New temporary waiting for work scheme to combat economic crisis

On 27 May 2009, the Slovenian parliament adopted a Law on Partial Refund of Pay Compensation (LPRPC), an anti-crisis measure aiming to protect workplaces. The LPRPC states that eligible employers can place up to 50% of their workers on a temporary waiting for work scheme. These workers will not work but they will keep their employment relationship. They will get 85% pay compensation and must devote 20% of the time off to education and training.

Further anti-crisis measures introduced

Due to the global economic crisis and diminishing orders, many employers in Slovenia are reducing their workforce. Initially, the Law on Partial Subsidisation of Full Working Time was adopted, granting subsidies to companies that introduce a shorter working week instead of laying off workers, in order to prevent further job losses in companies where demand for products or services had declined by up to 20% (SI0903019I).

However, with the continuation and worsening of the economic crisis, this measure proved to be insufficient. In order to prevent further dismissals and help companies where orders have diminished by up to 50%, the Slovenian parliament adopted a Law on Partial Refund of Pay Compensation (LPRPC) on 27 May 2009. The LPRPC stipulates that eligible employers can place a maximum of half of their workforce on a temporary waiting for work (TWW) scheme. These workers will not work. However, they will receive pay compensation of 85% of their average pay and will be obliged to devote 20% of the time while waiting for work to education and training. They will remain in an employment relationship. Of the 85% compensation, the government will refund to employers 50% of the workers’ average pay and employers will pay the remaining 35%.

This is a flexicurity measure, combining flexibility with employment security. The workers keep their jobs, although they have to live temporarily on a lower income. The employer saves costs in difficult economic times, while retaining workers and their experience for when the economy recovers. This subsidisation scheme is temporary and will last until 31 March 2010.

More options for employers

A spokesperson from the Slovenian Employers’ Association (Združenje delodajalcev Slovenije, ZDS), Nina Globočnik, explained that, according to the old labour legislation, it was difficult to cancel an employment contract. However, the employer could place a worker on a waiting for work scheme and pay the worker compensation of 70% of the salary in case the employer could not provide work. The current labour law does not include this provision. According to the Law on Labour Relations (LLR) (SI0206101N, SI0706019I), the employer must provide the worker with the work agreed on in the employment contract. The worker is entitled to pay compensation for the period of absence when they do not perform this work. The LPRPC is introducing a new temporary waiting for work scheme. Two parallel systems are thus available to the employer that cannot provide work to the worker. However, the employer cannot use both systems simultaneously.

Examples from other countries

Similar initiatives exist in other European countries. For example, a flexicurity measure exists in Belgium, where temporary unemployment is regulated (BE0904019I, BE0906029I). Temporarily unemployed workers are entitled to an unemployment benefit from the National Employment Office. These workers are temporarily unemployed when the execution of the employment contract is partly or wholly suspended on a temporary basis for various reasons.

In Italy, a special public Wages Guarantee Fund (Cassa Integrazione Guadagni, CIG) is used to protect workers’ income, which is financed by companies and the state, and administered by the National Social Security Institute (Istituto Nazionale Previdenza Sociale, INPS) (IT0311306T, IT0604029I). In cases laid down by law, the CIG makes up the pay of employees affected by lay-offs or short-time work, up to 80% of the lost pay.

Details of pay compensation law

Eligible employers

The employers eligible to submit an application for a partial refund of pay compensation include private companies, public companies – for example, in the railways sector – cooperatives, and small and micro enterprises.

Application for subsidy

The eligible employer must submit:

  • a description of the company’s business situation in relation to the economic crisis;
  • a statement declaring that, for business reasons, the company temporarily cannot provide work to up to 50% of workers at the same time and therefore has decided to place them on the TWW scheme;
  • a programme on maintaining and increasing the quality of workplaces and developing human resources.

Before deciding to put workers on the TWW scheme and adopting the quality of work programme, the employer must consult the trade union in the company. If no trade union is present in the company, the employer must then consult the employees’ council (SI0311102F) or workers at the workers’ assembly – a meeting of all the workers.

An employer cannot submit an application for the subsidy if:

  • the loss of business in the previous 12 months amounts to more than half of the basic capital;
  • the value of the company’s assets is less than the sum of its liabilities;
  • insolvency proceedings have been launched against the company.

