INTERNATIONAL CONFERENCE

“The economic crisis impact on industrial relations national systems: Policy responses as key recovery tools”

Sofia, November 15-16, 2012

Hrvoje Butković, PhDVišnja Samardžija, PhD

Institute for International Relations - IMO, Zagreb, Croatia

ECONOMIC CRISIS AND CHALLENGES OF SOCIAL DIALOGUE◦ Economic framework◦ Crisis as a challenge ◦ Towards finding solutions◦ Key issues analysed in a study

FRAMEWORK FOR INDUSTRIAL RELATIONS IN CROATIA◦ Legal and policy framework◦ Basic features of representative social partners◦ Collective bargaining in Croatia

LEGISLATIVE AND FISCAL CHANGES ◦ Law on representativeness◦ Other legislative changes◦ Fiscal changes◦ Examples from the practice

KEY FINDINGS AND RECOMENDATIONS

Croatia strongly hit by economic crisis in 2009, continued recession underway, slow recovery expected

Key issues: ◦ Continued economic decline, high level of public consumption,

lack of investment, decreasing competitiveness, restructuring – new employment or deepening unemployment?

Austerity measures, cuts in budget, wages in public sector, material rights in collective agreements

Trade unions and employers associations - strong response to austerity measures

Negotiations on collective agreement for public services Challenges of future EU membership

Indicator 2008 2009 2010 2011 2012prognosis

2013prognosis

GDP, real annual growth rate (%)1

2.2 -6.0 -1.2 0.0 -1.2 0.8

GDP per capita (EUR)2 10 722 10 111 10 394 10 427 - -

General government balance (% GDP)1

-1.4 -4.1 -4.9 -5.0 -5.1 -5.0

General government gross debt (% GDP-a)1

28.7 35.0 41.2 45.7 51.3 57.1

External debt (% GDP)2 85.4 101.0 101.2 99.6 - -

Average annual inflation growth (%)2

6.1 2.4 1.1 2.3 - -

Unemployment rate (%)3

8.4 9.1 11.8 13.5 - -

Employment rate (%)4 57.8 56.6 54.0 52.4 - -

Foreign direct iinvestments (mil EUR)5

4 218 2 415 0 297 1 074 - -

Government-Ensuring conditions for economic recovery and growth, preserving work places-Reducing public spending, increasing efficiency of public sector-Ensuring public sector development, maintaining social peace-Introducing order to payment system, diminishing illiquidity

Employers-Amending the Labour law, with aim to facilitate flexibility and possibilities of employment-Obtaining the greatest possible tax reliefs-Diminishing the role of public sector in Croatian economy

Trade unions -Preserving existing levels of salaries and employment-Maintaining rights from collective agreements-Strengthening trade unions on all levels

Crisis as a challenge – new way of thinking, realistic approach!

Completing structural reforms necessary Restructuring, reindustrialisation, reducing barriers to

investment, management of human resources Labour market reform should be accelerated Social „peace” necessary – further increase of debt not

possible Agreement between social partners should be achieved

in a different way, considering economic potentials of the country

Searching for different modalities of work and reaching agreements through social partnership

Social dialogue - still not seen as a mechanism for reaching compromises between social partners and shaping public policies

Positions of Government and other social partners differ significantly: public spending, reducing substantive rights in public sector. Rapprochement of standpoints on the ways for overcoming the crisis

Trade unions are fragmented, not always sharing same views Fairly and equal distribution of austerity measures needed, finding

solution within available financial possibilities Quality of social dialogue should be brought on higher level,

building capacities and competencies of all social partners Analytical monitoring and recording indicators on industrial relations

are not sufficiently developed Culture of argumentative dialogue should be strengthened

Labor law (LL)◦ enacted in 1995 and revised five times;◦ industrial relations reviewed in five chapters;◦ strike has to be announced; ◦ mediation process obligatory;◦ dual system of workers representation

Economic and Social Council (ESC)◦ the highest form of tripartite social dialogue in Croatia; ◦ advisory body;◦ national and the regional ESCs; ◦ permanent and temporary working bodies;◦ in March 2011 the ESC was re-launched

Established as Office for Social Partnership in December 2001 Changed to Independent Service for the Social Partnership in

January 2012 Logistic and expert support for the social dialogue and partnership Coordinates work of the ESC Promotes sectoral social dialogue Intermediates in settlement of labour disputes Operates as the secretariat of the EU-Croatia Joint Consultative

Committee

Confederation/ Association

Year of establishment

Number of trade

unions/employers

Number of workers

President

Trade union associations

Independent Trade Unions of (ITC)

1999 61 125,000 Krešimir Sever

Union of Autonomous Trade Unions of (UATC)

1990 17 110,000 Mladen Novosel

MATICA – Association of Croatian Trade Unions (MACT)

1993 10 64,000 Vilim Ribić

Croatian Trade Union Association (CTA)

1990 70 45,000 Ozren Matijašević

Association of Workers’ Trade Unions of (AWTC)

1994 45 24,000 Damir Jakuš

Employers’ associations

Croatian Employers’ Association (CEA)

1993 6,000 400,000 Ivica Mudrinić.

