Austerity pay deal signed in public sector

In late February 2009, the government and the representatives of 23 public sector trade unions signed an austerity pay deal for the period 2009–2010. Under the agreement, wage growth in the sector envisaged for 2009 will be reduced from 9.9% to 7.1%. The pay deal is part of the government’s austerity plan and consists of 13 measures. The austerity plan seeks to cut public sector spending by €100–€120 million as part of the state’s anti-crisis efforts.

On 24 February 2009, an austerity pay deal was signed by the Minister of Public Administration, Irma Pavlinič Krebs, and the Minister of Finance, Franc Križanič, along with the representatives of 23 public sector trade unions. The official title of the deal is the ‘Agreement on the measures in the field of pay in the public sector due to changed macroeconomic circumstances for the period 2009–2010’. Under the agreement, the growth in wages envisaged for 2009 in the public sector will be reduced from 9.9% to 7.1%. The pay deal is part of the government’s overall austerity plan (see below) and consists of 13 measures.

Government austerity plan

On 19 February 2009, the ‘Savings measures of the government of the Republic of Slovenia’ were adopted. The initiative includes 30 measures designed to cut spending by the public sector and public administration by between €100 million and €120 million as part of anti-crisis efforts. The austerity plan seeks to save funds in light of the global economic downturn and to prevent Slovenia from exceeding the EU Stability and Growth Pact cap for general government deficit of 3% of gross domestic product (GDP).

The measures include reducing the pay growth agreed with the public sector trade unions. In addition, the total number of employees in public administration will now be 2% lower than that projected in the original staffing plan for 2009. Ministries and government services have been told to merge departments where possible. Expenses for work performed on the basis of copyright contracts and work contracts will have to be 20% lower than last year. At the same time, institutions such as hospitals and schools, along with the state-run Pension Fund Management (Kapitalska družba pokojninskega in invalidskega zavarovanja, KAD) and the Restitution Fund (Slovenska odškodninska družba, SOD), and the public sector as a whole have been told to follow the government’s lead by curbing wages and bonuses.

Details of austerity pay deal

The public sector austerity pay deal is partly regulated by the Law on the Execution of the Budget (LEB) and partly by the Annex to the Collective Agreement for the Public Sector (ACAPS), which was concluded by the government and the public sector trade unions on 13 March 2009 (SI0708039I). The annex was signed by 21 out of 27 representative public sector trade unions.

Among its provisions, the austerity pay deal stipulates that:

  • bonuses for work performance and increased workload will be reduced;
  • annual leave bonuses for all public sector employees for 2009 will be the same as those for the previous year and will not be increased to take inflation into account;
  • the pay adjustment foreseen for July 2009 will not be implemented; the pay adjustment in January 2010 will be implemented if inflation reaches a certain level;
  • the third quarter of the pay rise for eliminating pay disparities, which public service employees were to receive on 1 September, is to be postponed until 1 January 2010; the last quarter pay rise will be implemented on 1 March 2010;
  • some posts will be transferred to higher pay classes.
  • trade unions and the government also agreed that they would start discussing the amendments to the Law on the Pay System in the Public Sector (LPSPS) (SI0510304F), as well as negotiating changes to the overall intersectoral Collective Agreement for the Public Sector (CAPS) in order to eliminate deficiencies in the public sector pay system.

Government position

Minister Pavlinič Krebs stated that the conclusion of the agreement was proof that social dialogue is also essential in a time of crisis. She added that the deal shows that public sector employees are also willing to contribute to the sustainability of public finances in a difficult macroeconomic situation.

Minister Križanič underlined that public employees had enabled the state to adjust the structure of their pay gradually and not all at once. The minister added that Slovenia had demonstrated the flexibility of social partnership, which can also be counted on in difficult times.

Views of trade unions

The President of the Confederation of Public Sector Trade Unions (Konfederacija sindikatov javnega sektorja, KSJS) (SI0603019I), Branimir Štrukelj, outlined that the trade unions agreed on postponing the government’s obligations primarily out of solidarity with industry workers, and called on managers to give up high bonuses. Mr Štrukelj assured that the trade unions would monitor how the saved funds were being used, adding that the government was expected to use public funds carefully, primarily regarding public procurements. By signing the deal, public employees showed their awareness of Slovenia’s current economic situation and of the severity of the crisis – for which, it was highlighted, neither public sector employees nor industry workers were responsible.

President Doro Hvalica of the Trade Union of Culture of Slovenia (Sindikat kulture Slovenije, Glosa), an affiliate of the Union of Free Trade Unions of Slovenia (Zveza svobodnih sindikatov Slovenije, ZSSS) (SI0210102F), explained that the union had not signed the agreement as a result of the postponement of the pay rise due to public service employees on 1 September until 1 January 2010. The trade union president said that this move encroached considerably on the rights of employees.

Štefan Skledar, Institute of Macroeconomic Analysis and Development

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