Croatia National Report
Improving knowledge on the impact of Central- and Eastern European social partners on competitive labour market reforms facing the global crisis, VS/2016/0368
CASE STUDY: CROATIA
Author: István HORVÁTH, Dr. , ELTE Faculty of Law, Department of Labour Law and Social Law
www.ceelab.eu
Sole responsibility lies with the authors, the publication reflects only the author’s view and the Commission is not responsible for any use that may be made of the information contained herein.
This publication was prepared in the framework of the project “CEELAB – Improving knowledge on the impact of Central- and Eastern European social partners on competitive labour market reforms facing the global crisis, VS/2016/0368” The project is co-funded by the European Union, in frame of the program VP/2016/004 „Improving expertise in the field of industrial relations”
1
National Report Croatia
National Report
Croatia
Overview The reference period covered in this report is 2007 to 2017. This period is marked by two distinctive events that have influenced and shaped Croatian labour and social policies in the last decade. The first concerns the onset of the global financial and economic crises in 2008. The effects of the crises started in Croatia around 2009-10 and provoked negative movements in the labour market: a decrease in employment and an increase in unemployment. However, the negative trends in the labour market, as well as the economic and financial situation in Croatia were not directly connected to the global economic and financial crisis, since the Croatian economy is relatively small and isolated, and also suffers from inherent structural deficiencies. The second event concerns the accession of the Republic of Croatia to the EU on 1 July 2013. The benefits of the free movement in the internal market have prompted a wave of emigration of the Croatian labour force, despite the fact that a certain number of EU Member States have kept their labour markets closed to Croatian citizens for the first two, or five years following accession. It is estimated that in the period between 2013 and 2016, around 230,000 people emigrated to EU countries.1 Generally, employment legislation has not been responsive to the situation in the labour market. The unemployment rate, which has been steadily growing since 2009 and which reached its peak at 17.3 % in 2014, has been on a declining course since. Even though the new Labour Act was adopted in 2014, it would be wrong to ascribe the drop in the number of unemployed to its entry into force. The lower unemployment rate is probably more connected with economic and industrial growth (primarily seasonal employment in tourism) and the aforementioned emigration, than the legislative changes. The observed period was also marked by political instabilities, culminating in 2016, when early elections were held because the Croatian Parliament adopted a vote of no-confidence against the 13th Government, which had only been in office for five months at that time. The political scene in general and the work of the current 14th Government in office is characterised by uneasy coalitions and heavy political trade-offs, which make any attempt to develop a coherent and comprehensive approach to any policy field virtually impossible.
Methodology The research was conducted in two phases. The first phase was based on desk research method. It consisted of gathering information on basic labour market indicators and national legislation. Based on the results of the first phase, a questionnaire for the social partners was developed and applied in the second phase of the research. The methodology in the second phase was therefore based on written replies to the questionnaire formulated by the researchers.
1 See Draženović I., Kunovac M. and Pripužić D. (2018) Dynamics and Determinants of Migration - The Case of Croatia and Experience of New EU Member States, Croatian National Bank, https://www.hnb.hr/documents/20182/2101832/24-dec-drazenovic-kunovac-pripuzic.pdf, p. 12. The authors point out that the official statistics from recipient EU Member States shows that the number of emigrants is up to three times higher than the official Croatian records show. The official Croatian statistics are significantly lower, because they capture only officially reported emigration, but they nevertheless show that the number of emigrants has more than doubled since 2013 (from 15,262 emigrants in 2013 to 36,436 emigrants in 2016). See Statistical Information 2018, https://www.dzs.hr.
2
Croatia National Report
The biggest information gaps are in the field of social dialogue – trade union density and the coverage of collective agreements, as well as the operation, prevalence and influence of the workers’ councils, because there are either no official statistics or the monitoring tools are just starting to develop.
1. Economic Crisis in Croatia 1.1. General Considerations The Croatian economy entered a period of recession in 2008. The biggest drop of GDP was recorded in the first quarter of 2009 (a drop of 6.7% compared to the same period in 2008). After an initial Government denial that Croatia was in recession, the first counter-measures appeared in the second half of 2009, with the budget amendment and introduction of the so- called crisis tax (on salaries, pensions and other income above HRK 3,000 (EUR 407) the rate of this tax was 2%, above HRK 6000 (EUR 815) it was 4 %), as well as an increase in the rate of VAT. In April 2010 the Government presented the Economic Recovery Programme, aimed primarily at reducing public sector expenditure, reforming the income tax system, reducing the number of parafiscal charges and reducing the number of public service employees by 5%. Although the decrease in GDP in the following years was lower than in 2009 and 2010, many economists warned that stagnation following a sharp decline was not surprising, and that the slowing of the negative trends was more due to income from tourism, than the reform efforts. In the period between 2010 and 2014 the ambitious reform programme essentially turned into a series of budget amendments to preserve macroeconomic stability. The first signs of recovery started in 2014, when annual GDP growth of 0.3% was recorded, after 12 consecutive quarters in which GDP had been on a downward slope. The continuous GDP growth and the slow path to economic recovery started to also positively affect the labour market from 2015 onwards. The average number of unemployed peaked at 345,112 in 2013. By 2017, this number had fallen by 44 % (the average number of registered unemployed in 2017 was 193,967).
ILO unemployment rate, %
20
15
10
5
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
The biggest problem in the labour market, apart from the low activity rate (around 51%), relates to the skills shortages and mismatches between the labour supply and demand. Even seasonal employment in tourism decreased by about 10% in 2017 compared to 2016,2 and there are labour shortages mostly in accommodation and the food service industry, which has prompted many employers in the tourism sector to demand higher quotas for foreign (non- EU) workers. Part of the explanation why the decrease in unemployment since 2015 has not led to an increase in employment lies in the growing trend of emigration.
2 Croatian Economic Outlook No. 71, September 2017, Institute of Economics, Zagreb, https://www.eizg.hr/userdocsimages/publikacije/serijske-publikacije/ceo/CEO_71_September-17.pdf.
3
National Report Croatia
1.2. Opinion of the Social Partners 1.2.1. What are the consequences of the economic crisis that emerged in the national and sectoral level of your member organizations from 2007? a) Trade Unions' responses: - Matica hrvatskih sindikata –Association of Croatian trade unions – MATICA: A reduction in wages and standard of living for all the employees in the public sector from which they still haven’t recovered.
- Hrvatska udruga radničkih sindikata – Croatian Association of Workers’ Trade Unions – CAWTU: In economic crises our members (trade unions) barely managed to hold on to their members. One of the consequences of the crisis was the loss of jobs, primarily those for which the workers had employment contracts on an indefinite term, and mostly those workers who are members of trade unions. In addition, employment on a definite term or through the intermediation of agencies (temp agencies) prevailed, which decreased the opportunities for newly employed persons to join the trade unions. The intention was to include (in-calculate) the burden of the crises, in collective agreements, as usual, and therefore in that period the priority was to insist on a (more) equilibrated division of that burden.
- Savez samostalnih sindikata Hrvatske - Union of Autonomous Trade Unions of Croatia - UATUC: In the private sector, the crisis has directly led to a decrease in the number of members, especially in such sectors as construction and the metal industry, where a lot of cases are registered, which resulted in the automatic loss of a great many members. This was difficult to make up for, despite the activities of the trade unions operating in those sectors to organize and find new members. That had an impact on the number and the structure of the members at the national level, where the influence of the crisis hit more trade union headquarters that have a significant part of the members in the private sector (such as UATUC), than those that operate dominantly in the public sector (where no significant loss of jobs occurred).
- Nezavisni hrvatski sindikati - Independent Trade Unions of Croatia - ITUC: The cuts in pay and in other material rights, the increase in employment on definite terms, the increase in the employment of agency workers and frequent abuse of students' work, the increased number of workers that work but are poor (working poor), dismissals because of the collective redundancies, insolvency/bankruptcy procedures, the strike on collective bargaining and trade unions, emigration of Croatian citizens in search of better working conditions and pay. b) The Croatian Employers’ Association’s response3: The last economic crisis that started in the USA in 2008 in the real estate market and financial sector resulted in a large drop in aggregate consumption all over the world, especially because of a high globalization process spread. The collapse of public housing-credit institutions in the USA produced the biggest global economic crisis since World War II. The global crisis that hit the world in 2008 reached Croatia in 2009 and over the years left an indelible mark and unforeseeable consequences for the domestic economy. The global financial and economic crisis has had a strong impact on the economy of Croatia, and especially on the labour market. Gross Domestic Product (GDP) fell by almost 6% in 2009
3 There is only one employers interest group in Croatia.
4
Croatia National Report
and foreign direct investments by more than 50%. Real GDP continued to fall in 2010, albeit at a slower pace (–1.2%). Public finances came under strain, with decreasing revenues and higher spending in automatic stabilizers. The introduction of both spending cuts and increased taxes maintained the budget deficit at 3.3 per cent of GDP in 2009 and 4.2 per cent in 2010. Labour force participation rates decreased, partly as a result of worker discouragement effect and employment dropped, especially for adult male workers. Unemployment rose, particularly for young people (aged 15 to 24). The consequences multiplied in the operations of SMEs that registered a drop in revenue up to 30% compared to the pre-crisis years. With the proliferation of the financial crisis to the real sector there was a reduction in final demand in developed countries. Therefore, from mid-2008 there was a reduction in demand for Croatian exports and exported goods. That additionally influenced previously weakened demand for final and intermediate goods, and the import of goods decreased. As was expected, the crisis significantly effected economic movements in Croatia. Finally, after 2008 a drop in GDP was noted, as well as a reduction in industrial manufacturing, a drop in the export of goods, an increase in unemployment, growth of public and foreign debt, and a rise in business illiquidity.
1.2.2. Evaluate the state employment policy measures to overcome the crisis. a) Trade Unions' responses: - MATICA: There was no suitable employment policy for dealing with the crisis. Only restrictions for employment in the state and public sector. A shortage of workers has been dealt with through introducing the “Professional training without employment” measure, which is not employment.
- UATUC: Some of the employment policy measures applied during the crisis were better, some worse, but our general evaluation is that the employment policy did not adequately respond to the challenges brought about by the crisis. The reform of the labour legislation in 2014 was, among others, represented as the response to the crisis, and we did not agree with that, because our opinion was that labour legislation has to be created for normal situations, and extraordinary ones should be resolved with extraordinary and temporary measures (like the solution of the state aid for the reduction of working time in order to preserve jobs in times of crisis, that was adopted, but not used enough in practice). Besides this, we consider it as especially problematic that the intention to solve the problem of high unemployment among young people by introducing and expanding the scope of virtually only professional training without commencing a labour relationship, as it has detrimental consequences for young people but also for the labour market in general, as we repeatedly warned. At the same time, in Croatia efficient active market policy measures are lacking that are directed at the really vulnerable categories in the labour market, including young people who have difficulties with finding employment, the long-term unemployed, people with few qualifications and older workers.
- ITUC: They are bad and the proof of this is the long duration of the crisis and the mass emigration of people from Croatia.
- CAWTU: The state employment policy totally failed in the period of crises. The most important project was the so called “workplace training” (professional training without entering into an employment relationship (unremunerated traineeship), that made it easier to employ people who were not finding it difficult to find a job, but conversely made it more difficult to employ those less equipped to find a job.
5
National Report Croatia b) The CEA’s response: The economic crisis swept away the progress made by the country in job creation since the mid-2000s, in particular the progress in reducing youth unemployment. These trends has caused mounting concerns about the risk of a lost generation, e.g. a group of disaffected young people forced to live on the margins of the labour market. The number of jobs fell at a slower rate than GDP initially, but as the crisis continued, the fall in employment drew close to the drop in the GDP rate. Expenditure on unemployment benefits increased from 0.24 per cent of GDP in 2007-08 to 0.37 per cent in 2009 and 0.43 per cent in 2010. This expenditure partially compensated for the income loss due to unemployment, and as such maintained consumption demand and dampened fluctuations in real GDP. Several measures for economic recovery were undertaken by the Government, many aimed at supporting enterprises as an instrument for job preservation. As part of the anti-recession package, several acts and decisions were adopted in 2009. The measures envisaged by the Economic Recovery Programme to improve labour market policies included: a) Investing in vocational education and training programmes targeting the unemployed and inactive individuals to increase their occupational competencies. b) Introducing time limits on the full unemployment benefit entitlement to motivate the unemployed to actively search for a job and making part of the unemployment benefit conditional upon participation in training programmes. At the same time, the unemployed at risk of long-term unemployment would benefit from a longer duration of cash unemployment benefits. c). Expanding apprenticeships, internship and work practice programmes targeting young people to help them acquire work experience highly valued by employers; d). Strengthening the capacity of the Croatian Employment Service (CES) to provide career information, counselling and guidance and improve service delivery to the most disadvantaged groups by enhancing cooperation with the Centres for Social Welfare and the Vocational Education and Training Agency.
2. Labour Market Indicators 2.1. Croatian Labour Market Trends 2.1.1. Population - Employees and the Unemployed In Croatia, 2016 was marked by positive economic trends including a dynamic GDP growth of 2.9%. The changes in the labour market mainly refer to a decrease in the number of the unemployed and the rate of unemployment, stagnation, i.e. a slight increase in the number of the employed, and the consequent decrease in the active population. The significant decrease in the number of the unemployed and the stagnating number of those in employment led to a decrease in the average annual registered unemployment rate of 2.2%, i.e. from 17.0% recorded in 2015 to 14.8% in 2016. The labour market is shrinking, primarily due to demographic reasons (an ageing population, a declining birth rate) and increasing emigration (mostly to other EU countries) in recent years. The active population in 2017 amounted to 1, 601,165 people (out of approximately 3.5 million of working age (15 +) population), out of which 1,407,198 were in employment. This is a decrease in the active population of more than 10% compared to 2007. According to the Labour Force Survey (LFS), there were on average 1,590,000 employed and 240,000 unemployed persons in 2016. Compared to 2015, the number of employed persons increased by 0.3%, while the number of unemployed persons decreased by as many as 21.6%. Consequently, the rate of employment (15 – 64) increased to 56.9% (by 0.9 percentage points). The average LFS-based unemployment rate amounted to 13.1% in 2016, dropping by 3.1% compared to 2015.
6
Croatia National Report
2.1.2. Employment Contracts - Period of Fixed-term Employment and Part-time Work The number of open-ended employment contracts shows a decreasing trend, because around 90% of new contracts of employment are for a definite period of time (fixed-term employment contracts).4 Part-time work reached its peak in 2011, with a 7.2% proportion of part-time work contracts. A slight increase in the number of part-time workers in 2010 and 2011 coincides with the entry into force of the Labour Act of 2009 and could be associated with it. However, according to its stated objectives, the intention of that act was not to stimulate part-time work, but to implement Directive 97/81/EC on part time work, by providing additional guarantees to part-time workers. Part-time work has been decreasing since 2011, and revolves around 5% of all employment contracts.
