salary is set at 510.95 Euros and for blue-collar workers under 25 years of age the minimum day wage is set at 22.83 Euros.

After the end of the period of economic adjustment, i.e. not earlier than 1.1.2017, the minimum salary and the minimum day wage shall be determined by decree of the Minister of Labour after obtaining the assent of the Cabinet of Ministers, within the last fortnight of the month of June each year. For the determination of the amount of the minimum salary and day wage a) the situation of the Greek economy and its prospects for growth in terms of productivity, prices and competitiveness, employment, rate of unemployment, incomes and salaries are taken into consideration; b) a consultation takes place with the participation of the Greek General Confederation of Labour (GSEE), the Hellenic Federation of Enterprises (SEV), the Hellenic Confederation of Professionals, Craftsmen and Merchants (GSEVEE), the National Confederation of Hellenic Commerce (ESEE) and the Association of Greek Tourism Enterprises (SETE) on the social partners' side, and of the Bank Greece (TtE), the Hellenic Statistical Authority (ELSTAT), the Manpower Employment Organisation (OAED), the Labour Institute of the Greek General Confederation of Labour (INE/GSEE), the Institute of GSEVEE (IME/GSEVEE), the Foundation for Economic and Industrial Research of the SEV (IOVE), the Institute of ESEE (INEMY-ESEE), the Institute of SETE (INSETE), the Centre of Planning and Economic Research (KEPE) and the Organism for Mediation and Arbitration (OMED) on the side of scientific institutions.

n) reconfiguration of existing sector agreements, establishment of new sector agreements, termination of existing sector agreements

Act of the Cabinet of Ministers (PYS) No. 6/28.2.2012 about the “Regulation of issues regarding the application of paragraph 6, article 1 of Law 4046/2012” prescribes that:

The CEAs that on 14.2.2012 were already in force for 24 months or more expire on 14.2.2013.

The CEAs that on 14.2.2012 were in force for a period of less than 24 months expire upon the lapse of three years from their date of entry into force, unless terminated earlier.

o) other aspects of wage setting, for example integration of agreements covering blue- and white-collar workers in the same sector

Law 1876/1990 prescribed that, if the negotiations between the parties fail, the interested parties may have recourse to arbitration. The related services are provided by the “Organisation for Mediation and Arbitration” that issues arbitration awards having the force of a CEA. Under law 1876/1990, the unilateral recourse to arbitration was possible. In practice, the employees' side unilaterally resorted to the mediation and arbitration proceedings and caused the issue of an arbitration award.

Article 14 of Law 3899/17.10.2010 on “Urgent measures for implementing the support programme of the Greek Economy” abolished the possibility of unilateral recourse to arbitration and a joint decision of the workers' and the employers' side on the recourse to arbitration is now required.

Section 2: Sources of change to wage setting mechanisms

For each type of change that has occurred (except c) d) i) o)), please indicate the main source(s) of the change. Note that more than one of the following sources may have been influential to a change. Please provide brief details in the relevant rows in the table below.

2.1. externally imposed or required (e.g. by the European Commission, ECB and/or IMF)2.2. externally influenced (e.g. via Country Specific Recommendations under the EU’s new Economic Semester governance arrangement) 2.3. imposed by national government 2.4. negotiated/concerted between cross-sector social partners, with or without government involvement2.5. negotiated between social partners at sector level 2.6. other (please specify)

Section 3: Factors influencing changes in wage setting mechanisms

For each type of change identified in Section 1 (except i) and o)), please indicate the main factors or rationales which have been influential. Please provide brief details in the relevant rows in the table below.

3.1. Macro-economic, e.g. wage moderation, uncertain economic outlook 3.2. Micro-economic, e.g. increased variability in competitive circumstances of companies, financial hardship, business restructuring 3.3. Economic organization, e.g. emergence of new business activities which increase diversity within existing sectors and/or blur boundaries between sectors and/or create new sectors; and/or growing recourse to outsourcing, which blurs boundaries between sectors and creates structural tensions according to position in the supply chain within sectors 3.4 state policies and/or requirements from the European Commission, ECB and/or IMF involving weakening or strengthening of state supports for collective bargaining, e.g. changes to extension mechanisms, changes to indexation mechanisms, changes to the favourability principle, authorising workforce representatives other than trade unions to conclude agreements, changes to the boundary between statutory determination and collective bargaining

Section 4: Influence of the EU’s new economic governance regime

Have any aspects of a) wage setting arrangements b) other features of industrial relations been the subject of country specific recommendations under the European Semester system which took effect as from 2011 i.e. in 2011, 2012 or 2013?

4.1 Please check the Table summarising country specific recommendations attached to the questionnaire, and indicate any changes or amendments that are needed.

For the time being there are no further changes needed.

4.2. If Yes, specify any changes to a) wage setting arrangements b) other feature of industrial relations that have been implemented following the recommendation(s)

See above.

