The government’s priority is to keep existing workplaces and create new ones 

Employers call for a more flexible Labour Code.

This article was published in the Career & Employment Guide 2020, our special annual publication focused on the labour market, human resources and education.

The Igor Matovič government had to prepare the roadmap for its operation in the next four years amidst the fight against the COVID-19 pandemic. The crisis that is expected to follow will bring not only challenges, but also opportunities, observers say – including for the labour market.

In the area of work and employment, the government of four parties promises to pursue measures to keep employment and create workplaces while reducing payroll taxes as a means of increasing citizens’ incomes. Its programme statement prioritises the improvement of the business environment, the fight against corruption and red tape, a prudent fiscal policy, and tackling tax evasion.

"The programme statement contains several good ideas, but it is questionable how many of them they will really be able to implement," Martin Kahanec of the Central European Labour Studies Institute (CELSI) non-governmental think tank told The Slovak Spectator. "Paradoxically, the pandemic could be helpful in forcing Slovakia to focus on key measures."

The business sector takes a positive view of the programme statement, pointing to the plans to reform payroll taxes and to enhance the flexibility of the Labour Code. Flexibility is pinpointed as key, particularly during the crisis and its aftermath. The Labour Ministry pledged, in its part of the programme statement, to consult on changes to the labour legislation with social partners.

Flexibility is key in a crisis

The National Union of Employers (RÚZ) points out that the coronavirus crisis has shown how unbending the labour legislation and the Labour Code are.

"The labour legislation must be thoroughly assessed. It must be modernised and set more fields where the adjustment of relations between employer and employee could be based on an individual or a collective agreement and not set by the law," said Martin Hošták, secretary of the RÚZ.

The Federation of Employers’ Associations (AZZZ) welcomes any improvement in flexibility, adding that any easing that means employees achieve a better work-life balance will lead to companies retaining a happier and more loyal workforce.

"Society as such has been changing, and keeping talent requires some flexibility on the side of companies," said AZZZ spokesperson Miriam Filová.

In terms of wage costs, employers have been complaining that current health and social insurance premiums make the labour force expensive.

"The reform of payroll taxes is an inevitable instrument for the creation of new workplaces and for the retention of existing ones," said Filová. The coronavirus has made the situation even worse, she added.

Nevertheless, businesses question the extent of the goals, given that the ruling coalition is composed of four rather different parties.

"I’m afraid these goals will end up far from fulfilled, as it is clear that differences in opinions in the government are too great and the agreements are far from valid," Peter Serina, executive director of the Business Alliance of Slovakia (PAS), told The Slovak Spectator.

The PAS finds the programme statement lacking in terms of a more detailed plan for the modernisation of the Labour Code and elevating employees’ organisations to the same level as trade unions, among others.

More equality and inclusion demanded

Kahanec welcomes measures that would help reduce differences between men and women on the labour market. As it stands, mothers especially are penalised.

"Care for children needs to be divided more evenly," said Kahanec. This requires measures like paternity leave and the availability of kindergartens.

While Serina welcomes the implementation of paternity leave, he objects to the fact that the current plan will only partially change bad legislation and a bad setup.

"This means that in effect, we will change nothing; we will just give the steam engine a nicer mount," said Serina.

Michal Páleník of the Employment Institute and the Faculty of Management at Comenius University would like to see the programme statement provide more concrete measures to include disabled people and people from excluded environments, like the Roma minority, in the labour market. The coronavirus has shown just how inflexible the current payment system for the care of a family member (OČR) or sick leave actually is.

"The current scheme does not enable one parent to care for children on Monday, Wednesday and Friday and the other one on Tuesday and Thursday, while this is exactly what many people now working from home need," said Páleník.

Some people would be able to work some hours from home even when they are sick, but the law does not allow for working and receiving sick pay simultaneously, the analyst noted.

Meal vouchers to become voluntary

The government also promises to give employees a choice between meal vouchers and money for meals. At present, companies must provide meal vouchers to employees if there is no on-site canteen serving hot meals at the workplace. Experts and employers have heavily criticised the voucher system. Employers represented by the PAS and the RÚZ support making meal vouchers voluntary.

"Employee benefits may be higher and employer’s wage costs lower with direct payments to the employee’s account as part of their salary," said Kahanec, adding that companies issuing meal vouchers earn dozens of millions a year but this burdens employers with unnecessary administration.

"The state should not use the law to create business for a narrow group of service providers in any field and afterwards force others, by law, to pay for them," Kahanec added.

Minimum wage to be altered again

The Matovič government is considering binding income and payroll tax parameters and relief onto the minimum wage, but it does not specify how.

The minimum wage has become a hot topic for employers hit by the coronavirus. In 2019, the Peter Pellegrini government changed the way the minimum wage is set to a formula attached to the average wage. It is expected to be used for the first time for the calculation of the minimum wage for 2021, setting it at eur656. The increase of eur76 reflects the prosperous year of 2019.

"We expect that the government will change the formula for the calculation of the minimum wage and tie it to labour productivity as well as change the formula for the calculation of wage surcharges currently attached to the minimum wage," said Serina.

Páleník points to the enforceability of the minimum wage when he estimates that about 5-10 percent of employees earn less than the minimum wage, such as jobseekers on activation work or those attending on-site training.

"This doesn’t seem to bother anyone," said Páleník.

Increasing the minimum wage to a level unacceptable for employers would lead to abuse. For example, employers might push their employees into part-time contracts, while expecting them to work the same number of hours as before, for a lower wage. Or employees might get paid only part of their remuneration officially and the rest in cash.

Calling for permanent kurzarbeit

To help companies hit by the coronavirus to keep their skilled workforce, the government implemented the so-called kurzarbeit or short-time work scheme. It is a mechanism whereby the state pays part of a worker’s salary to ensure they are not dismissed by employers who decided or had to, upon the government’s decision, shut down their businesses due to the pandemic. But the scheme differs from that in Germany or Austria.

The Slovak model consists of two pillars: granting allowances per employee either to employers with significant reduction in turnover or to employers who send their employees home without any work and continue to pay 80 percent of their wages. In Germany, it is an allowance which is directly paid to the employees and not to the employer. Thus, it is not classified as a subsidy in Germany. The financing derives from unemployment insurance whereas in Slovakia, it is being paid by taxes, which should be covered by EU funds, explained Markus Halt, spokesperson of the Slovak-German Chamber of Commerce.

The business sector supports the plan to make the short-time work scheme a permanent instrument in Slovakia while the form of its financing has not been agreed upon yet.

"With the already excessive burden of health and social levies, the RÚZ would advocate solutions that would not lead to an increase of taxes or levies," said Hošták, proposing that the scheme should be financed from levies employees as well as employers already pay into the unemployment insurance fund.