2.1.3. Women & Men: Employment Ratio There has been a slight increase in the employment rate of women over the past decade. However, women make up the majority of the population (51.7 %, mid-2015 estimate), yet their employment rate is still lower than for men. There are over 10 % more women than men among the registered unemployed. However, men are more likely to enter the labour market from unemployment. In 2016, a decrease in the unemployment rate of men was higher (-17.4 %), than the decrease in the unemployment rate of women (-13.7 %), so that the proportion of men among the total number of unemployed has decreased, and the proportion of women has increased (+1.1 %).
2.1.4. Unemployment Rate In the period between 2007 and 2017, the highest recorded unemployment rates were in 2013 and 2014. Croatia joined the EU on 1 July 2013. In 2014, the new Labour Act entered into force. However, the relatively constant decline in the number of the unemployed since is probably more due to other factors, than legislative changes. These other factors include: a continuous decrease in the labour force, emigration, seasonal employment in tourism, and deregistration from the registry of unemployment due to reasons other than employment. In 2016, for example, 218,834 people exited from the registry of unemployed due to employment or other business activities; whereas 107,513 people were deregistered for other reasons (probably failure to fulfil certain obligations, etc.). This means that on average, for every two people employed, one person was deleted from the registry for other reasons. The decreasing trend in registered unemployment continued for a third consecutive year. The average number of the unemployed decreased from 285,906 recorded in 2015 to 241,860 in 2016, dropping by 15.4%. Unemployment decreased in terms of both unemployed men (17.4%) and unemployed women (13.7%). The largest percentage decrease in the average number of unemployed persons was recorded in the younger age groups (persons aged 15 to 19: 20.0% and 20 to 24: 19.8%), while the oldest age group (60+) was the only group that recorded a slight increase in unemployment (0.8%). The structure of the unemployed included 54.4% short-term (less than one year) and 45.6% long-term (more than one year) unemployed.
2.2. Labour Force Demand and Employment In 2016, employers reported 232,254 vacancies to the CES, which represents a 14.7% increase compared to 2015 and continued growth in labour force demand. The increase in the number of reported vacancies was recorded in most areas of activity and across all counties.
4 Croatian Employment Service - Statistics, https://statistika.hzz.hr/Default.aspx.
7
National Report Croatia
In July 2017, employers reported 15,481 job vacancies with the CES, which is 7.8% more than in July 2016. The major proportion of new job vacancies was reported by employers: in manufacturing (2,882 or 18.6%), in wholesale and the retail trade (1,820 or 11.8%), in construction (1,762 or 11.4%), in health and social work activities (1,531 or 9.9%), in accommodation and the food service industries 1,312 or 8.5%) and in administrative and support services (1,245 or 8.0%). After several years of oscillating growth, the trend in registered employment shifted in 2016. The number of persons from the CES unemployment register who found employment decreased by 5.9% compared to 2015. More precisely, 218,834 persons from the CES unemployment register were employed during the year, of which 197,047 (90.0%) were on a work contract basis and 21,787 (10.0%) on the basis of other business activities (workplace training without a work contract, starting a company, craft or trade business, temporary service contract, etc.). Compared to 2015, employment regulated on a work contract basis decreased by 4.6%, while the number of persons employed on the basis of other business activities decreased by 15.9%. Seasonal employment accounts for a large proportion of total employment. More precisely, 40,682 persons found seasonal employment in 2016, which accounts for 20.6% of the total number of persons from the CES unemployment register employed on a work contract basis. Compared to 2015, the total number of seasonal workers slightly decreased by 785 or 1.9%.5 With the aim of promoting permanent seasonal employment, the institution of employment contract for permanent seasonal jobs was introduced in 2001. According to the Labour Act (2014)6, where the employer is mostly engaged in seasonal activities, a fixed-term employment contract may be concluded for permanent seasonal jobs. In the event of concluding this type of contract, the employer shall be responsible for the application for extended pension insurance, for contributions and calculation, and payment thereof. This institution is coupled with the measure ‘permanent seasonal worker’ (“stalni sezonac”), as an active labour market policy measure (ALMPM).
3. Government Measures to Decrease Unemployment, Especially Long- term Unemployment 3.1. Passive Measures Unemployment benefit, an insurance based benefit, is regulated by the Act on employment services and unemployment rights.7 Unemployed people in need are also entitled to welfare payments, regulated by the Social Welfare Act.8 In 2016, there were on average 39,907 unemployment benefit recipients per month, i.e. 16.5% of the total number of the unemployed.9 Besides the unemployment benefit, the unemployed claimed other types of financial insurance/benefits as well (all regulated by the Act on employment services and unemployment rights; i.e. financial assistance during education and training, financial assistance during workplace training without a work contract, financial assistance to persons insured under an extended pension insurance scheme on the basis of temporary work contracts for regular seasonal jobs, reimbursement of travel and relocation expenses, one-off financial
5 CES, 2016 Yearbook, http://www.hzz.hr/UserDocsImages/HZZ_Godisnjak_2016.pdf, 10.9.2017, p 7ff 6 Art. 16 7 Zakon o posredovanju pri zapošljavanju i pravima za vrijeme nezaposlenosti, Official Gazette of the Republic of Croatia, No. 16/17 8 Zakon o socijalnoj skrbi, Official Gazette of the Republic of Croatia, No. 157/13, 152/14 9 For comparison, in December 2010 out of total number of the registered unemployed around 83,000 or 26% claimed unemployment benefit. Around 50,000 (20%) received welfare payments. A comparatively small number (around 2,000) receive both. Bejaković, Predrag, Situation and consequences of long-term unemployment in Croatia and measures to decrease it, Croatia, EEO ad hoc request, May 2011, p 6, ec.europa.eu/social/BlobServlet?docId=12057&langId=en, 12.09.2017
8
Croatia National Report
assistance and pension insurance.10 In July 2017, out of the total number of registered unemployed persons, 27,221 people (or 16.0%) claimed unemployment benefit. If compared to the previous year, the number of unemployment benefit recipients decreased by 5,582 people or 17.0%.11
3.2. Active Measures - The Effectiveness of the ALMP Measures12 3.2.1. The ALMP measures in the period 2010-2014 In Croatia, the situation has changed for the better in recent years due to the impact of the EU accession and strategic documents that Croatia had prepared for entering the EU, such as the Joint Assessment of the Employment Policy Priorities of the Republic of Croatia. Thus, in the period from 2006 to 2010, measures have begun to focus more intensively on people with low employability and the long-term unemployed. This shows a significant positive qualitative step in the design and implementation of ALMP’s measures. Notwithstanding the heterogeneity of employment policies in the EU, it can be estimated that Croatia mainly follows the activities which have been carried out in Europe. They are characterized by greater emphasis on active measures in employment policy in which unemployment benefits are being more closely linked to mandatory participation in training and retraining programmes and/or activation (Predrag Bejaković13). Croatia has implemented active labour market policies (ALMP) the main purpose of which is to activate the labour force and include the unemployed in the labour market, as well as to reduce the risk of job losses for the employed who lack specific knowledge and skills. This evaluation (Predrag Bejaković) covers ALMP measures that were carried out between 2010 and 2013, in order to determine their success and impact on the employment opportunities in comparison with those in the control group who did not participate in the measures. Official CES (Croatian Employment Service) data and the data by the Croatian Pension Insurance Institute (CPII) are complemented by information obtained through questionnaires, interviews and focus groups, to assess expectations of participants’ - the employer and the unemployed - their satisfaction and experience with a particular measure. This formed a solid foundation for further development and improvement of ALMPs. It is safe to conclude that Croatia is pursuing the direction of employment policies implemented in Europe, characterized by greater emphasis on active measures as opposed to passive ones. Although Croatia has increased spending on ALMPs, the problems were related to their short duration and a relatively low consistency (Bejakovic).
3.2.1.1. Job Retention Incentives These measures are intended to preserve existing jobs by the employers who are in temporary difficulties or employers who have periods of reduced workload (seasonal feature of the business) during the year. The measures are also envisioned to encourage flexible forms of work. The programmes were not implemented in 2010, while in 2011 and 2012 only one measure was implemented. In 2013, the programmes contained several measures: a) "Permanent seasonal worker" - co-financing contributions for extended pension insurance for seasonal workers that are constantly employed during the season, (lásd melyik pontnál!)
10 CES, 2016 Yearbook, p 8 11 CES, Monthly Statistics Bulletin, 2017, no 7, p 7, http://www.hzz.hr/UserDocsImages/stat_bilten_08_2017.pdf, 12.09.2017 12 The information given in this report is based on the following documents: External Evaluation of Active Labour-Market Policy Measures 2010-2013 (Summary evaluation report, February 2016, hereinafter: Bejaković) Croatian Employment Service’s Yearbook (for 2014, 2015 and 2016) and National Reform Programme 2017. 13 Prof. dr. sc. Predrag Bejaković - Financial law and finance; Law Faculty; University of Zgreb
9
National Report Croatia b) "Not working Friday" - support for the preservation of jobs by topping up wages for employees with reduced working hours, and c) "Staying in employment" – co-financing of employment with another employer, and "Work after the summer." The purpose of this measure is to retain workers for which the employer can ensure full-time work under hours a week (non-working Friday), and to motivate employers to increase the number of permanent seasonal workers, thus ensuring better management of human resources (permanent seasonal worker). The measure coverage indicates that employers have not yet fully embraced the measures, and that they should be enhanced and adapted to suit the groups they were intended for. According to employers, the positive effects of both measures (permanent seasonal worker and not working Friday!) refer to increased job security and establishing a personal connection between employee and employer. Another important element is to stabilize the employer in the labour market and to bridge periods of reduced workload. The negative elements of the measure are mainly related to procedural difficulties (reporting, documentation), but also to the conditions that favour larger and more stable employers with the operational capability for the procedure, but also greater financial benefits compared to the number of employees (Bejaković).
3.2.1.2. Non-working Friday Non-working Friday is a programme not many participants are aware of and employers are reluctant to participate in, due to the complicated procedure and potential risks. Likewise, they doubt that they would be able to retain the necessary number of employees, thus jeopardizing the implementation of the measure, and risking increased loss and being forced to relinquish the received incentives. Those that did participate, report positive effects and a new atmosphere of security and trust. Likewise, another intended effect is the ability to overcome business crises and maintain work continuity during such times. Experience has shown that this measure helps companies during the transitional period by retaining the trained labour force who are prepared to continue working full time when the need occurs. Thus, the measure prevents redundancies and re- entry to the labour market, as well as long-term damage for the employer. The harshest criticism relates to exhaustive documentation and insufficient funds available to employers. There is a discrepancy between the obligations and risks faced by employers with business problems who are participating in the measure. Likewise, the set conditions restrict the choice of employers, as those who are facing production problems are forced to make employees redundant or cut work hours, yet if they wish to participate in the measure, they are not allowed to have tax debts, financial difficulties, or make workers redundant. The rigid design prevents the employers who might benefit from the measure from actually using it (Bejaković). Conclusion and propositions for improvement: In order to improve job-retention incentives, the rights and obligations of employers and permanent seasonal workers must be more detailed and further adapted for the practice and experiences of the seasonal labour market. The criteria for Non-working Friday should be more lenient to allow the companies which are facing problems, including possible redundancies, and/or insolvency to participate in the measure for the purpose of long-term recovery. Likewise, the condition prohibiting redundancies across the company should also be considered with the benefit of advice, as there is a big problem with labour force fluctuation in certain sectors, whereas larger companies operating on county or regional levels have trouble adhering to the no redundancy rule (Bejaković).
10
Croatia National Report
3.2.1.3. The Subsidies for the Improvement of Employability Measures such as workplace training without employment with the aim of gaining work experience and improving employability are being more intensely focused on people with lower employability and the long-term unemployed, which is a significant positive qualitative step in their design and implementation. Different stakeholders assess ALMPs as sufficiently available and all potential participants in the measures as sufficiently well informed about them. Respondents say that the measures are positive for both employers and the unemployed registered with CES alike, and that everyone definitely benefits from them. The measures are well targeted towards the young and the employment of people over 50 while public works are mainly intended for the long-term unemployed. Employers are satisfied because there is a whole range of measures in which they can find the ones they can use. (Bejaković) Those measures are: a) workplace training without employment; b) public works; c) labour market-oriented training; d) training incentives.
3.2.1.4. Workplace Training without Employment (See also point 3.2.4.5. Workplace Training without a Work Contract) Workplace training without employment is a measure intended for young unemployed people registered with the CES, who have up to one year of recorded work history in the vocation for which they were educated, so that they can get the work experience necessary to enter the labour market and/or pass state finals and licensing exams. Workplace training without job placement is an extremely familiar measure, among those involved in it, but with other participants as well, and one of the reasons why this is so is its high media visibility. The primary goal of this measure is to enable unemployed individuals, lacking in relevant experience on the labour market, to gain such experience so as to meet formal or informal demands of the labour market. The evaluation results demonstrate that the described main goal of this measure was achieved with the majority of participants, within the reference period. Specifically, the results have shown that a significant majority of surveyed participants, more than four fifths of them, estimate that they were truly given an opportunity to gain practical knowledge and the skills necessary for working in their line of work. Those participants who participated in the measure with the goal of achieving prerequisites for taking licensing exams have more often than not achieved that goal upon exiting the measure (nine out of ten participants). However, with approximately one sixth of participants the measure did not completely fulfil its purpose, i.e., it did not provide an opportunity for workplace training and for gaining suitable work experience in their line of work/occupation. A proportion of the participants have found themselves in positions where they predominantly performed routine, simple, intellectually undemanding jobs, or administrative jobs of a lower degree of complexity, i.e. jobs not in their line of work/occupation. Also, they worked in positions for which a mentor had not been provided, except formally "on paper", which is an important provision of the measure. Such negative experience more often occurred with participants who received workplace training in government administration bodies, or bodies of local/regional local- government, and participants who and received professional training in non-profit organizations, while they were less frequent in public service (i.e. education and health care, where participants were commonly obliged to take licensing exams received workplace training) and in the private sector. One of the positive, but unintended effects of this measure is the process called upwards moving knowledge transfer. Working in those kinds of jobs, participants often introduce an
11
National Report Croatia inovation in the work process itself or in the organization process, or they somehow improve it, or relay their knowledge and skills to the work force which happens to be there. The main goal of this measure is not securing immediate employment for participants, but it definitely includes raising medium-term employability of participants through equalizing their position on the labour market with the unemployed who have previous work experience within their line of work or have taken a licensing exam. In this context, the results of the quasi-experimental method of impact assessment demonstrate that for those participants who entered the measure after May 2012 under the EPA (Employment Protection Act) (when WT had been expanded to occupations generally without the licensing exam obligation) participating in this measure increases the medium-term employment probability for approximately 40% in contrast with the comparable group of unemployed persons not participating in this measure. The effect with participants who entered the measure under the Labour Act is slightly less (since they are obliged by their occupations to take licensing exams or state finals), i.e. participating in this measure increases the probability of the person remaining employed 12 months after leaving the measure by one third. The cited difference between the two groups of participants can be explained by the characteristics of the labour market to which they aspire. Those who took part in the measure under the Labour Act are predominantly professionally trained for occupations and jobs in the public sector (government administration, local/regional local-government, public institutions in health, education and social service), where opening new positions in the previous couple of years had been restricted. On the other hand, participants who entered the measure under EPA are a more heterogeneous group and as a population compete for a wider range of positions. In summary, we can conclude that this measure achieves a significant positive effect on participant employment probability for those who entered this measure, and especially for participants who entered the measure under EPA, which confirms that expanding it to the new group of participants was the right decision. The downsides of the system manifest themselves primarily in that, for young people, it became almost the only way of entering the labour market. The high reach of this measure suggests the existence of another negative effect of it on a macro-scale, the phenomenon of pushing out other forms of entering the labour market after finishing education, that is, other forms of internship. In relation to this, it can be observed that the existing administrative panic of the public sector in respect to the employment restriction and the non-existence of non-combatant military service, are dealt with through workplace training (WT) and that the measure is becoming a substitute for opening regular work positions and employment. The second fundamental negative effect of the measure was termed institutionalized unpleasantness, and it relates to a specific type of inappropriate use of the measure nominated as continuous circulation of participants. It involves utilizing the measure to continuously use new highly educated participants to perform specific jobs for which there is no sufficient capacity within the institution, where the participants performing them are overqualified. It leaves the impression that participating in the measure would be useless, i.e. that workplace training was "pro-forma", and the discovery that after the measure expires other participants will be employed in the same position, only increases dissatisfaction and spreads a negative image about the measure. According to participants' opinion "the feeling of being used" is primarily experienced in government administration bodies and bodies of local/regional local- government. Lastly, unwelcome consequences of pushing out other types of internship, which would include entering a contract of employment that also ensures a more appropriate salary, manifest themselves in creating unequal terms for approaching the labour market, considering the socio-economic background and the background of young unemployed people. WT as a
12
Croatia National Report
measure, considering the fee, is appropriate for and acceptable only to those unemployed individuals who can rely on financial and material support from their families. Those unemployed people who do not have the privilege of such support, will not be able to afford to take part in this measure, and will have to search for positions outside their line of work/occupation, which aggravates their return to their line of work/occupation in the long run, considering that a large number of their colleagues will have gone through WTWJP in the meantime, and are thus more competitive in gaining appropriate positions.
