COLBAR Bratislava, 09/10/2019

1. COLBARBratislava, 09/10/2019 Szilvia Borbély Collective bargaining in Hungary – characteristics and trends

2. General characteristics Collective bargaining in Hungary began to develop in the early nineties. Partners for industry level bargaining remained weak on both sides • Trade unions lost the majority of their membership in course of restructuring the economy – TU density(LFS) 2001- 20%, now 9%) Pluralisticbutfragmentedtrade union structure has been developed (6 national confederations) • Employer organisations were newly established during the transition period(9peak level employers’ organisations) Asa result: • collective bargaining – started to be decentralised, uncoordinated • thelow-coverage systemused to belimited to single-employer agreements in the private sector and companies owned by the state and municipalities • In the public sector wages, terms and conditions of employmentaresetbylaw, thecollective bargaining and social dialogue have limited role.

3. Factors shaping the development of CB -Institutionaland politicalbackground • (National) Council for the Reconciliation of Interests (O)ÉT)) shaped thelegal and framework conditions of sectoral and local collective bargaining (founded in Dec 1988). • OÉT set the National Minimum Wage (compulsory) and recommendations for the annual wage increase. • Until 2010 right and left wing governmentsalterated. In 2010 FIDESZ was elected with a two-thirds majority in Parliament. • This government (still in power) curbed democratic institutions, including national level consultations with the social partners • In 2012 the Parliament passed the fundamentally new Labour Code • Since 2012 a new tripartite forum, (VKF) replaced OÉT with limited functions and participation of fewer social partners. However, in practice this is stilltheplaceof setting the National Minimum Wage.

4. Factors shaping the development of CB • Obviously the public sector affected more directly by political will • The general wage scale of public sector employees have been frozen since 2008. • Instead, the government engaged in selective negotiations with different groups with strong bargaining power and introduced separate wage scales for these public sector groups. By this policy the government has successfully divided public sector employees and their unions • Recently thetight labour market has had a considerable impactoncollectivewagenegotiations in thecompetitive sector. (Highlabourshortage -> around5% of the country's working-age population has emigrated+ growingforeigninvestments -> increasingdemandforlabourforce)

5. Level of bargaining - single-employer level is the dominant Main characteristics of collectivebargaining: it is decentralised-uncoordinated and atmicrolevel • The lawdistinguishbetweensingle-employer and multi-employeragreements (at least two employers or by employer organisations with voluntary membership) • Mainlysingle-employer agreements (company or a public sector institution) • Establishment levelagreementstoo (national-wide companies can make use of regional pay differences in the labour market to reduce the overall wage bill) • Onlyfew multi-employeragreementsexists • The vastmajority of CAsare signed by a single employerof large- or medium- sized companies • No or „empty” CAsinSMEs • Highestcoverage - atstate- and municipality-owned companies

6. Poorindustrylevelbargaining Veryfewsectoral/industry agreements (f.e. roadtransport, electricityindustry, healthcare (2017)) • organisational weakness of the sectoralorganisations • no employers’ organisation ready to negotiate • confusing employer’s side, lacking real powers • badly funded and staffedsectoralTUs and employers’ organisations From 2004 Sectoral Social Dialogue Committees were established to facilitate bipartite sectoral dialogue, in general, and more specifically to promote industry-level bargaining • Thoughthey became the venues of professional discussion of sectoral issues no sectoralagreementswereconcluded • Recently the government has significantly reduced the financial support, and this has practically led to the death of the institution

7. Number and coverage of collective agreements (31/08/2017), source MKIR and KSH

8. Mechanisms to promote bargaining • Extensionprocedure: Since 1992, when the Labour Code first regulated, it has been used only in a couple of sectors (construction, hotel and catering, electricity and bakery) • Since the mid-nineties the state provided mediation and arbitration service, though a couple of cases emerged annually. In 2017 the service was re-established. • Legalregulation: Low unionisation rate and weak bargaining power of trade unions – highlights the importance of legal regulation and its quality • Until 2011 socialpartnerscould influence the content of legislation on labour regulation (throughnationalleveltripartite interest reconciliation body) • ActI of 2012 ontheLabourCode has beenstronglycriticizedby trade unions – it distorted the balance of power in favour of employers

9. Act I of 2012 ontheLabourCode – onrightstobargain CA • New bargainingrights’ rules: CAmay be concluded only with trade union who represents at least 10% of the workers • If more than one union attains the 10 per cent threshold, all of the unions present in the company have to bargain jointly = onlyone CA is allowedtoconcludeinoneworkplace • In the absence of trade union(s) entitled to negotiate a single-employer agreement, the company’s works council may conclude a quasi-collective agreement with the management of the company. Such work agreements cannot deal with wages.