Time limits

Application for the subsidy must be submitted by 31 March 2010. The employer can only apply once for a subsidy lasting at least three months. This period can however be extended by three months several times up to a maximum of 12 months.

The employer can place an individual worker on the TWW scheme for a maximum of six months; interruptions during this period if a worker is working again are not included. The period for which a worker is put on the TWW scheme may be prolonged by a maximum of six months in the case of changed circumstances.

Rights and duties of workers on TWW

The workers on the TWW scheme retain all rights and duties from the employment relationship. They cannot be dismissed and they remain in employment.

The worker has:

  • the right to receive a pay compensation of 85% of the basis for compensation, which is the average monthly full-time pay during the previous three months. This should not be lower than the statutory minimum wage nor higher than the pay received by the worker when working;
  • the right and the duty to participate in training for 20% of the time on the TWW scheme;
  • the right to reimbursement of expenses for meals and travel in connection with the training;
  • the duty to return to work at the request of the employer.

Amount of subsidy

The refund scheme is managed by the Employment Service of Slovenia (Zavod Republike Slovenije za zaposlovanje, ZRSZ) and is financed from the state budget. The employer receives 50% of the basis for compensation from the ZRSZ; the maximum amount payable is the highest cash unemployment benefit, which currently stands at €805. The employer must pay the remaining 35%. If the pay compensation is lower than the statutory minimum wage, the employer also receives 50% of the difference between the two amounts.

Training

The employer is responsible for the training of workers on the TWW scheme and is refunded training costs up to a maximum of €500 per worker. This is financed from the European Social Fund and the state budget.

Duties of employer

During the period when the employer is receiving the subsidy, they:

  • must pay the workers on the TWW scheme pay compensation and social security contributions;
  • are not allowed to dismiss workers for business reasons;
  • are not allowed to assign overtime work if this work can be done by the workers on the scheme;
  • are not allowed to pay bonuses to the management and to the supervisors of the supervisory board for the business year during which they received the subsidy;
  • must provide training for the workers on the scheme.

If the employer does not fulfil these duties, they must return the whole subsidy or a proportional part of it. Moreover, they must return the whole subsidy if the company begins liquidation proceedings during the period of receiving the subsidy or for the same length of time afterwards.

Tripartite expert working group

The draft LPRPC was discussed twice by the Economic and Social Council of Slovenia (Ekonomsko socialni svet Slovenije, ESSS) (SI0207103F). In general, both social partners expressed a positive attitude towards the LPRPC, although some controversial issues still had to be resolved. The ESSS nominated a tripartite expert working group to deal with mostly technical matters, while the ESSS discussed issues concerning conflicting interests. At the end of the talks, only two issues remained unresolved among the social partners.

Reaction of small employers

According to the daily business newspaper, Finance, the Secretary General of the Association of Employers in Crafts and Small Business of Slovenia (Združenje delodajalcev obrti in podjetnikov Slovenije-GIZ, ZDOPS-GIZ), Igor Antauer, argued that it would be wrong if small employers were obliged to submit sophisticated analyses and programmes, and were forced to seek paid expert advice to produce them. Employer organisations do not have enough resources to help their members. The second problem is that the LPRPC does not determine which training programmes are adequate. Mr Antauer expects that training within a company would also be acceptable.

Commentary

The European Commission emphasises that short-term measures aiming to prevent job losses should not obstruct structural changes or the transfer of the workforce from declining to developing economic sectors in order to ensure sustainable economic growth in the long term. Therefore, such measures must be well targeted. Contrary to this principle, the LPRPC is not selective enough and allows many employers to submit an application and receive the subsidy. It should contain more exact criteria for the eligibility of the employers and for establishing proof that the difficulties that a company is facing are purely connected with the global economic crisis, that is, a decline in orders.

The European Commission also underlines the need for appropriate retraining and upgrading of skills in accordance with future labour market needs. Unfortunately, the LPRPC does not contain any criteria for assessing the adequacy of the training of workers on the TWW scheme.

Štefan Skledar, Institute of Macroeconomic Analysis and Development

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