3.2.1.5. Public Works A public work is a community service that takes place for a limited period and offers co- financing and financing of the employment of unemployed persons from target groups. Public works have a two-fold role in the range of active policy measures. Their first specific feature is that they are used to increase and maintain a certain level of social inclusion of the unemployed who are long-term unemployed, that is, who have not worked for a prolonged period. Their second task is to "create" jobs that probably would not have been created without this measure, i.e. funds allocated for its implementation, in order to open up space for the activation of these persons, whereby these jobs must necessarily be for the general well- being. If we assume the main purpose of these measures is to activate the long-term unemployed, the results of this evaluation show it has mostly successfully fulfilled this purpose. The results show that participants in the measure during the reference period were primarily people who were not particularly active in the labour market before entering the measure, especially when compared with participants in other measures. Participants' stated motivation for participating in the measure suggests the same, whereby the vast majority of them stated activation and satisfaction with being given a chance of inclusion in the labour market and getting “out of the house” as their motives for participating in it. More proof that this measure was relatively well targeted is the fact that approximately half of the participants who took part in the quantitative research said they were in a way ‘forced’ to participate in this measure because of the “threat” of being deleted from the CES records if they refused to do so, and that statistically there is no significant difference in any of the indicators in regard to the total experience and the benefits of this measure when compared to those who participated but not because of a fear of deletion. The fact that the unemployed who became so passive in respect to the labour market that their employment counsellor had to "coerce" them to participate in this measure in the end had as positive experiences and benefits from the measure as those who participated without "coercion" suggests that the measure is properly meeting its goals. Besides the activation role, this measure also has a very important financial aspect for participants. Although the financial situation of their households is slightly better today than it was before inclusion in the measure, given that these are people who live in financially deprived households, the regularity of income from public works and its importance for guaranteeing a minimum of livelihood security are crucial, as for many of them public works are the only source of income. The fact that financial benefits from this measure, along with the activation ones, are very important to participants should, therefore, be taken seriously in any possible revision of its design, but also in its implementation. It should be taken into account that this measure is not only a part of labour market policies, but also of social welfare policies. However, there are discrepancies and obstacles to be solved, such as the problem of the cost-effectiveness of working, i.e. the fear of losing a variety of social welfare benefits if one finds employment through measures such as public works.
13
National Report Croatia
It is interesting that, although public works are in general, both by the unemployed and by other stakeholders in this process, often characterized as socially stigmatizing for those who participate in them, the results of this study suggest that only one in six participants in this measure in the reference period had a sense of social stigmatization while performing public works. If we talk about the long-term impact of the measure on the increase of employability of participants, it is relatively small, about one-fifth of participants in this measure in the reference evaluation period has a job today. This proportion is slightly higher among participants in non-municipal, i.e. social public works, or those whose public works involved working in public services (schools, homes, cultural institutions), of whom 29% are employed, and those who participated in public works, of whom 32% are employed today. Compared with the control group, the quasi-experimental method has shown that the average effect of the measure on employment slightly increases over time; a positive average effect of four percentage points was recorded in the period covered between the participants in the measure and the comparable group of the unemployed who did not participate in this measure and whose employment rate was 16%. On the other hand, when the primary goal of this measure is considered in the context of public works, i.e. to maintain a certain level of activation of the long-term unemployed, the effect of the measure is slightly higher. Therefore, since the primary goal of this measure is not direct employment but activation of the participant in the labour market, the effect should be considered with regard to registered unemployment, which in the context of public works is considered as a positive outcome, i.e. to remain active. In this context, evaluation findings show that about 80% of those who took part in public works do not have a job today. While about 64% of participants in the measure are unemployed, 16% of participants in the reference evaluation period are no longer active today, that is, they are no longer present in the labour market. Since the quasi-experimental (PSM) analysis shows that 27% of people from the comparable group of the unemployed who did not participate in this measure did not remain in the labour market, we can conclude that the measure has an average impact of 11 percentage points when it comes to remaining active. Unlike the unemployed, for whom evaluation findings show that they fulfil the objectives of the measure, when it comes to employers, evaluation findings suggest that they take a number of approaches which are not, or should not be, part of the intervention logic of the measure. Although results suggest that employers are essentially satisfied with the design and the implementation of the measure and all of their suggestions for improving the measure may be summarized as we want more of this measure, the findings in fact show that the employers' understanding of the goals of this measure are contrary to the nominal design of public works. Therefore, they should not interfere with the existing, regular activities or substitute regular expenses or free resources for investments or achieving positive business results. Besides not achieving the main purpose of the measure (work for the public benefit), it may weaken the effect of an automatic stabilizer of the local economy because it does not create "new" jobs, instead the existing activities for which money dries up are transferred to public works (public services welfare). In this sense, the estimated dead weight could be attributed to as many as half of the employers, public works organizers, who cited saving money as their main motive for using the measure. Conclusion and propositions for improvement: Steps should therefore be taken in the implementation of the measure to avoid such unwanted side effects as the substitution of activities, and potentially also the substitution of workers. In this context, the basic problems of CES staff should be mentioned in respect to the implementation of public works, which refer to the existence of ambiguity regarding the assessment and evaluation of public works programmes. (Bejaković).
14
Croatia National Report
3.2.1.6. Labour Market-oriented Training Incentives These are aimed at unemployed persons registered in CES's official register in order to make them more employable and competitive on the labour market. The evaluation findings suggest that this measure is in need of substantial redesigning, re-examining of goals and a significant change in its implementation method. The problems with this measure are present in all three levels of stakeholders (the CES, educational institutions, unemployed persons) who are all aware of them and have no qualms reporting them. To start with, there are clear problems in the estimates of the labour market needs. The impression exists that the criteria for monitoring labour-market demands are frequently insufficiently clear, imprecise, or unsubstantiated, while the CES has the capacity to meet demands i.e. provide an adequately trained labour force. One gets the impression that CES staff tasked with assessing labour-market demands do not always have all of the information and information sources necessary at their disposal to produce a realistic labour-market assessment for a particular regional office. Therefore, the aim of the programme is unclear and the CES relies on unsubstantiated assessments of in-demand occupations in the county/region. The next important issue is the public procurement procedure which is inadequate, lasts too long and plays into the hands of dumping. Because accepting the lowest prices is a must, lower quality programmes are chosen. Another problem facing the implementation of this measure is "pushing the unemployed" into "in-demand" occupations or qualifications i.e. counsellors recruiting participants merely to sustain the programme, despite the fact that a substantial number of candidates had no actual desire or interest in participating. The highest number of participants in this measure, 42%, report that the initiative or role of their CES counsellor for participating in an educational programme exceeded their own. Interestingly enough, a quarter of participants joined a programme they had no desire to complete. Over a third (35%) of participants report they had no intention of exploiting the newly-acquired skills/qualifications, as they joined the programme simply because it was offered. Almost 1/5 of participants, 19%, agreed they participated in the measure in order to avoid being penalized i.e. removed from the CES register of the unemployed. The most problematic thing about the measure is not meeting its objectives. For a fifth of the participants (21%) the measure did not increase the chances of finding a job, whereas for 18% the chances were only slightly higher. More than half of participants, 54%, have never worked at a job that required the qualifications they were trained for. Approximately 40% of the participants in this programme are now unemployed, and while 92% of those who remained at the jobs they were trained for would participate in the measure again, 1/3 of those currently unemployed would not, illustrating a clear disadvantage of insisting on education programmes that are difficult to sustain and "forcing" people to participate in them.
3.2.1.7. Training Incentives In general, training incentives are used in accordance with the objectives of the measure, which is additional training of the employees in the case of new technologies, retraining or diversification. Estimated positive effects of the measure are related to higher-quality employee training, as well as companies' improved business activities due to financial benefits provided by the measure. The measure is well targeted because it specifically targets the employers' current need for specific training and enables more quality training than the one an employer would be able to offer without it. The measure is rarely used because of the
15
National Report Croatia vagueness of the terms of use, especially in justifying the costs that both employers and the CES often finds unclear. The purpose of this measure is to enable additional training for several groups of employees: people in employment over 50 who aim to retain their job, newly-employed persons at jobs for which there are no qualified workers on the labour market, and people employed in companies which are introducing new technologies, higher standards, or changes to their production programme. Training incentives are allocated for general training (professional training) and specific training (acquiring new knowledge and skills related to profession/occupation). The reasons why employers participate in this measure coincide with its purpose. Therefore, the measure fulfils its function. Estimated positive effects of the measure are related to higher- quality employee training, as well as companies' improved business activities due to financial benefits provided by the measure. Training and retraining are an important part of modern business and would exist without the help of the CES, but it is important to stress that this measure enables more systematic training, especially because the CES covers the costs of employees absent due to training. CES staff believe this measure is well-designed and useful, as it meets the current needs of employers and the market in general by focusing training on specific needs of specific employers, and at the same time reducing unemployment for the participants. The positive influence and significance of this measure is particularly evident in the retraining of persons over 50 or unemployed women entering predominantly "male" areas, like manufacturing, due to new technologies, automatization and robotization. According to participants, this measure is characterised by low awareness i.e. employers describe the conditions for entry as unclear, and the necessary documentation, which must accompany the reports as too exhaustive and complicated. Employers are not particularly interested in this measure, probably because of its complexity; the report they submit must include detailed cost justification, work hours, and amortization. One might assume that this measure is an incentive for better employers who are able to provide the necessary training and, subsequently, jobs for their employees, while "bad" employers cannot. Does this measure aim to exclude problematic employers, or support the good ones in maintaining employment? Training incentives have a more specific and applicable function which labour market- oriented training lacks, and refer to ad hoc application to concrete local labour-market demands and current employer needs. A more comprehensive application of this measure, especially relating to newly-employed persons at jobs for which there are no qualified workers, would solve certain problems on the labour market caused by labour migrations, as well as scarce occupations and technologies, that the current education system is unable to tackle.
3.2.1.8. The Scope of Measures In a relatively short time period from 2009 to 2014 (which is broader than the period of this ALMPs measures evaluation, but it is necessary to gain an insight into the main trends in the evaluation period) the number of people participated in the Active Labour Market Policy measure increased by more than eight times from 6,296 participants in 2009 to more than 44 thousand in 2013. The biggest absolute increase was through the measure of Workplace training without a work contract (from around 450 participants in 2010 to more than 15 thousand participants in 2013). The biggest relative increase was through the measure in Employment incentives, followed by Labour market-oriented training.
