THE EFFECTS OF THE ECONOMIC CRISIS ON INDUSTRIAL RELATIONS IN CROATIA

1. THE EFFECTS OF THE ECONOMIC CRISIS ON INDUSTRIAL RELATIONS IN CROATIA INTERNATIONAL CONFERENCE “The economic crisis impact on industrial relations national systems: Policy responses as key recovery tools” Sofia, November 15-16, 2012 Hrvoje Butković, PhD Višnja Samardžija, PhD Institute for International Relations - IMO, Zagreb, Croatia

2. Content of presentation • 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

4. Framework for analyses – crisis as a challenge • 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

5. Selected macroeconomic indicators for Croatia

6. Main goals of social partners

7. What are the solutions? • 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

8. Some key findings of the study on Croatia… • 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

9. Legal and policy framework for social dialogue • 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

10. Institutional support:Independent Service for the Social Partnership • 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

11. Basic features of representative trade union confederations and employers’ associations in Croatia

12. Trade unions in numbers • 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

13. Collective bargaining in Croatia • 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 agreementsdon't properly express specific characteristics of branches and industries

14. Branch collective agreements signed 2009 No CA were concluded 2010 • 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

15. Sectoral social councils • 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

16. Key issues in 2012:Negotiations on benefits, BCA for Public Services • 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

17. Law on representativeness • 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

18. Terms of representativeness for employers’ and trade unions’ of a higher level (Law on representativeness)

19. Other legislative changes • 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

20. Announced legislative changes (2013) • 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 Lawchanges ◦ better regulation of the part time work; ◦abolishing sharp distinction between indeterminate and fixed term employment - a single employment contract

21. Fiscal changes • 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 %) -

22. Recommendations • 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.

23. Recommendations (2) • 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

24. Thank you! visnja.samardzija@irmo.hr butkovic@irmo.hr