Impact of higher work surcharges on companies is still unknown (Slovak spectator)

Radovan Ďurana kometnoval dopady príplatkov za prácu pre Slovak spectator. 25.1.2018 

Neither trade unions nor employers are satisfied with reached compromise

Surcharges for night, weekend and holiday work will gradually increase in Slovakia in two phases and not in one step as originally proposed. Those for night and weekend work will be even lower. Both trade unions and employers showed dissatisfaction over the agreed-upon compromise. While trade unions regret lower than proposed surcharges, the employers see this as the biggest possible compromise for now.

"What we, as employers want, is the competitiveness of our industry not to be harmed and for this [hike in surcharges] not to have a fundamental impact on work places," said Roman Karlubík, first vice-president of the Federation of Employers’ Associations (AZZZ), after the negotiations. "In any case, we have to say that we as employers are not satisfied even with this proposal. We take it only as a kind of compromise."

The Trade Union Confederation (KOZ) is especially dissatisfied with changes in proposed night surcharges.

"We are not enthusiastic about people working at nights in particular should get a lower surcharge," said KOZ vice-president Monika Uhlerová. "Our opinion is that in particular this group of workers should be remunerated more."

Representatives of employers, employees and parliamentary deputies for the ruling Smer party agreed upon compromise increases on January 15. The draft revision to the Labour Code increasing the surcharges is already in parliament, in its second reading. The parliament will deal with the revision at the next session starting on January 30.

"Today, for me as the labour minister, my priority task is not only to reduce unemployment but the much bigger challenge is to secure enough of a labour force," said Labour Minister Ján Richter, adding that higher work surcharges should distract people from leaving Slovakia to work abroad. Another goal is the reduction of night work. It is estimated that about 250,000 people in Slovakia work night shifts.

Increase in surcharges

The surcharges will increase in two phases, as of May 1, 2018 and then again as of May 1, 2019.

In terms of night surcharges, it will depend on whether workers are conducting ordinary or risky work. In the case of surcharges for ordinary night work, they will increase from the current 20 percent of the minimum wage to 30 percent as of May 1, 2018 and to 40 percent as of May 1, 2019. Night surcharges for risky work will increase to 35 percent and then to 50 percent, respectively. Originally the government proposed a 50 percent increase in one step.

Employers will be able to use a so-called derogation exemption. This means that they will be able to agree upon an increase of night work surcharges within a collective agreement, but the surcharge will have to increase to 25 percent at least as of May 1, 2018 and to 35 percent at least as of May 1, 2019.

The weekend work surcharge will account for 25 percent of minimum wage and for 50 percent, respectively, for work on Saturdays. On Sundays, the surcharge will be higher - 50 percent and 100 percent, respectively. Originally, Smer deputies made a proposal of at 100 percent of the minimum wage. Employers will again be able to agree upon exemptions, but this time the surcharges will be not divided into ordinary and risky work.

The proposal for the increase of the surcharges for work during holidays remains unchanged. It should increase from the current 50 percent of the average wage of the worker to 100 percent.

Apart from the private sector, the surcharges will increase in the public sector as well as in self-administration.

"I consider it logical and correct that when the state puts such a duty up for private companies that it will take care of its employees in the same way," said Erik Tomáš (Smer), who has proposed this change to the draft revision to the Labour Code addressing the surcharges.

What will be the impact?

Employers and analysts expect the higher surcharges to perhaps hit small companies the most, discourage companies from the creation of new jobs and result in the hike of tariff wages.

"Certainly small and medium-sized companies will be hit," said Karlubík. "This will have a quite negative impact on them."

The employers have not calculated yet how their wage costs will increase due to the increased surcharges.

Luboš Sirota, vice-president of the National Association of Employers (RÚZ), does not like that wages are being increased by administrative intervention.

"In many large companies the surcharges have been on the proposed levels for some time already," said Sirota as cited by the Hospodárske Noviny. "But this intervention will also hit small employers. Here we wanted to achieve a more sensitive approach."

In this respect he also criticised the fact that the surcharges will change as of May 1 when this will make wage-related administration more complicated for companies.

Radovan Ďurana, analyst of the think-tank Institute of Economic and Social Analysis (INESS), does not like increasing wages in Slovakia with administrative measures.

"The question is not whether a person working at night deserves more money," said Ďurana, adding that already many companies either pay night surcharges, shorten working time or provide other benefits to night workers. He sees the problem as a politician, who arrives with the order to increase wages and takes credit for it. "In developed countries labour and wage-related issues are agreed upon between employer and employee."

Ďurana sees the Slovak business environment restricted by too many regulations. This reflects in the ranking of Slovakia on the Employment Flexibility Index, on which it is 26th out of 41 EU and OECD countries. The planned changes in surcharges for night, weekend and holiday work will send Slovakia down to 36th place.

"The surcharges will complicate the business plans of employers and reduce the flexibility of employment," said Ďurana, as cited by the SITA newswire. "This means their willingness to create new jobs and expand production will diminish."

In the long run, the change in surcharges will impact the entire labour market, but in the short term it will be most evident in sectors that depend more on weekend work, in sectors that are not so profitable, and where employees do not have such a strong negotiating position, believes Ďurana.

"The impact will be mainly on sectors such as retail, restaurants, hotel services and other services with lower wages," said the analyst.

SPECTATOR, Jana Liptáková, 25.1.2018