Total number of persons included in ALMPs in the period 2009 - 2014
16
Croatia National Report
Measure 2009 2010 2011 2012 2013 2014 2014/0 92 in % Employment incentives 213 2,361 3,195 3,343 6,366 10,847 5,092.5 Start-up incentives 298 283 861 864 5,009 2,277 764.1 Institutional training 116 630 657 97 286 66 56.9 for the employed Labour market- 65 5,446 1,778 2,361 1,758 2,149 3,306.2 oriented training1 Workplace training 454 5,110 5,191 15,337 14,263 737.1 without a work contract Employment and 3,025 training for unknown employer Public works 135 5,610 10,778 15,324 13,270 3,956 204.4 Job retention - - 533 170 1,310 999 187.4 programmes Total 6,296 14,784 36,912 27,350 43,336 34,557 548.9 Roma national 244 332 547 662 686 281.1 minority. Total + measures for 6,540 15,116 37,459 28,012 44,022 34,557 528.4 the Roma Number of the 263,174 302,425 305,333 324,324 345,112 328,187 124.7 unemployed registered by CES3 Coverage rate in % 2.49 5.00 12.27 8.64 12.76 10.53 Index of the coverage rate in respect to the previous year 201.1 245.5 70.4 147.7 82.5
3.2.2. Measures in the Period 2014 – 201614 3.2.2.1. Active Labour Market Policy in 2014 In 2014, 56,632 people participated in the measures defined under the Active Labour Market Policy (ALMP) falling within the scope of responsibility of the CES, of which 28,293 were active participants from the previous year and 28,339 were new entrants. Compared to 2013, the total number of participants increased by 5.5%, while the total number of new entrants decreased by 33.8%. According to the type of ALMP measure, most people participated in educational activities, including workplace training without a work contract (49.5%), institutional training for the unemployed (3.8%) and institutional training for the employed (0.3%). The remaining number of participants took advantage of the following measures: employment incentives (19.2%), start-up incentives (12.5%), direct job creation - public work programmes (12.0%) and job retention subsidies (2.8%). In 2014, most new entrants joined workplace training (14,263 people or 50.3%) or took advantage of the following measures: education incentives (4,956 people or 17.5%), direct job creation – public works programmes (3,956 people or 14.0%), start-up incentives (2,277 persons or 8.0%), institutional training for unemployed persons (1,822 people or 6.4%), job retention subsidies (999 persons or 3.5%) and institutional training for people in employment (66 people or 0.2%). In 2014, the measures defined under the Active Labour Market Policy (ALMP) were carried out in accordance with the ALMP Guidelines passed by the Croatian Government in November 2013. The Guidelines were drawn up in adherence to the ALMP priorities and
14 CES Yearbook
17
National Report Croatia objectives based on the labour market analysis and strategic employment documents of both the Republic of Croatia and the European Union. In 2014, the affirmed ALMP measures were broken down into packages of measures intended for specific target groups of the unemployed and people in employment facing the threat of redundancy, including: • young people up to 29 years of age; • the long-term unemployed; • people aged 50+; • people with disabilities; • special groups of the unemployed such as: single parents, young people leaving children’s homes, victims of family abuse, Croatian war veterans, parents of four or more underage children, parents of children with special needs, asylum seekers, addicts undergoing treatment, and other groups of the unemployed facing the threat of social exclusion and long- term unemployment; • members of the Roma national minority; and • employers facing difficulties in efforts to save jobs. In 2014, 2,149 of the unemployed participated in labour market-oriented training, 28,039 in workplace training without a work contract, 10,847 took advantage of employment incentives, 6,777 participated in public work programmes, 7,077 took advantage of start-up incentives, 1,595 participated in job retention programmes and 148 participated in institutional training for those in employment. It is clear that most participants in ALMP measures took advantage of the opportunities for education, including workplace training without a work contract (49.5%), institutional training for the unemployed (3.8%) and institutional training for the employed, followed by employment incentives (12.5%), public works programmes (12.0%) and out-of-work income maintenance and support (2.8%). The total number of participants in 2014 included 783 people belonging to the Roma national minority. The largest number who participated in public works programmes were Roma (747 or 95.4%), while 19 people took advantage of employment incentives (2.4%), 16 of start-up incentives (2.0%), while one person participated in workplace training. (Yearbook 2014: 32, 33)
3.2.2.2. Active Labour Market Policy in 2015 In 2015, 64,773 persons participated in the measures defined under the Active Labour Market Policy (ALMP) falling within the scope of responsibility of the Croatian Employment Service, of which 23,178 were active participants from 2014 and 41,595 were new entrants in the course of 2015. Compared to 2014, the total number of participants increased by 14.4%, while the total number of new entrants increased by 46.8%. In 2015, most new entrants joined workplace training without a work contract (18,597 or 44.7%), which represents an increase of 30.4% compared to 2014. New entrants also participated in public works (9,961 or 23.9%) and took advantage of education incentives (6,603 persons or 15.9%), which represents an increase of 151.8% and 33.2% compared to 2014. A small number of new entrants took part in the following measures: start-up incentives (6.7%), job retention subsidies (3.8%), institutional training for the unemployed (3.7%) and institutional training for people in employment (1.2%). The measures defined under the Active Labour Market Policy (ALMP) were carried out in accordance with the Guidelines for the Development and Implementation of the Active Labour Market Policy in Croatia for the period 2015 - 2017 adopted by the Croatian Government in December 2014. The Guidelines were drawn up in adherence to the ALMP priorities and objectives based on the analysis of the labour market and strategic employment documents of both the Republic of Croatia and the European Union. In accordance with the defined goals, the following measures were implemented under the ALMP: employment and
18
Croatia National Report
start-up incentives for the unemployed, institutional training for newly recruited employees and people made redundant, labour market oriented education for the unemployed, workplace training without a work contract, co-financing or financing of direct job creation, i.e. employment in public work programmes, and job retention programmes. The affirmed ALMP measures were divided into packages intended for specific target groups of the unemployed and people in employment facing the threat of redundancy - according to the same criteria as in the previous year. The conditions for participation in particular measures, primarily public work programmes, were eased with the aim of achieving the involvement of as many young people and people above 50 as possible. This particular measure targets homeless people as well. Over the year, the framework of the measure under which workplace training without a work contract is provided to the unemployed was revised to include people qualified in shortage occupations and those with specific skills in a concrete workplace training with the aim of increasing their employability. More than half of the total number of participants attended workplace training without a work contract (32,494 people or 50.2%). Although with smaller participation rates, the following measures were also used: public work programmes (11,745 people or 18.1%), employment incentives (11,281 persons or 17.4%), start-up incentives (4,885 persons or 7.5%), out-of-work income maintenance and support (2,226 or 3.4%), institutional training for unemployed persons (1,606 persons or 2.5%), and institutional training for employed persons (536 persons or 0.8%). (Yearbook 2015: 32, 33)
3.2.2.3. Active Labour Market Policy in 2016 A total of 70,728 people participated in the measures envisaged under the ALMP from the scope of responsibility of the CES, i.e. 9.2% participants more than in 2015. The total number of participants included 33,021 active participants from the previous year and 37,707 new entrants in the course of 2016. Most new entrants joined workplace training without a work contract (15,059 people or 39.9%) or took advantage of the available public work programmes (8,773 or 23.3%) and employment incentives (5,716 people or 15.1%). Furthermore, a relatively small proportion of new entrants took advantage of the following measures: institutional training for the unemployed (3,809 people or 10.1%), self-employment (start-up) incentives (2,333 people or 6.2%), job retention subsidies (1,920 people or 5.1%) and institutional (advancement) training for the employed (97 people or 0.3%). The said Guidelines (2014) were prepared in accordance with ALMP priorities and goals defined on the basis of the results of the labour market analysis and strategic employment- related documents of Croatia and the European Union. Taking into account the defined goals, the following measures were implemented under the ALMP: employment and self- employment (start-up) incentives for the unemployed, advancement training incentives for newly recruited employee and redundancies (job retention), financing of labour market- oriented education for the unemployed, financing of workplace training without a work contract, co-financing/financing of direct job creation, including public work programmes and job retention programmes. The affirmed ALMP measures were divided into packages intended for specific target groups of the unemployed and employed people facing the loss of their jobs according to the same criteria as in the previous years. In 2016, the target groups defined for individual measures were revised with the aim of ensuring better targeting of interventions. Furthermore, the workplace training without a work contract measure was revised in order to allow people trained in shortage occupations and those with specific competencies to take part in workplace training with the aim of improving their employability and to provide them with an official document confirming their competence. Most participants joined workplace training without a work contract (33,366 people or 47.2%). Other participants took advantage of the following
19
National Report Croatia measures: employment incentives (12,056 people or 17.0%), public work programmes (11,990 people or 17.0%), self-employment (start-up) incentives (4,980 people or 7.0%), institutional training incentives for the unemployed (4,904 people or 6.9%), job retention subsidies (2,928 people or 4.1%) and institutional (advancement) training incentives for people in employment (504 persons or 0.7%). (Yearbook 2016: 8, 39-41).
3.2.3. ALPM according to the National Reform Programme 201715 In order to align active employment policy measures with the labour market and economic development, the Ministry of Labour and Pension System (MLPS) started redefining active employment policy measures in line with external evaluation at the end of 2016.16 Evaluation has shown that active policy measures are effective, but further improvement needs to be taken, such as: ensuring the financial sustainability of measures, abolishing measures that are not being used, setting criteria for existing measures, and simplifying the overall administrative procedure for measure beneficiaries. New active employment policy measures are directed at those groups of unemployed who, for a number of reasons, are in a disadvantaged position on the labour market. The main objective of these measures is to increase employability of people at risk of long-term unemployment, but also to encourage employers to recruit and open up new jobs. Active employment policy measures in 2017 include: employment grants, training grants, self-employment grants, education of the unemployed, on-the-job training, vocational training without employment, public works, job preservation grants and permanent seasonal work. According to the Programme, in particular, the activation and education of young people and the long-term unemployed must be encouraged, and targeted education must achieve better employability of the unemployed, in order to facilitate the faster activation and inclusion of unemployed people into the working world. In 2017, active employment policy measures were planned to cover 55,000 people. (National Reform Programme, 2017: 76)
3.2.3.1. New Package of Measures by the CES In order to simplify active employment policy measures and focus them on groups which have difficulties with employability, in February 2017 the Managing Board of the CES adopted a package of active employment policy measures with a particular focus on educational measures. The Plan for the Education of Unemployed Persons in 2017 is based on specific needs of the labour market in various parts of Croatia (e.g. labour market demand, unemployment status records, availability of institutions and programmes, availability of traineeships for individual programmes, etc.). Educational activities are aimed at increasing the employability of unemployed people, especially vulnerable groups such as those that have lost work skills due to long-term unemployment, and those lacking qualifications that are required in the labour market. Moreover, considering that the available labour force often doesn’t have the required level of skills and professional knowledge required by employers, it is necessary to enable the acquisition of additional skills related to vacant jobs by placing special attention on the
15 National Reform Programme 2017 - 4.2. Increasing employability and aligning education with labour market needs; 4.2.1. Implementation of education, lifelong-learning and labour market integration programmes. Education of the unemployed to perform deficit jobs in the labour market. https://ec.europa.eu/info/2017- european-semester-national-reform-programmes-and-stability-convergence-programmes_en#croatia, 14.11.2017 16 In September 2016, a Working Group was established with the task of redefining active employment policy measures and included representatives of ministries, social partners and civil society organisations. It was concluded that the revised measures should be focused on groups which have difficulties with employability, with particular emphasis on the long-term unemployed, young people and people with insufficient qualifications, which was taken into consideration when adopting a new package of measures.
20
Croatia National Report
stimulation and education of the unemployed. Educational activities ensure better employability of the unemployed in areas with the greatest shortage of skilled workers (e.g. tourism, construction, shipbuilding etc.). The plan is to cover more than 9,500 unemployed people with educational measures in 2017. Active employment policy measures in 2017 include: employment grants, training grants, self-employment grants, education of the unemployed, on-the-job training, vocational training without employment, public works, job preservation grants and permanent seasonal workers. In particular, activation and education of young people and the long-term unemployed will be encouraged, and targeted education will achieve better employability of the unemployed. This will ultimately lead to faster activation and inclusion of unemployed people into the working world. In 2017, active employment policy measures will cover 55,000 people. Educational measures enable the unemployed to acquire additional job-related competencies, thereby helping employers to further develop and plan business processes. Unemployed persons will be able to engage in more diverse education programmes, while greater consideration is given to individual needs of the unemployed person. In addition, the scope of professional training measures without further employment has been expanded to include those with secondary education with regard to jobs that will enable them to acquire new knowledge and skills according to their level of education. Through employment grants, employers will be provided with co-financing of salary costs of up to 75% for the person employed by using this measure. The amount of subsidies for self-employment has been increased to help the unemployed realise their entrepreneurial ideas. Furthermore, the measure aimed at public works will be implemented with the aim of stimulating unemployed persons to engage in socially-oriented jobs with the purpose of motivating them for further inclusion on the labour market.
3.2.4. Active Labour Market Policy programmes of the CES CES is the central institution in Croatian labour market with the main task of adjusting supply and demand in the labour market aimed at maximizing employment. To facilitate the transition from unemployment to employment and also to lower the rising unemployment rate, CES implements active labour market policy (ALMP) measures. In Croatia there has been a range of active labour market measures, but they are comparatively small scale and suffer from a funding mechanism that treats them as residual once the costs of passive measures are met. It must be emphasised that, although monitored, ALMM have not been systematically evaluated for net effect (i.e. improving the success of participants subsequently getting jobs in the open labour market). Exceptionally, the evaluation is available of ALMP measures which were carried out from 2010 and 2013, in order to determine their success and impact on the employment opportunities in comparison with members of the control group whose members did not participate in the measures.17 In the period 2009 – 2014 measures of the ALMP were defined by: the National Employment Promotion Plan 2009-2010, the National Employment Promotion Plan 2011-2012 whose effect was extended until the end of 2013 and the Guidelines for the Implementation of the ALMP Measures.18 In the period 2015 – 2017, the CES implemented a series of active labour
17 CES, External Evauation of Active Labour-Market Policy Measures 2010-2013, Summary evaluation report 2016, p 5; http://www.hzz.hr/UserDocsImages/Sumarno%20evaluacijsko%20izvje%C5%A1%C4%87e_ENG_Vanjska%2 0evaluacija%20mjera%20aktivne%20politike%20tr%C5%BEi%C5%A1ta%20rada%202010%20-2013.pdf, 13.09.2017 18 Nacionalni plan za poticanje zapošljavanja za 2009. i 2010. godinu, http://www.ogi.hr/files/strategije/Nacionalni_plan_za_poticanje_zaposljavanja_2009_2010_%28NPPZ%29.pdf, 11.09.2017; Nacionalni plan za poticanje zapošljavanja za 2011. i 2012. godinu, http://www.mrms.hr/wp- content/uploads/2012/11/nacionalni-plan-za-poticanje-zaposljavanja-za-2011-i-2012-godinu.pdf, 11.09.2017;
21
National Report Croatia market policy measures in accordance with the Guidelines for the Development and Implementation of ALMP in Croatia for the period 2015 - 2017 adopted by the Croatian Government in December 2014.19 The Guidelines were prepared in accordance with ALMP priorities and goals defined on the basis of the results of the labour market analysis and strategic employment-related documents of Croatia and the European Union. The ALMP measures targeted unemployed people who are disadvantaged in the labour market, and employers that need assistance to preserve jobs. The CES has also implemented active labour market policies which stimulate employment, self-employment, training, occupational training and participation in public works programmes of specific target groups and the preservation of jobs with employers in difficulties. Therefore, it aimed to improve the competitiveness of employers, increase the professional, geographical and educational mobility of the labour force and ensure a good match between demand and supply in the labour market.20 The following measures were implemented under the ALMP: employment and self- employment (start-up) incentives for the unemployed, advancement; training incentives for newly recruited employees and people made redundant (job retention), financing of labour market oriented; education for the unemployed, financing of workplace training without a job; contract, co-financing/financing of direct job creation, including public work programmes and job retention programmes. In 2016, the affirmed ALMP measures were divided into packages intended for specific target groups of the unemployed and employed people facing the loss of their jobs. Included were: young people up to 29, the long-term unemployed, people aged over 50, people with disabilities, special groups of the unemployed such as: single parents, young people leaving children’s homes, victims of family abuse, Croatian war veterans, parents of four or more underage children, parents of children with special needs, asylum seekers, addicts undergoing treatment, and other groups of unemployed persons facing the threat of social exclusion and long-term unemployment, members of the Roma national minority, and employers facing difficulties saving jobs. In 2016, the target groups defined for individual measures were revised with the aim of ensuring better targeting of interventions. Furthermore, the workplace training without a work contract measure was revised in order to allow persons trained in shortage occupations and persons with specific skills to take part in workplace training with the aim of improving their employability and providing them with an official document confirming their competence. In 2016, a total of 70,728 people21 participated in the measures defined under the ALMP falling within the scope of responsibility of the Croatian Employment Service, which represents an increase of 9.2% compared to the number of participants recorded in 2015.22
Smjernice za provedbu mjera aktivne politike zapošljavanja za 2014. godinu, https://vlada.gov.hr/UserDocsImages/Sjednice/Arhiva/126.%20-%2010.pdf, 11.09.2017. 19 Smjernice za razvoj i provedbu aktivne politike zapošljavanja u Republici Hrvatskoj za razdoblje od 2015. do 2017. godine (Vlada Republike Hrvatske, 2014.). 20 CES, Yearbook 2016, http://www.hzz.hr/default.aspx?id=18012, 10.09.2017, p 39 ff 21 The total number of participants in ALMP measures included 33,021 active participants from the previous year and 37,707 new entrants in the course of 2016. Ibid., p 40 22 Most participants joined workplace training without a work contract (33,366 people or 47.2%). Other participants took advantage of the following measures: employment incentives (12,056 people or 17.0%), public work programmes (11,990 people or 17.0%), self-employment (start-up) incentives (4,980 people or 7.0%), institutional training incentives for the unemployed (4,904 people or 6.9%), job retention subsidies (2,928 people or 4.1%) and institutional (advancement) training incentives for people in employment (504 persons or 0.7%). Loc. cit.