10. Act I of 2012 ontheLabourCode– goodby „In FavourPrinciple”, hello employmentflexibility • Hungarian legislators considered the possible deviations fromlaw in collectiveagreementsnotonly in favourbutalso inthe detriment of the employees -as asort of incentive to employers to engagetheminto bargaining. • Whenthere is ban of divergenceforthedetriment of employees,itis indicated individually in every case. (F.e., it is not allowed to diverge in case of trade unions‘rightsor employer should not discriminate employee because of his/her trade union affiliation or trade union activity; it is not possible to redeem holiday for money, etc.). • The CA can diverge from the law on employees’ benefit and also on detriment in concern of itemslike the length of notice period, dismissal time, the volume of severance pay and the right to it, the length of work time framework, the length of age based additional leaves, the wage supplements, etc..

11. New „Slave Act” • Overtimelimitswhich may be unilaterally ordered by an employer - 250 hours per calendar year or 300 hours per calendar year based on a collective bargaining agreement. • SinceJanuary 2019 LabourCode („Slave Act”) employers may order an additional 150 hours (or 100 hours where collectiveagreementalreadyincludes300 hours) of „voluntary” overtime (altogether 400 hours of overtime) based on an individual agreement concluded with the employee. The new rule opens a back door to exceed weekly working time with legal limit of 48 hours. • Employersand trade unions may agree via a collective agreement to apply a work-time cycle of 36 months where this is justified by objective technical reasons or reasons relating to work scheduling. The previous limit was 12 months.Where no collective bargaining agreement exists, work-time cycles may last for 4 months.

12. Scopeof agreements CAsusedtoincludeproceduralissueslike • topics on industrial relations within the company, rights and duties of interest representation • procedures in concern of the collective agreement bargaining • CA validity • procedures in concern of disputes Substantiveissues, like • Rulesof hiring and firing (probation period, cases for immediate termination, duration of notice period, severance pay). • Termsand conditions of work (work schedules, working time, overtime, and framework of working time banking, the breaks during the work, the leisure time, length and order of getting the paid leave) • Methodto payingthe wage and the wage supplements, cash and in kind compensation, including “cafeteria, guaranteed and variable pay (like bonuses, shift bonus, overtime pay, etc.) • Rules(legal consequences) on staff’s liability for damage arising in cases of negligence and also on employer’s liability on wrongful breach of their duty

13. Main issues in CAs, basedon 2925 collective agreements (MKIR, 2017)

14. Someother CA characteristics • Durationof agreements • most of CAare signed for an unlimited period; however, the frequent changes in the legal and economic environment force the parties to modify the agreements in every two to three years. • Wage agreements are separated from the main body of collective agreements, and they are renegotiated annually • Free riders. The collective agreement affects all employees of the given company, or that of the companies signed a multi-employer agreement. Therefore, trade unions often complain about ‘free riders’. • Emptiness.It is a general problem that manycollective agreements simply repeat regulations in the Labour Code – smallcompanies/companiesrunby local authorities • CA enforcement- unions became almost helpless following the legislative changes -The legislation curbed the Labour Inspectorates’ scope of action and decreasedthenumber of inspectors.

15. Strike – little influence on security of bargaining in Hungary • The detailed rules are set out in ‘Act 7 of 1989’ on the right to strike • The amendment of the Strike Act in 2010 fundamentally changed the regulation of minimum services - minimum services must be ensured by employers who provide public services, such as public transport, communications, electricity, water supply etc • The minimum level is regulated by law (postal services and public transport) or the stakeholders have to agree or the court decides on it. • This change led to a drastic decrease in the number of strikes

16. Conclusions • The coveragebycollectiveagreement is around 30%. • Collectiveagreementsarenegotiatedby tradeunions and employers or employers’ associations (butworkscouncilsalsohave limited possibilitiesincertaincases). • The trade unions’ bargainingpower is low, the trade uniondensity is around 9%). The sectoralbargaining is obstaculisedbythelowemployers’ associations’ density (21% in 2013). • Single employer is the dominant level, however national negotiations on the Minimum Wage are of importance. • The end of theabundantly available cheap labourand thelabourshortage in several sectors has strenghtenedtheworkers’ bargainingpower. • Time will tell, if trade unions will be able to translate the labour market shortage not only into immediate wage increases, but also into a better and sustainable system of collective bargaining, which assumes organisationally strengthened trade unions at all levels of bargaining.

17. SUMMARY