4.3. If Yes and changes, were these required by the European authorities, required by the IMF or recommended but not required?

See above.

4.4. Have there been changes in any formal or informal mechanisms aimed at cross-border coordination of wage setting, for instance in response to the new economic governance regime?

If yes, please provide brief details.

See above.

Section 5: Perspectives of the social partners

What are the views of employers’ organizations and trade unions on:

5.1 The desirability of the changes to wage setting arrangements introduced

The Greek General Confederation of Labour (GSEE) considers those interventions by and large unconstitutional and contrary to international conventions and, therefore, has resorted to national and international adjudicatory authorities (GR1303019I). The GSEE considers that these interventions lead to the abolition of the institutional framework of labour relations and undermine labour, social and income-related rights.

According to the basic proposals of the Hellenic Confederation of Professionals, Craftsmen and Merchants (GSEVEE) for the competitiveness of SMEs that were put forward during the dialogue between the social partners concerning wages in the private sector, the GSEVEE proposes: “A) Maintenance of the 13^th - 14^th wage; B) Maintenance of the minimum wage (751€ gross) as provided for by the National General Collective Employment Agreement (EGSSE); C) Freezing of any wage change for 2 years”. According to the GSEVEE “It is also known that a series of reports and studies by international organisations highlight taxation, red tape, the operation of the public administration in general and the access to financing as the most important problems of the Greek economy. The foregoing make it easy for one to understand that other should be the priorities of the Government, not wages”.

In the context of the social dialogue on wages in the private sector (2012) the National Confederation of Hellenic Commerce (ESEE) proposed a wage freeze in the private sector for three years, until 2014, with a parallel 10% reduction of the non-wage cost, in order to reduce the total annual wage cost of enterprises by 2 billion Euros. According to a press release of the ESEE “In the case of the three-year wage freeze, both the employer and the employee will know their obligations and their remuneration respectively, in order for them to re-programme their finances, while we all know that the freeze essentially means a reduction proportional to the change of inflation and is calculated to range from 2.6% to 3.8%”. As regards the new system for the determination of the minimum wage, the ESEE maintains its consistent position that the determination of the minimum wage should remain the object of the National General Collective Employment Agreement and be decided freely through negotiations between the social partners. According to the ESEE “the National General Collective Agreement has always been the apex of the principle of free collective bargaining that is guaranteed by article of 22 the Constitution. It is the outcome of a laborious effort of several decades and it is a process which all social partners are proud of. We consider that mutual trust between employers and employees in recent year is the most powerful barrier against the further deepening of the recession; for this reason, we believe that the determination of the minimum wage should remain our own responsibility."

5.2 The effects / impact of the changes to wage setting arrangements introduced

According to the GSEE, the budgetary, economic, developmental and social choices of the Troika and of the Greek government will create conditions of weak and anaemic viability of the Greek economy and will result in maintaining high levels of unemployment and low living standards for the majority of the population. According to the GSEE, the policy of internal devaluation in Greece either cannot achieve the results it promised, or will still need a very long period of recession before there is any recovery.

According to the basic proposals of the GSEVEE for the competitiveness of SMEs that were put forward during the dialogue of the social partners “indeed, a potential government intervention in terms of the amount of the minimum wage and of the Christmas, Easter and Holiday Bonuses (13^th-14^th wage), will lead to even greater recession”. The ESEE seems to side with the GSEVEE, stating that the austerity measures result in reducing consumption power and, as a consequence, in rendering the viability of enterprises impossible.

5.3 The main factors or rationales influencing changes to wage setting arrangements

According to the GSEE, the Memoranda of the Greek economy’s “Bailout” not only constitute an unsuccessful debt crisis management policy but, furthermore, make up a new development model of unequal growth in the European distribution of labour, characterised by an underdeveloped socio-economic formation.

According to the basic proposals of the GSEVEE for the competitiveness of SMEs that were put forward during the dialogue of the social partners “it’s true that the improvement of competitiveness is a common objective but the wage cost plays a secondary role compared to the multitude of other factors that impede, if not undermine, the viability and the growth prospects of enterprises”. According to the proposals of the GSEVEE “It is, therefore, clear that micro and small enterprises have already proceeded to all the necessary adjustments to wage cost to ensure their viability and, therefore, do not consider it an obstacle. By and large, the debate on wage costs is of secondary importance”.

According to the ESEE “the labour cost per unit of product, the hourly labour cost, competitiveness and productivity do not depend only on the wage cost but also on the non-wage cost, the number of workers, the working hours and, of course, the GDP of our country.”

Sources: Euro plus Pact Commitments in 2011 - Background on the Euro Plus Pact, European Commission; European Semester recommendations – European Commission, 2011a, 2012, 2013.

Sofia Lampousaki, Labour Institute of Greek General Confederation of Labour (INE/GSEE).