22
Croatia National Report
In order to simplify active employment policy measures and focus them on groups that have difficulties with employability, in February 2017 the CES adopted a package of active employment policy measures with a particular focus on educational measures. The Plan for the Education of Unemployed Persons in 2017 is based on the specific needs of the labour market in various parts of the Republic of Croatia (e.g. labour market demand, unemployment status records, availability of institutions and programmes, availability of traineeships for individual programmes, etc.). Educational activities are aimed at increasing the employability of the unemployed, especially vulnerable groups such as those that have lost work skills due to long-term unemployment, and those lacking qualifications that are required in the labour market. Moreover, considering that the available labour force often does not have the required level of skills and professional knowledge required by employers, it is necessary to enable the acquisition of additional skills related to vacant jobs by placing special emphasis on the stimulation and education of the unemployed. Educational activities ensure better employability of the unemployed in areas with the greatest shortage of skilled workers (e.g. tourism, construction, shipbuilding etc.). The plan was to cover more than 9,500 unemployed people with educational measures in 2017.23 In 2016, a total of 70,728 persons participated in the measures envisaged under the ALMP from the scope of responsibility of the CES, i.e. 9.2% participants more than in 2015. The total number of participants included 33,021 active participants from the previous year and 37,707 new entrants in the course of 2016. Most new entrants joined: - workplace training without a work contract (15,059 people or 39.9%) and - public works (8,773 people or 23.3%) or - took advantage of employment incentives (5,716 people or 15.1%). A relatively small number of new participants took advantage of the following measures: institutional training for the unemployed (10.1%), - self-employment (start-up) incentives (6.2%), - job retention subsidies (5.1%) and - subsidies for institutional training (advancement incentives) for the employed (0.3%).24 In the active labour market policy programmes, there were 26,890 participants at the beginning of 2017. During the first seven months of 2017, there were 15,808 new entrants, and at the same time 16,811 exits from the measures. At the end of July 2017 there were 25,887 active participants in the active labour market policy programmes. There were 11,273 active participants from the previous years (43.5 per cent) and 14.614 active participants from the current year (56.5 per cent).
3.2.4.1. Job Preservation Measures Some of the active employment policy measures (AEPM) carried out by CES serve as an alternative to dismissal, was directed at employers in difficulties trying to preserve jobs. In 2016, there were only 82 beneficiaries of the subsidy for preserving employment. Compared to other AEPM measures, this one had the smallest number of beneficiaries. It must be emphasised that, as already mentioned, at the beginning of this year a new package of measures was adopted that reduced the number of measures, albeit with the purpose of achieving more clarity and availability. The measures are coordinated with the Ministry of Labour and Pension System.25
23 Government of the Republic of Croatia, National Reform Programme 2017, p 51; https://vlada.gov.hr/UserDocsImages/Europski%20semestar/NRP%20HR%202017.pdf, 12.09.2017 24 CES, 2016 Yearbook, op. cit., p 8 25 More: Laleta, S., Restructuring of Companies and Employment Security, in: Economic and Social Development, 22nd International Scientific Conference on Economic and Social Development – “The Legal
23
National Report Croatia
Job retention measures (‘potpore za očuvanje radnog mjesta’) are subsidies that aim to preserve the jobs under employers facing a temporary decrease in their business activities and/or loss in business. Two measures for preserving jobs are subsidies for the reduction of working time (‘potpora za skraćivanje radnog vremena’) and subsidies for worker’s education (‘trošak obrazovanja radnika’). In both cases, the employer should make an appropriate programme for job preservation. The novelty is that the measures can also apply to workers older than 50 employed by employers facing difficulties or who cannot fulfil their working duties in full due to personal work or other factors. The maximum period for awarding the subsidy is six months for each worker. In the event of a reduction in working time, the subsidy is proportionate to the amount of wages for the number of working hours that were reduced (up to 40% of reduction of working time and up to 40% of the gross salary) up to the amount of the minimum wage, according to a special regulation.
3.2.4.2. The Permanent Seasonal Worker Subsidy The permanent seasonal worker subsidy is aimed at supporting those workers who work only during the season. The measure can be used by employers in every branch of activity that due to its seasonal nature has a period of decreased business activity. The condition that needs to be met is a continuous six-month employment by the same employer and the continuation of the employment for at least one (before: three) season. The duration of the subsidy is six months. Permanent seasonal worker is a measure that is constantly evolving as a shared experience between employers and the CES, while the employers who have been using it continuously notice improvements. Its positive effects include retaining a quality labour force, showing concern for employees, creating a safe working environment, and continued employment throughout the year. This measure enables more stable business activities and a safer position on the market due to the retaining of some employees, particularly the best ones, for the next season. The purpose of this measure has been achieved because employees have exercised all of their rights, they have a secure job over a particular time period, and the number of the unemployed in the register has decreased due to the workers' stable, seasonal work. Likewise, workers feel rewarded for being able to participate in the measure, and by their new status, which affects a healthy competitiveness and increased productivity and professionalism. CES staff believe this measure is attractive to employers due to its low costs, which helps retain seasonal workers and enables participation in all of the related benefits. Low participation in the measure was also examined in the qualitative research with CES employers. Employers' reluctance to participate in the measure is somewhat of a mystery because they can benefit from lower expenses, as the CES covers the extended insurance costs for permanent seasonal workers in full for the first three months, and 50% in the next three months. The experience of both employers and the CES has shown that this measure is usually chosen by larger entities with operational resources and the knowledge necessary for participation and realisation of rights. The limitations with respect to the number of permitted permanent seasonal workers in relation to the number of regular employees is another reason why smaller business do not participate, due to the discrepancy between the effort put in and the results gained. There have been proposals for redefining the quotas for the allowed number of permanent seasonal workers with respect to company size. (Bejaković, 2016: 62
3.2.4.3. Subsidies for the Improvement of Employability
Challenges of Modern World”, Book of Proceedings (Eds Zeljko Radic, Ante Roncevic, Li Yongqiang), Split, 29-30 June 2017 , p 186
24
Croatia National Report
CES also finances subsidies for the improvement of employability, useful especially for young new-employed workers and older workers who are at risk of losing their jobs due to the modification of production processes, the introduction of new technologies or higher standards. For the employers in difficulties or in a process of restructuring CES offers help through its mobile teams, established by the regional offices. The aim was to prepare the workers who are at risk of dismissal for the labour market and mediate for them while they are still employed, in order to prevent or reduce their entry into the register of unemployed persons. The team offers information for groups and individuals, individual consultation and help in assessing the working potential of the worker, help in recognizing the transferable and other skills necessary for employment in new positions, preparation of a job search plan and psycho-social support.
3.2.4.4. Job Placement and Preparation for Employment Job placement activities are aimed at improving the employability and labour market orientation skills of the unemployed, as well as for the purpose of preventing their social exclusion. In 2016, CES employment counsellors therefore held 410,621 individual counselling meetings and 3,263,082 individual consultations, and assisted in defining 236,605 professional job search/employment plans for the unemployed. Furthermore, 11,736 unemployed people participated in 390 organised informative group meetings/forums and 21,555 unemployed persons participated in 3,883 various strengthening workshops. Special attention was dedicated to people characterized by low employability in the labour market, such as young people, the long-term unemployed, the Roma national minority, persons with disabilities, and to activities aimed at encouraging and assisting the unemployed in their efforts to start their own business, i.e. self-employment. Depending on the results of the needs analysis, a number of unemployed persons are advised to participate in vocational guidance activities, i.e. various types of vocational informing and counselling meetings intended for groups or individuals. In 2016, 24,728 people participated in the workshops and informative group meetings organised in district and regional offices of the CES, while 18,410 people participated in individual counselling/informative meetings. Furthermore, the eleven Career Informing and Counselling Centres (CISOK) operating within the CES have been established precisely for the purpose of making vocational guidance services available to the widest group of users. Career informing and counselling services provided by CISOK centres were used on 53,185 occasions in 2016, while the associated web portal recorded 74,729 visits, including multiple viewings and use of the available e-tools.26
3.2.4.5. Workplace Training without a Work Contract One type of professional traineeship (“workplace training”) is regulated by the Employment Promotion Act27 as an active labour market policy measure.28 Under the recent employment promotion package (2017), employers can obtain subsidies (12 or 24 months) for the employment of an unemployed person up to 30 years of age with no more than 12 months of work experience in the occupation he/she is trained for who has been enrolled in the CES register for at least 30 days. The subsidy includes the payment of obligatory pension and health insurance contributions, as well as a part of the education costs29 to the employer. The examination costs plus a monetary benefit are paid to the trainee. The measure also can be used where no examination or work experience is prescribed as a prerequisite for the
26 CES, 2016 Yearbook, p 9 27 Zakon o poticanju zapošljavanja, Official Gazette of the Republic of Croatia, No. 57/2012, 120/2012, 16/2017. 28 Introduced in 2010 by the National Employment Promotion Plan 2009 – 2010. 29 Up to HRK 7,00,000 (approximately EUR 1,000).
25
National Report Croatia performance of the occupation at issue. Accordingly, it is criticised as a tool providing employers with cheap labour where a regular employment relationship should be concluded.30
3.2.4.6. Job Creation Programme for Women A job creation programme for women, called "Make a Wish", aimed at employing approximately 3,000 women throughout Croatia who would care for senior citizens, was presented in July 2017. The project will be carried out in remote rural and island areas and in areas in which the unemployment rate is higher than the national average. Local and regional local-government units can apply for the tender, which is open until 2020. The project, worth HRK 400.9 million, will be financed within the framework of the Efficient Human Resources 2014-2020 operational programme by the European Social Fund. The programme is in line with European and national recommendations for the promotion of the position of women on the labour market and the protection of women's rights. The minimum non-refundable amount per project is HRK 900,000 and the maximum is HRK 10 million.31
3.3. Taxation Measures Croatia reduced labour taxes by means of measures targeted at particular groups, including low-income earners and workers with children. Personal and family-related allowances were increased. Additionally, Croatia reduced social security contributions (SSC) for young employees, as a way of encouraging employers to recruit more young people. Croatia reduced the tax burden on high income earners by shifting the highest personal income tax (PIT) bracket upwards. In respect to increased reliance on tax bases less detrimental to growth, there were few reforms introduced relating to the standard rate of value added tax (VAT). Croatia introduced new reduced rates, lowered their existing reduced rates or extended the scope of their application. In order to develop a more investment friendly tax system, Croatia introduced tax incentives to stimulate investment in plants and machinery. Croatia was one of several EU Member States that also introduced reforms to address tax evasion, in response to the developments taking place internationally in this area. According to the Tax Reform in the EU Member States report, Croatia, to a lesser extent, appears to have both a potential need to reduce a relatively high tax burden on labour (either overall or for specific groups) and potential scope to increase the least distortive taxes.32
3.3.1. Personal Income Tax – Reform in 2017 Tax on personal income is regulated by the Act on Personal Income Tax.33 A taxpayer for personal income tax purposes is every natural person in receipt of an income. Resident taxpayers are subject to worldwide taxation in Croatia. Non-resident taxpayers are liable to pay tax in Croatia on Croatian-source income. Under certain circumstances, an individual can either voluntarily or obligatorily become a corporate income tax (profit tax) payer instead of a personal income tax payer. When it comes to personal income tax rates, Croatia has progressive tax rates that are applied to the taxable
30 Trade unions strongly oppose this model because of its negative impact on the labour market. See more: Hiessl, Christina, Laleta, Sandra, Implementation problems of the Collective Redundancies Directive and their consequences: the Croatian example, Europäische Zeitschrift für Arbeitsrecht, Heft 3/2017, p 441-454 31 "Make A Wish" programme to provide jobs for 3,000 women, https://vlada.gov.hr/news/make-a-wish- programme-to-provide-jobs-for-3-000-women/21994, 15.09.2017 32 Tax Reforms in EU Member States 2015, September 2015, https://ec.europa.eu/info/sites/info/files/file_import/ip008_en_2.pdf, 14.09.2017 33 Act on personal income tax (Zakon o porezu na dohodak), OG No. 177/2004, 73/2008, 80/2010, 114/2011, 22/2012, 144/2012, 43/2013, 120/2013, 125/2013, 148/2013, 83/2014, 143/2014, 136/2015, 2017 Reform: New Act on personal income tax (Zakon o porezu na dohodak), OG No. 115/2016.
26
Croatia National Report
base, which is calculated by applying prescribed tax deductions and tax allowances (i.e. non- taxable parts of income). Before the 2017 Reform the tax allowances were for the coefficient 1.0 HRK 2,600 (cca EUR 346.66)34, while after the 2017 Reform it is now HRK 3,800 (cca EUR 506.66). The following tax rates and tax bands, defined in Table 1 (before 2017 Reform) and Table 2 (after the 2017 Reform), are used on an annual basis (i.e. when filing the annual tax return) to calculate personal income tax liability.
Table 1 Annual Tax Bands (in HRK / EUR) per year (before the 2017 Reform) Annual Tax Bands (in HRK / EUR) per year Tax Rate % Over Not over 0 HRK 26,400 / EUR 3,250 12% HRK 26,400 / EUR 3,250 HRK 158,400 / EUR 21,120 25% HRK 158,400 / EUR 21,120 / 40% Source: Act on Personal Income Tax, Article 8
Table 2 Annual Tax Bands (in HRK / EUR) per year (after the 2017 Reform) Annual Tax Bands (in HRK / EUR) per year Tax Rate % Over Not over 0 HRK 210,000 / EUR 28,000 24% HRK 210,000 / EUR 28,000 / 36% Source: Act on Personal Income Tax, Article 19
Cities and municipalities in Croatia may levy an additional tax, the so-called surtax. The decision on the amount of the surtax rate lies with the city or municipality officials and is levied according to the individual's place of residence in Croatia. For taxpayers who live in towns where the surtax is levied, their income is subject to the surtax. Surtax rates in Croatia range from 0% to 18% (the highest surtax rate is for Zagreb, the capital of Croatia). The base on which the surtax is calculated is the amount of the tax.