237 national trade unions, 534 trade unions 423 964 trade union members (35% coverage) Public sector (68%) Private sector (17%) Privatized companies (31%) New private sector companies (9%)

Employers in numbers 24 higher confederations 52 employers’ associations Employers’ associations are mostly grouped by the sectors Croatian Employers’ Association (CEA) the only representative

employers’ association in Croatia CEA operates in 3 regional offices and has 25 branch associations

Negotiation with a bargaining committee Possibility of extending application of national collective agreement May 1st, 2012: total of 141 national collective agreements were in

force in Croatia, 16 of which were branch agreements Five sectoral collective agreements were extended In 2010 the number of county collective agreements was 685 Collective agreement coverage is around 61%. 44% in private

sector and nearly 100% in public (Bagić, 2010) Collective agreements don't properly express specific

characteristics of branches and industries

2009No CA were concluded2010 ◦ BCA for public service officers◦ CA for workers in secondary education◦ CA for the private healthcare sector◦ CA for science and higher education◦ CA for workers in primary education

2011◦ CA for workers in primary education◦ CA for workers in cultural institutions ◦ CA for the social welfare services◦ CA for the security industry 2012 ◦ CA for the civil servants

In the last two years four sectoral social councils have been established

◦ Textile – tripartite council◦ Forestry and Wood Industry -tripartite◦ Road Transport–bipartite ◦ Railroad Sector– bipartite

Agreements specified actions to be taken by the social councils In many industries there are no branch unions or existing ones are

weak compared to the in-house unions

BCA for the Public Services set to expire in October 2013 Government started negotiations to change BCA in June 2012. Government proposed irreversible revocation of certain substantive

rights in 2012 and 2013 ◦ Christmas bonuses◦ vacation allowances◦ anniversary bonuses

Four trade unions accepted proposal, but four rejected it Mediation process with the four trade unions failed Government terminated the BCA in September 2012. The new BCA has been announced

Law on the criteria for participation in the tripartite bodies and representativeness for collective bargaining (July 2012)

Law limits extended application of collective agreements to a period of three months from their expiry

Right of collective bargaining only to representative unions Representative union has at least 20% of employee members in the

total number of unionized employees

Employers’ associations Trade unions’ associations

1. At least six months in register of higher level employers’ associations.

1. At least six months in the register of higher level trade unions’ associations.

2. Membership of at least 3000 employers, or affiliated with employers employing at least 100,000 workers.

2. Affiliated trade unions have at least 50 000members (workers).

3. Gather at least five employers’ associations operating in different areas.

3. Gather at least five trade unions’ associations, operating in different areas.

4. Have regional offices in at least four counties.

4. Have regional offices in at least four counties.

5. Have proper premises and other necessary material working conditions and employ at least five workers.

5. Have proper premises and other necessary material labour conditions and employ at least five workers.

Law on promotion of employment (May 2012)◦ Riddance from salary contribution (2 years) for employer hiring

unemployed person without work experience◦ State pays contributions for a highly educated young persons

who can acquire a year of work experience this way◦ For their work young people will receive atonement benefit of 1 600 HRK

An annual tax on unused property in the amount 0.5% to 2% of the market property value to be re-established every year

Labour Law changes◦ better regulation of the part time work; ◦ abolishing sharp distinction between indeterminate and fixed term employment - a single employment contract

Law on the special tax on salaries, pensions and other incomes

◦ 2%-4% of the net salary („crisis tax”) valid in 2009-2010 The Value Added Tax (VAT)

◦ From from 22% to 23% (2009) / from 23% to 25% (2012) The Increase of 20% to electricity and gas prices (May 2012) The Package of Tax Laws (2012)

◦ General Tax Law (publishing names of tax debtors)◦ Directive preventing redemption of salaries without paying

taxes ◦ Law on Income Tax (exempting all reinvested profits) ◦ Law on the Revenue Tax (increases non taxable salary base) ◦ Law on Contributions (health insurance 15 %to 13 %)

-

Rapprochement of standpoints on the ways for overcoming the crisis - parameters of the future economic development

Fairly equal distribution of austerity measures needed Finding solution within available financial possibilities Labour market reform in Croatia should be accelerated Activities aimed at building the capacities and competencies of all

social partners need to be intensified Solving the persisting problems in the industrial relations system:

◦ fragmentation of the union scene;

◦ reluctance of employers to accept unions as partners;

◦ insufficient CA coverage in the private sector, etc.

Social partners should be given timely insight in Government's future intentions

Social dialogue should be started at earlier stages Collective agreements should express particularities of the areas for

which they are composed Frequency of using the instrument of extending provisions of CA to

entire industry should be reduced More intensive work is needed on spreading the model of bipartite

and sectoral social dialogue Regular collection and development of indicators for monitoring and

evaluation of industrial relations Communication with the media should be improved A culture of argumentative dialogue between all participants should

be strengthened

Thank you!

visnja.samardzija@irmo.hrbutkovic@irmo.hr