3.4. Wages What is the mechanism for determining the minimum wage? How is a decision made? Has it changed between 2007 and 2016? The minimum wage is based on the Act on Minimum Wage. The current Act on Minimum Wage was adopted in 2013 (Official Gazette Narodne novine No. 39/2013). All workers working in Croatia, regardless of the seat or registration of their respective employers are entitled to a minimum wage. The minimum wage represents the minimum gross wage for a full-time job. It is set once per year, for the following year, in accordance with the Ordinance of the Government, at the proposal of the minister competent for labour relations. The minimum wage is treated as an instrument of social protection. The formula for its determination is set in the act itself, taking into account the following parameters: a) statistical data on monthly at-risk-of-poverty threshold for a one-member household; b) ratio (coefficient) between the total number of inhabitants and total number of households according to the 2011 population census; c) ratio (coefficient) between the total number of inhabitants according to the 2011 population census and the number of active population, according to the Labour Force Survey;
34 1 EUR = 7,5 HRK
27
National Report Croatia d) changes in the average consumer price index for the current and preceding year. The minimum wage calculation base represents the product of a monthly at-risk-of poverty threshold for a one-member household and coefficient of the average number of household members, divided by the coefficient of employment and corrected for the average consumer price index change. Exceptionally, an amount up to 5% lower than the minimum wage can be agreed in a collective agreement. The minimum wage has been rising since 2013, when the current Act on Minimum Wage entered into force. It replaced the previous Act on Minimum Age from 2008, which was combined with the collective agreement on the minimum wage from 1998, concluded for an indefinite period between the Government, the Association of employers in crafts, small and medium enterprises, UATUC and the Association of Public Service Trade Unions. This collective agreement was declared universally applicable to all employers and workers in Croatia. The 2008 Act prescribed a different mechanism for setting the minimum wage. It was determined by taking into account the average wage and real GDP growth for the preceding year, which proved untenable in times of economic and financial crisis when GDP decreased two years in a row. It was therefore replaced with a new act and a formula of calculation in 2013. At the time of the adoption of the new act, it was estimated that around 7 % of employees receive the minimum wage (around 100,000 employees).
3.4.1. Minimum and Average Wages The average wage has risen by 20 % in the last decade. The biggest rise was recorded in 2008, followed by a period of relative stagnation between 2009 and 2014. GDP has been rising since 2015 and Croatia has come out of recession, which has also reflected on the average wage. The data on the average wage, however, includes only wages of persons in paid employment in legal entities, which makes up about 85% of the total persons in employment (persons in employment in crafts and trades and free-lances, as well as private farmers are not included).35
Table 5: Minimum wage / average wage (gross, in euro36) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Mini 363. 372. 372. 372, 372. 395. 399. 401. 413. 434. mum 98 86 86 86 86 38 76 35 4 07 wage Avera 933, 999. 1021 1017 1032 1043 1051 1053 1067 1027 1067 ge 74 6 .73 .49 .99 .46 .94 .79 .31 .16 .31 wage Source: Croatian Bureau of Statistics, http://www.dzs.hr
4. Social Dialogue 4.1. Social Partners On the national level, there are only four trade unions’ associations of a higher level: The Independent Trade Unions of Croatia (Nezavisni hrvatski sindikati), the Union of Autonomous Trade Unions of Croatia (Savez samostalnih sindikata Hrvatske), the Association of Croatian Trade Unions (Matica Hrvatskih sindikata), the Workers Trade Union Association of Croatia (Hrvatska udruga radničkih sindikata).
35 Since 2016, data on gross and net average wages for people in employment in legal entities have been gathered by processing data from the Report on Income, Income Tax and Surtax as well as Contributions for Mandatory Insurances (JOPPD form). 36 Inforeuro monthly accounting rate for 12/2017.
28
Croatia National Report
On the employers’ side there is only one association: The Croatian Employers’ Association (Hrvatska udruga poslodavaca).
4.1.1. Economic-Social Council (ESC) – Tripartite Cooperation at a National Level The Labour Act37 defines the powers of the ESC. The activities of the ECS shall be based on the concept of tripartite cooperation among the Government, trade unions and employers’ associations. The ESC may be established at the national level. The establishment is subject to an agreement between the Government, trade unions and higher-level employers’ associations. Every member of the ESC may make a proposal to discuss an issue or to make a decision falling within the competence of the ESC. The ESC shall, at the national level: a) monitor, study and evaluate the effects of - the economic policy and the measures undertaken in pursuance thereof on social stability and development, of social policy and the measures undertaken in pursuance thereof on the economic stability and development, - the fluctuation of prices and salaries on economic stability and development, b) give reasoned opinions to the Minister regarding any problems relating to the conclusion and application of collective agreements, c) make proposals to the Government, employers and trade unions, or to their associations and higher-level associations, aimed at achieving a coordinated price and salary policy, d) establish a list of potential mediators, e) give opinions on the ordinance governing the methods for - the election of mediators and procedure for conducting mediation, - the election of arbiters and procedure for conducting arbitration, f) encourage amicable dispute resolution of collective labour disputes, g) give opinions on draft legislation in the area of labour and social security, h) promote the concept of tripartite cooperation among the Government, representative trade unions and representative employers’ associations for the purpose of resolving economic and social issues and problems, and i) give opinions and proposals to the Minister regarding other issues regulated by a specific law. There is no real tripartite decision-making, because the Government is not obliged to follow the suggestions made by the social partners before the ESC in the event of drafting or proposing new legislation. There are five sub-committees of the ESC, covering wage policy, taxes and living standards, social policy, education and the labour market, collective bargaining and employment rights and sustainable development. There are also local economic and social councils at county level. The work of the ESC, at both national and local level, is supported by an independent service for social partnership within the Ministry of Labour and Pension System.
4.1.2. Bipartite Social Dialogue Bipartite social councils between the employers and unions is present in four areas: road traffic, railways, tourism and construction.
4.1.3. What is the reason for the decline of trade union membership? A high level of trade union membership was present at the beginning of the 1990s because of the socialist regime being in power. Now, it seems that one of the reasons is that with the retirement of trade unions’ members (because of age or some other reason) the membership is
37 Link to the official English translation of the Croatia Labour Act: http://www.mrms.hr/wp- content/uploads/2015/03/labour-act.pdf; Labour Act. Art. 221.
29
National Report Croatia declining. In tandem with this young workers are not joining trade unions. The Grgurev&Vukorepa Study (2015, 403) demonstrated that even the trade union leaders expect membership numbers to decline, mainly because of the further enactment of the flexibilisation of the labour legislation. Furthermore, the defragmented trade union scene together with bad media coverage of some trade union activities and bad trade union leadership has given the trade union movement a bad reputation.
4.2. Social Dialogue - Evaluation of Social Partners 4.2.1.. How satisfied are you as social partners with social dialogue in Croatia? a) Trade Unions' responses: - MATICA: We are not satisfied because even though sessions of the Economic and Social Council (ESC) for the past few years have been held on a regular basis there is still a problem with documents, strategies and important laws that the Government does not send to social partners for their consideration before adopting them or sending them to Parliament. In addition, opinions given by the social partners are often not adopted by the Government
- CAWTU: As social partners we cannot be satisfied with the level of the social dialogue in Croatia. This primarily relates to the institutional tripartite social dialogue at the national level. The reason for this can first of all be found in the lack of knowledge and interest on the part of the Government's representatives. There is neither the continuity of the staff (which is not bad), nor the continuity of the politics, at least in respect to orientation (which is bad). In technical terms, the institutions of social dialogue function, in ad hoc fashion. Nevertheless, the additional activities concerning the issues of more systematic planning, analysing, control of the realization and, in general, more coherent care about the relationships between the social partners and development of appropriate regulations in order to establish a wealthier economy are necessary. Bipartite relationships are adequate, especially where the state or their emanations are not a social partner.
- ITUC: We are not satisfied. From the beginning of 2001 social dialogue was ascribed importance. At that time the Office of the Croatian Government for social partnership was established and started to work, social partners had access to a large number of Parliaments’ committees (as external members), in certain institutions the social partners were involved in the activities of governing bodies with the full voting rights (the Croatian Employment Service, the Croatian Pension Insurance Fund, the Croatian Health Insurance Fund and others), regular meetings with the Croatian Prime minister were held etc. Upon the trade unions’ demand the Agreement on the establishment of the Economic and Social Council to strengthen social dialogue, as well as the economic and social councils of the counties were established. That practice also continued during the mandate of prime ministers Mr Ivo Sanader38 and Mrs Jadranka Kosor39. Unfortunately, after the establishment of the coalition government of Mr Zoran Milanović40 everything was abolished. The Office of the Croatian Government for social partnership was recalled and its work transferred to the Service for the social partnership in the Ministry in charge of labour and the pensions system (but it exclusively carries out the administrative tasks), the number of the social partners’ representatives in the governing boards was decreased, the opportunity of the social partners
38 Mr. Ivo Sanader (HDZ – Croatian Democratic Union – “right party” – November 2007 – July 2009 - resignation) 39 Mrs Jadranka Kosor (HDZ – Croatian Democratic Union – “right party” – July 2007 – December 2011) 40 Mr. Zoran MIlanović (SDP – Social Democratic Party – “left party” – December 2011 – January 2016)
30
Croatia National Report
to appoint the representatives in Parliament’s committees (as external members) was abrogated, and only one meeting with the prime minister was held, while during the Government’s mandate all the acts that regulate work and social security were changed and workers’ rights were diminished. The involvement of social partners was reduced to a formal level, without real influence. At the moment the Government are sending out messages publicly about the importance of social dialogue and social partners, but in practice little is done.
- UATUC: Generally speaking, we are not satisfied with the situation of social dialogue in Croatia, and for several reasons. In spite of relatively good institutionalized structures of tripartite social dialogue (first of all, those agreed between the Government and social partners in the Agreement of the establishment of the ESC), the problem is that prescribed / envisaged / modalities of social dialogue are not realized in practice. The representatives of the social partners are very often not included in the working groups that prepare acts, despite their having expressed their interest and the fact that their involvement is envisaged in the Agreement on the establishment of the ESC, as well as in its annual action plans. It happened that the proposals of several acts have completely circumvented the ESC and the procedure of the consultations with the social partners. The planned deadlines for the delivery of the materials are often not respected. The second problem concerns the absence of the Government’s real interest in social dialogue and the lack of substantial debate with social partners. The Government perceives social dialogue mainly as a formal mechanism that should be respected, in order to give social partners the chance to express their opinions (orally or in written form), but does not express a real interest to really debate public policies, to analyse opinions and arguments, and to try to achieve a consensus, at least about the most important issues. Both problems are also influenced by the low capacity of the Government for normative planning, and for the formulation of the public policies based on the facts (evidence), concerning their horizontal integration. The acts are therefore prepared at the last moment, and without an elaborated analytical basis, so the representatives of the Government themselves have difficulties debating on the basis of disputes on public policies that are prepared in such a way. b) The CEA response: The goal of the CEA activities related to the social dialogue is to contribute to the effectiveness and sustainability of social dialogue and to strengthen it at both national and regional level. The specific objectives of CEA is to improve effective interaction in genuine and constructive social dialogue at the bipartite and tripartite level. The strengthened social dialogue enables all the social partners to be better equipped to deliver on the objective of the decent work agenda, and thus to the overarching objective of a more sustainable social and economic development of the Republic of Croatia. The Croatian Employers’ Association, as the sole social partner on the employers’ side in the Republic of Croatia, has always, since its establishment in 1993, been actively involved in the promotion and implementation of social dialogue, in its tripartite and bipartite forms.
4.2.2. Were there any changes in your involvement in the last period 2007-2016? a) Trade Unions' responses: - MATICA: Trade union centrals left the ESC in May 2010 after the Government, without consulting the social partners, sent Parliament amendments to the Labour Law that limited the extended application of the legal rules contained in collective agreements. The Government withdrew the amendments after the trade unions gathered signatures of support for holding a referendum on adopting these amendments to the Labour Law. The ESC started with sessions
31
National Report Croatia again in the beginning of 2012 after the constitution of a new Government and following the parliamentary elections and signing the new Agreement on the establishment of the Economic and Social Council, which was jointly designed by the social partners and the Government.
- UATUC: During the last 10 years the quality of the social dialogue has gone through different phases, even though the institutional framework remains the same. The quality of the social dialogue clearly deteriorated during the first year of the mandate of the Zoran Milanović Government, when a number of proposals of the acts were drafted and sent to a parliamentary procedure within a short time, while the process of social dialogue was entirely skipped. The scope and the quality of the social dialogue were improved in the following years of the mandate, even though the trade unions abandoned the ESC in the period when the Labour Act was changed, and the changes to the pension acts were prepared without the participation of the social partners, who were only allowed to express their opinion about the already prepared draft act proposals. A similar situation played out again during the mandate of the Tihomir Orešković41 Government, when the package of the taxation acts was drafted without consultations with social partners. All in all, it seems that the economic crisis in the period 2009 – 2014 has not significantly influenced the dynamics and structure of the tripartite social dialogue, but the oscillations in its quality were rather the result of the short-term changes in the approach successive governments had toward the process of reforms and social dialogue. The situation is, again, a bit different in respect to the bipartite social dialogue that proved to be, with many employers, a relatively efficient mechanism for adapting to business conditions during the crises. For many employers the difficulties in business activity were attempted to be relaxed with the agreements on the temporary decrease of particular rights guaranteed in the collective agreements, which shows responsibility in the approach of both sides. With economic growth, there is a clear trend of pay increasing thanks to collective agreements, which means that a bipartite social dialogue follows and responds to economic trends.
- CAWTU: The changes took place due to the membership of Croatia in the EU and because of the changes in life and legislation (regulation). The additional instance of supranational sovereignty brought us new tasks, but also new opportunities. The Act on Representatives (Act on Representativeness of Employers’ Organisations and Trade Union Organisations, op. SL) and the Health and Safety and Work Protection Act was essentially influenced by their new formulations, and the functioning of the trade unions. The scope of the trade unions entitled to bargain collectively is narrower; the trade unions are being pushed out of the areas of health and safety, and work protection. b) The CEA response: Despite the solid institutional framework and enabled environment for efficient tripartism, for many years the situation hasn’t changed much due to the following: a). A lack of understanding/lack of knowledge in the field of tripartite social dialogue, i.e. different levels of knowledge in different ministries. b) A lack of a real atmosphere of cooperation and participation: sometimes it is evident that employers’ and workers’ arguments are not accepted by the Government, even in cases when they have equal positions. c) A lack of knowledge of the importance of tripartite social dialogue during a crisis. d) A misconception that Social dialogue is the equivalent of public discussion. e) A lack of continuity: with each and every new government – new beginning
41 Prime minister; 22.01. 2016 – 07.06. 2016
32
Croatia National Report
f) Abolition of the Office for Social Partnership (that was established by the tripartite consensus in 2001). g) There is always room for improvement – the first step of which could be improvements in the functioning of the highest tripartite body – the Economic and Social Council.
4.2.3. How do you evaluate your role in forming economic and social policies during the crisis and your proper effect on labour market policies? a) Trade Unions' responses: - MATICA: Unfortunately, the Government followed the strict course of austerity measures that were imposed by Brussels and never adopted any of the criticism of such policies by trade unions nor suggestions for better ways of dealing with the crisis, so the trade unions had no influence in forming economic and social policies during the crisis.
- CAWTU: During the crises there were the frequent attempts by employers and politicians to disproportionately transfer the (financial) burden of the crisis onto the backs of workers. In such circumstances we vociferously defended the rights we had won and insisted on a fair division of “the damage”. On some occasions our members - trade unions have achieved praiseworthy compromises with the purpose of preserving the production and overcoming the hardships (non-working Friday – Radin Ravna Gora, INA – campaign to maintain the retail trade). We have participated in a successful campaign against the monetization of the motor- road…
- ITUC: Trade unions are not involved. In fact, in that period in Parliament acts were adopted that prohibited the granting of certain rights guaranteed in the collective agreement in force. The act on the representativeness of trade unions and employers were adopted which additionally lowered the role of the trade unions. The acts adopted in that period derogated the collective agreements signed by the social partners. Furthermore, some collective agreements signed by the Government as a contractual party were cancelled due to the economic crisis. The representatives of the employees in the Croatian legal system are exclusively trade unions or higher-level trade unions associations. The Act on Representativeness of Employers’ Organisations and Trade Union Organisations42 (hereinafter: Act on Representativeness) as a lex specialis in contrast to the Labour Act43 (hereinafter: LA) as a lex generalis, stipulates the representativeness of the trade unions and employers’ association, and in its Article 25, defines that parties to a collective agreement may be, on the employer side, one or more employers or their organizations and, on the trade union side, one or more trade unions which have representative status in accordance with that act. Parties to a collective agreement which is to cover several areas of public services are, on the employer side, the Croatian Government and, on the trade union side, the unions which are represented in the negotiating committee. The parties to a collective agreement which is to cover a particular area, section or group of public services or employees in scientific institutions, or higher education institutions may be, on the employer side, the Croatian Government and, on the trade union side, one or more unions which have the representative status in accordance with the Act on Representativeness. Parties to a collective agreement that applies to employees of the members of a higher-level employer organisation may be, on the employer side, higher-level employer organisation, and on the trade union side, one or more
42 Act on Representativeness of Employers’ Organisations and Trade Union Organisations (Zakon o reprezentativnosti udruga poslodavaca i sindikata), Official Gazette of the Republic of Croatia (hereinafter: OG) No. 93/2014, 26/2015. 43 Labour Act (Zakon o radu), OG No. 93/2014, 127/17.
33
National Report Croatia trade union organisations that have the representative status in tripartite bodies at a national level. It is important to note here that there is an important change in the definition of who may be a party to a collective agreement or even what the definition of collective bargaining is since according to the “old” LAs44 parties to a collective agreement may be, on the employer side, one or more employers, an employers' association, or a higher-level employers' association, and, on the trade union side, a trade union or a higher-level trade union association, which are willing and able to use pressure to protect and promote the interests of their members in the course of negotiations on the conclusion of collective agreements. So, in the statutory definition there was the notion of “the right to use pressure to protect and promote the trade unions’ members’ interests”, which is not present in the definition in force. In respect to the validity of the collective agreement, according to the Article 26 of the Act on Representativeness it is important to note that a collective agreement shall be deemed valid only if the representative union signatories represent more than 50 % of the total number of unionised employees represented by the representative unions. A collective agreement which will apply to many areas of public services in accordance with the National Classification of Activities, shall be deemed valid if it is signed by at least one union from each of at least three (out of five) different areas classified in the National Classification of Activities which were negotiated and whose membership accounts for more than 50 percent of the total number of unionised workers represented by the unions on the negotiating committee. The scope of such regulations is to avoid the cases in which minor trade unions could take part in collective bargaining.45 However, in cases where there is only one trade union at the level for which collective bargaining is being conducted, the trade union in question shall be deemed representative and its representative status need not be subject to the recognition procedure (Article 7/1 of the Act on Representativeness). To conclude, in Croatia in the collective bargaining process, collective agreements and in the strike actions connected to the collective agreements, only those trade unions may take part which have fulfilled the representativeness criteria. On the national level, there are only four trade unions’ associations of a higher level,46 which fulfil those criteria while on the employers’ side there is only one association47.48 We must point out that strike actions or industrial actions may be performed only by trade unions and not by individual workers, any other workers’ association or works councils. The actual problem is that during the economic crisis the Government decided to regulate the representatives of the trade unions and employers, directly affecting the status of parties to collective agreements. This resulted in numerous actions taken by trade unions against the “old Act on representativeness”49 because of its impact on the fragmentation of trade unions
44 Labour Act (Zakon o radu), OG No. 38/1995, 54/1995, 65/1995, 102/1998, 17/2001, 82/2001, 114/2003, 142/2003, 123/2003, 30/2004, 68/2005, 94/2009, 149/2009, Art. 185 (194) and Labour Act (Zakon o radu), OG No. 149/2009, 61/2011, Article 253. 45 Potočnjak, Željko, Reprezentativnost sindikata i udruga poslodavaca u Hrvatskoj, op. cit., p. 101. 46 The Independent Trade Unions of Croatia (Nezavisni hrvatski sindikati), Union of Autonomous Trade Unions of Croatia (Savez samostalnih sindikata Hrvatske), Association of Croatian Trade Unions (Matica Hrvatskih sindikata), Workers Trade Union Association of Croatia (Hrvatska udruga radničkih sindikata). 47 The Croatian Employers’ Association (Hrvatska udruga poslodavaca). 48 Potočnjak, Željko, Reprezentativnost sindikata i udruga poslodavaca u Hrvatskoj, Delavci in delodajalci, vol. 16, 2016, No. 1, pp.83-111, p. 105. 49 Act on Criteria for Participation in Tripartite Bodies and Representativeness for Collective Bargaining (Zakon o kriterijima za sudjelovanje u tripartitnim tijelima i reprezentativnosti za kolektivno pregovaranje), OG No. 82/2012 and 88/2012.
34
Croatia National Report
and making the trade unions’ scene weaker, despite a complaint to the ILO because of breach of ILO Conventions No. 87 and 98 by the Republic of Croatia.50
- UATUC: In spite of the aforementioned shortcomings in respect to social dialogue, it cannot be said that the trade unions had no influence on economic and social politics during the crisis. Although the changes in the Labour Act in 2014 were, in many parts, negative from the perspective of trade unions, we think that in respect to many issues we have successfully influenced the opinion of the Government, i.e. influenced the withdrawal from the range of the proposals included in the draft act proposals that were even more detrimental for workers. According to a statement by the minister of labour in that Government, we were successful in persuading the Ministry of labour to withdraw the proposal of the act on casual and temporary jobs. The UATUC also tries hard in discussions on the labour market policy and active labour market employment measures, which we still consider to be of good quality though not efficient, even though we had some influence on some of the problematic details. All in all, the key problem is still the low capacity, both politically and professionally, on the part of the Government to create and realize real reform measures. Publically, the blame for the lack of reforms is often wrongfully placed on the trade unions, and their influence is therefore overestimated; on the other hand, it is clear that many measures successive Croatian Governments have represented as “reformistic” are not so in reality, but in fact very superficial and short-term political tactics, often with detrimental socio-economic consequences. b) The CEA response: The consultation process with the interested public can be used (and some cases have been used) by social partners, but it has been noted that some ministries consider that the process of consultation with the interested public replaces institutionalized social dialogue. Impact Assessment analyzes the positive and negative impacts of regulations on the economy, including the financial implications, the area of social welfare, and the area of environmental protection, with the focus on fiscal impact, at the same time on public consultation and the public concerned. It is a special feature of this process to repeat early involvement of key stakeholders in the impact analysis, through targeted public consultations focusing on key impact assessment issues. It thus starts from the understanding that policy and regulatory users have the best insight into the benefits, the difficulties and the dangers that it brings. It is important to emphasize that the purpose of assessing the effect of regulation is not and must not be deregulation, but a smarter, more responsible and better-formulated policy and regulation that takes into account a wide, often neglected or hidden spectrum of social, ecological and economic consequences. Together with public advocacy, lobbying represents an important channel of influence on public policy in the democratic spheres. Lobbying is a process of dialogue between stakeholders - representatives of organized interests (mostly business) and decision-makers, whose aim is to make specific changes to the proposed public policy in the interest of a particular party, based on arguments in favor of a particular proposal. It is a highly structured process that takes place under strictly defined conditions, with the legal obligation of comprehensive disclosure of information about lobbyists (authorized representatives of particular interests) engaged in individual dialogues, meetings between lobbyists and decision-makers, policy requirements introduced and arguments on which they are based.
50 See Republic of Croatia Government Opinion, p. 4., availabe at: https://vlada.gov.hr/UserDocsImages//Sjednice/2017/12%20prosinac/71%20sjednica%20VRH//71%20- %2022%20a.pdf (20 Mar 2018).
35
National Report Croatia
Based on the requirements of a particular issue, the CEA has been using one or a combination of the aforementioned techniques, with different results each time. The results were different from issue to issue, with varying levels of success.
4.3. Sectoral Level Collective Bargaining51 The implementation of the “old” Act on Criteria for Participation in Tripartite Bodies and Representativeness for Collective Bargaining, which was amended by the Act on Representativeness in force, the coverage of workers by the collective agreements has significantly dropped. Only those trade unions may take part in collective agreements and in the strike actions connected to the collective agreements that have fulfilled the representativeness criteria: There are seven sectoral councils in Croatia: 1. The Social council for the food industry and agriculture sector 2. The Social council for the road traffic sector 3. The Social council for the railways sector 4. The Social council for the tourism sector 5. The Social council for the construction sector 6. The Social council for textiles, tubes, leather and footwear 7. The Social council for forestry and the timber industry One area of research dealing with the Croatian collective bargaining system demonstrated that in 2014 (the end of June until the beginning of November) around 570 collective agreements were being applied. The research detected the problems with the official registers of the collective agreements (Bagić) There are three levels: company collective agreements (binding on a single employer), sectoral or branch collective agreements (concluded on the level of a sector or a branch of industry and binding on all employers in such a sector or in the concrete branch of an industry) and national collective agreements concluded on a national level and binding on all the employers (no local level collective agreements). According to the Labour Act52 a collective agreement or a change thereto applicable within the entire Republic of Croatia, or within two or more counties, shall be submitted to the Ministry in charge of labour. On 03.11./2017 there were 171 collective agreements applicable within the entire Republic of Croatia, or within two or more counties (data given by the Ministry in charge of labour on 03.11.2017). All other collective agreements and changes to collective agreements shall be submitted to county public administration offices or the City of Zagreb office responsible for labour affairs – but those data are not available.
4.4. Collective Bargaining and Collective Agreements at the Work Place Level In Croatia, most of collective agreements have been concluded at the level of a single employer (enterprise level collective bargaining) as company collective agreements – 90%.
4.5. Collective Bargainings and Collective Agreement - Evaluation of Social Partners 4.5.1. What is the role of collective bargaining in regulating working conditions and wages on a sectoral level and a workplace level? a) Trade Unions' responses: - CAWTU: The role of the collective bargaining in the regulation of the working conditions in Croatia differs in relation to the scope of the application of the collective agreement (CA). The main division follows the source of financing the expenses that are based on the CA. If
51 Available at: http://gsv.socijalno-partnerstvo.hr/sektorski-socijalni-dijalog 52 Art. 201(2)
36
Croatia National Report
the users of the state budget are concerned (state and public services, services of the local and regional local-government), it is chiefly bargaining at a higher level. In the real economy bargaining at the enterprise (employer’s) level is the dominant form. The branch CAs, where they exist, rarely bring (regulate) more than what is regulated by the CA at the employer’s level
- UATUC: Where the social dialogue is concerned, the evaluation is a more complex one. Trade unions assembled in the UATUC are the contracting parties of around 300 collective agreements (of around 550 that are presently in force in Croatia), which means that by many employers the social dialogue about the pay and the working conditions functions and is accepted as the usual way of regulation of labour relationships. The problem is the undeveloped industrial relations at branch level, the proof of this is the fact that there are only two relevant branch collective agreements in the private sector the (construction industry and catering industry). The branch employers’ associations, with the aforementioned industries excluded, do not show any particular interest in bargaining collectively and regulate the labour relationships on the sector level, which creates the biggest difference in the collective bargaining system in Croatia in comparison to the majority of the old EU Member States. The total coverage of the workers with collective agreements still amounts to around 50 % or a bit more, even though it fell from 2009 by about 10 %, which means that collective agreements significantly influence the regulation of pay and working conditions in Croatia. That influence is, of course, stronger in the public sector, because the civil and public services are totally covered, as well as a large part of the public companies, while in the private sector the coverage is a bit smaller. As previously emphasised, in the private sector the collective bargaining on the employer’s level prevails, which is its main weakness in relation to the industrial relations in the old EU Member States. Collective bargaining at the employers’ level is desirable and useful, but should represent just an addition to the bargaining at the branch level, i.e. the mechanism of the regulation of the specific conditions with the individual employer. At the same time, the common influence of the collective bargaining on labour relations, especially in the private sector, is often underestimated in Croatia, not to mention the range of rights that are often taken for granted, from paid travelling expenses to work and vice versa, the and additional compensation for overtime and difficult working conditions, additional material rights of workers, are stipulated in/by collective agreements, and not by statutory regulations. Moreover, in Croatia the more systematic analysis of the labour market in general, of industrial relations and collective bargaining more specifically does not exist, so unfortunately, there are just a few detailed empirical data on these questions. The majority of the academic and professional literature on industrial relations is, unfortunately, focused exclusively on the legal framework, and empirical investigations are rare. Moreover, it is only possible here to give a general evaluation, which to a great extent depends on the tradition of the industrial relations of the individual employer. A significant number of employers, mostly bigger ones, have a long-standing tradition of collective bargaining, and approach to the process with responsibility, and with the goal of finding a compromise between the interests of both sides. But there are also employers that are reluctant to bargain collectively, or at least to contract out in collective agreement the significant level of rights, or the specific solutions that stand out from the statutory provisions. But in many cases the existent collective agreements secure a balance and compromise between the interests of both sides, enabling the regulation of labour relationships of a higher quality in relation to the labour legislation, as well as the appropriate level of material and other rights of workers that are adequate for the situation and the business process of the individual employer.
37
National Report Croatia
- MATICA: Working conditions and wages are negotiated during the collective bargaining process, regardless of the level that is bargained on, but the framework for negotiation for collective agreements in public and state services is provided by the laws and directives. For example, coefficients for salary calculations are set in the Directive on Titles of Posts and Complexity Coefficients of Civil Service Tasks and they cannot be the subject of negotiation for collective agreements.
- ITUC: Collective bargaining significantly contributes to the regulation of working conditions and pay, at the branch and the employer’s level. Branch level collective bargaining determines working conditions, i.e. the common standard applicable to all employers, while the regulation on pay determines the minimum that are all the employers operating at that level are capable of fulfilling. Collective bargaining on the branch level guarantees the minimum level of workers’ protection and eliminates disloyal competition. For better working and pay conditions there is the collective bargaining at the employers’ level, but as the trade unions do not operate at every place of employment, especially in the private sector, for a great many workers the branch level of rights is the only one they have. At the moment in Croatia there are just two sectoral collective agreements, for the construction industry and the catering industry and tourism. Their application is extended to all the employers that operate in those sectors. The number of employers’ level collective agreements is bigger and the working conditions and pay are regulated in accordance with the actual capacities of the employer. b) The CEA’s response: collective bargaining is based on the assumption that both employers and trade unions can find a balance and compromise between the interests of both sides, as both sides are aware that persistence on their unilateral interests ultimately endangers business and long-term sustainability of the organization and jobs in it. So, this is the reason why the state leaves it to social partners to regulate employment relations themselves, assuming that the situation in the field is better known to them than to the legislator. Collective agreements regulate issues of pay and other material rights, working hours and work organization, holidays and leave, occupational safety, vocational training and other labour and social rights of workers, as well as mechanisms to protect these rights. While content may overlap with individual employment contracts, collective agreements in the legal sense differ from those applied to all employees employed by one or more employers who have signed such a contract. For employers, this mechanism provides an advantage because they can deal with workers at a collective level rather than with each employee individually. Also, unlike the stipulation of the terms of work in a unilateral act of the employer (the Work Regulation), the collective agreement has the advantage of confirming that its provisions have been harmonized by both parties, and usually contains the so-called “clause on social peace”, or a provision by which workers will not undertake a strike on issues that they have agreed with the employer within the terms of a collective agreement.
4.5.2. How many collective agreements were concluded between 2007-2016 at the workplace level? a) Trade Unions' responses: - MATICA: Trade unions in Matica are mostly public sector trade unions and the public sector is covered only by sectoral level collective agreements.
38
Croatia National Report
- ITUC: Official data on the number of signed collected agreements are not available because there is no obligation to sign a registration of collective agreements. In the Croatian Official Gazette (Narodne novine) collective agreements are published that are concluded in the commercial companies where the state is the main owner, as well as those in civil and public services.
- UATUC: Unfortunately, we do not have these data. The available data from the register of the collective agreements by the Ministry of labour and pension system are fairly unreliable, since the system of their evidence of the collective agreements is fragmented (i.e. the evidence is kept in the Ministry, but also in 20 local offices of the state authorities in the counties), the data are not analysed, so in the register it is possible to find numerous collective agreements the duration of which has expired, and most probably there are the signed collective agreements that are applied in practice, but are not registered. The best estimation that we have is that in Croatia around 550 company’s (“house”) collective agreements are in force, most of which are concluded for a period of one or two years (even though it is possible to find collective agreements concluded for an indefinite time, with bargaining from-time-to- time about the amendments and changes). It can be estimated that every year around 150 and 200 collective agreements go through the process of the new bargaining and signing. - CAWTU: We can only provide a general assessment here, which largely depends on the traditions of industrial relations between the specific employers. A significant number of – mainly large – employers have a tradition in respect to collective bargaining and a responsible approach to processes aimed at reaching a compromise between the interests of the two parties involved. However, there are employers that are unwilling to enter into collective agreements, or at least to conclude a significant level of the rights and concrete solutions stipulated by law within the framework of a collective agreement. Still, in many cases, existing collective agreements ensure a balance and compromise of the two parties’ interests, enabling the regulation of higher-level labour relations within the framework of labour law regulation, while granting a suitable level of financial and other rights for employees which accord with the situation and business process of the given employer. b) The CEA’s response: in Croatia, there is no systematic record of collective agreements in force. According to expert Dragan Bagić, there are around 570 collective agreements, with the majority (around 80%–90%) at company level (Bagić, 2016) – although those signed at branch level account for the largest proportion of the bargaining coverage. The number of currently applicable collective agreements is approximately 275 less than the figure in November 2009, when their number was estimated to be around 845 (Bagić, 2014). This reduction may be due to a number of factors and does not necessarily mean a reduction in bargaining coverage (the number of workers that are covered) or that there have been changes in the patterns of collective bargaining. It may, for example, be the result of economic processes such as restructuring and consolidation (merging and/or buying) in certain industry sectors (for example in tourism, trade and food processing) or the closure of companies.
4.5.3.. What were the most important elements of these agreements? a) Trade Unions' responses: - UATUC: Like in other countries, in collective agreements the pay and other working conditions are stipulated. With collective agreements, both at the company and branch level, the basic pay, and pay classes or coefficients are stipulated for the particular group of jobs. Even though the bargaining over pay influence the real level of pay, a certain limitation
39
National Report Croatia represents the fact that the bargaining over pay is not developed enough, and in many cases basic pay is regulated in the collective agreement, while the coefficients or pay classes are regulated in detail in the individual decisions that the employer makes autonomously. On the other hand, the additional material rights are often the subject of detailed bargaining and are ascribed importance. In addition, collective agreements regulate the specificities concerning working time, paid annual leave and allowances, safety and health at work protection, the conditions regulating the functioning of the trade union, and a range of other issues. The more systematic empirical analysis that would compare the content of the collective agreements with the labour and social security legislation, and identify more accurately their real impact on the level of rights, is, unfortunately, missing.
- ITUC: There is no such analysis of all collective agreements.
- CAWTU: Besides the material rights, which are the most important part of every collective agreement, the most important provisions are those regulating working time because of the possibility to regulate it in a more flexible way, according to the changes of the Labour Act in 2014. It is clear that employers’ wishes are growing to make salaries variable through different ways of assessing the performed labour, and decreasing or cancelling various additional compensation for employees. b) The CEA’s response: in a large number of collective agreements, important provisions on workers’ pay rights are not strictly defined. Probably the most important matter of collective bargaining – the basic wage – is not fully defined in around half of the valid collective agreements, leaving substantial room for an employer to unilaterally determine the wage level of workers, particularly in collective agreements signed at branch level. In contrast, wage supplements or monetary and pecuniary rights are more clearly defined (Bagić.) Although the calculation of salaries and wages is mandated in specific regulations, bonuses and other pecuniary rights (fringe benefits) can be negotiated in collective agreements. As a result, there are more than 350 different supplementary payments (such as for working conditions, for work in potentially hazardous circumstances and weekend work) added to wages (only applicable in the public sector) and the practice of contracting pecuniary rights in sums exceeding the allowable non-taxable amount is widespread (Bejaković, 2015). Key elements are: a) a collective agreement must be in writing, b) it must define its area of application, c) it must be published, d) it is legally binding on those who have signed it, agreements cover all employees, not just union members, as failing to do so could be seen as discrimination. In addition, the Labour Minister can decide to expand the application and scope of the Collective agreement.
4.5.4. How did interest reconciliation work, were these agreements balanced in protecting employers’ and employees’ interests? a) Trade Unions' responses: - MATICA: Collective agreements protect both; employers’ and employees’ interests and every party has to give up of some of their demands in order to reach an agreement.
- UATUC: It’s also possible here to give just a general evaluation, which to a great extent depends on the tradition of the industrial relations in the case of the individual employer. A significant number of employers, mostly bigger, have a long-standing tradition of collective bargaining, and approach to the process with responsibility, and with the goal of finding a
40
Croatia National Report
compromise between the interests of both sides. But there are also the employers that are reluctant to bargain collectively, or at least to contract out in collective agreement the significant level of rights, or the specific solutions that stand out from the statutory provisions. But in many cases the existent collective agreements secure a balance and compromise between the interests of both sides, enabling the regulation of labour relationships of a higher quality in relation to the labour legislation, as well as the appropriate level of material and other rights of workers that are right for the situation and the business process of the individual employer.
- ITUC: Every collective agreement is a compromise of what is possible. Since they are the result of the free-will of the trade unions and employers that bargained collectively, there is a presumption that every party has protected its interests the best it could. But the terms and occasions in which the bargaining took place should be taken into account. In respect to the freedom of contract Article 9 of the Labour Act states that the employer, worker and works council, as well as trade unions and employer associations, may agree on working conditions that are more favourable for the worker than the conditions provided for by the Labour Act or any other laws and regulations. On the other hand, the employer, employer associations and trade unions may by virtue of a collective agreement agree on working conditions less favourable than the conditions provided for by the Labour Act only if it is explicitly regulated by the Labour Act or any other laws and regulations. Unless otherwise provided for by the Labour Act or any other laws and regulations, where a right arising from an employment relationship is differently regulated by the employment contract or working regulations, an agreement concluded between the works council and the employer, a collective agreement or by law, the most favourable right for the worker shall apply (the principle of in favorem laboratoris).53
- CAWTU: During the economic crisis many a trade union gave up the acquired standard of rights in order to preserve jobs. In more stable circumstances, requests (both from the management and trade unions) are defended by invoking the arguments of the business results, aims and plans and, finally, the potential to strike, which becomes weaker. b) The CEA’s response: Collective agreements are always the results of consensus, when adopted, collective agreements are respected by both sides.
5. Strike activity Only trade unions are allowed to strike. The legal source for strikes is the Labour Act. There is no precise and official data for the number of collective actions carried out, nor for the number of lost working hours.
5.1. Data (even informal from social partners) on strike activity for the period 2007-2016. a) Trade Unions' responses: - MATICA:
53 Examples of different regulation by a collective agreement in comparison to the Labour Act are, for instance, the cumulative duration of all successive fixed-term employment contracts, including the first employment contract, that may not exceed three consecutive years, and may be prolonged due to the objective grounds allowed by collective agreement (Labour Act, Article 12/3) or different regulation by collective agreements of the daily rest of at least eight hours instead of ten hours determined by the Labour Act (Labour Act, Article 89) etc.
41
National Report Croatia
2009: Public services strike after the Government reduced the wage basis for public service employees. 2012. Public services strike because of the Government’s unilateral cancellation of The Basic Collective Agreement for public service employees and reducing wages. 2014. General solidarity strike for supporting workers of two companies: Arena Modna kuća d.o.o. Pula and Zdravstveno-rekreacijski centar (ZRC) Lipik. The two workers did not receive any of their salaries for seven months in the first company and for 25 months in the other. 2015. Strike of education sector employees to raise their salaries by 4%.
– CAWTU: During the economic crisis the numerous trade unions gave up the acquired standard of rights in order to preserve jobs. In more stable circumstances, the requests (both of the management and trade unions) are defended by invoking the arguments of the business results, aims and plans and, finally, the potential to strike, which becomes weaker. For the period 2007 - 2016, we emphasise the strikes organized by our members - trade unions in (Osječka pivovara” (Osijek's Brewery) and ֞ ◌ Trajektna luka Split” (Ferry-boat Port Split ◌ ֞
- UATUC: Unfortunately, there are no available data on the number of strikes and days spent on strike. During the period 2009 – 2015 the numerous strikes in the private sector are noted, because of the non-payment of salaries, especially in the construction sector and metal industry. That number has decreased in recent years (due to coming out from recession, but also a new statutory framework relating to the payment of salaries). At the same time, interest strikes, i.e. those connected with the collective labour disputes and collective bargaining, are rare in the private sector, but they do occur.
- ITEC: Unfortunately, in Croatia there are no statistics on the number of strikes, the reasons for the strikse (prescribed by the Labour Act), the results of the strikes, nor the number of hours spent on strike etc. b) The CEA’s response: Trade Unions are active across the Croatian economy, but when it comes to strike activity, they have had limited results. For instance, at the beginning of October 2015, several teachers’ unions managed to organize a strike demanding a salary increase of 4%. The strike paralyzed the school system for three days, but it did not achieve any concrete objectives. The demining sector (particularity of post-war Croatia) also noted strike activity in 2013.
6. Participation The institution of the works council is regulated by the Labour Act.54 Workers employed with an employer who employs at least 20 workers, with the exception of workers employed by state administration bodies, shall have the right to take part in decision-making on issues related to their economic and social rights and interests, in the manner and under the conditions prescribed by the Labour Act. The employer has the responsibility -a) to inform the works council on important issues at least every three months; b) before rendering a decision that is relevant for the position of workers, the employer must consult the works council about the proposed decision and must communicate to the works council the information important for rendering a decision and understanding its impact on the position of workers; c) in rendering decisions on some issues the employer may render it only with the prior consent of the works council.
54 Art. 140-162
42
Croatia National Report
Works council data: According to the Ordinance on the method of electing the works council55 (Official Gazette No. 3/2016) the Ministry in charge of labour has a responsibility to record the number of works councils but since that article has been in force only since the first part of 2016 only 173 works councils are registered in Croatia (data given by the Ministry in charge of labour on 3/11/2017).
6.1. Participaton - Evaluation of Social Partners 6.1.1. How were the requirements set by Directive 2002/14/EC met in Croatia? a) Trade Unions' responses: - MATICA: Croatian labour laws regulated that the working councils and trade union commissioners are responsible for informing and consulting employees. We are not aware that Directive 2002/14/EC had any influence on improving consultations with employees.
- CAWTU: The right of workers to participate in a decision-making (worker's participation) is functioning better than before, partly due to the fact that the parts of the trade union movement that were the opponents of the workers' councils, and afraid of concurrence, became aware of the additional value of the workers' participation, both for the workers and the trade unions. The co-operation between the workers' councils and employers varies from case to case.
- UATUC: Directive 2002/14/EC has not significantly influenced the Labour Act in the process of its harmonization with the acquis communautaire in 2009, as the level of workers' rights to participate in decision making was already significantly above the minimum prescribed by the Directive. Croatia sets the lower level for the application of the right of workers to be informed and consulted (20 employed, in relation to 50 prescribed by the Directive), and besides the right of the workers’ representatives to be informed and consulted, in certain specific cases, gives the right to participate in decision-making. Situations in which it applies, as well as procedures in all three categories (information, consultation and decision- making) are also regulated more precisely compared to the Directive. The Directive is implemented in Croatia mostly through the mechanism of workers’ councils, but we should not forget that in Croatia there are other forms of workers’ participation, including the workers’ meetings, the workers’ commissioner for health and protection of safety at work, and the workers’ representatives in the employer’s body.
- ITUC: The responsibility of the employer to inform and consult the workers' representatives concerning the questions and situations regulated by Directive 2002/14 are, in general, respected. The workers employed in the companies in a state or mainly state ownership enjoy such protection to a great extent, while it is less the case with the private companies, mainly due to the fact that in those companies the organization and functioning of the trade unions and workers’ councils are more difficult. But it is noted that employers very often fulfil their responsibility to inform and consult the workers’ representatives at an inappropriate moment when the decision that is the issue of the consultations is in a high degree of realization, and consequently the workers’ representatives are put in such a position that have no impact on it or to a lesser extent. This means that the workers’ representatives are not in a position to realize the right to be informed and consulted in accordance with the intentions of Directive 2002/14. According to Article 149 of the Labour Act the employer shall be obliged to inform the works council at least every three months about:
55 Art. 24
43
National Report Croatia a) business situations, results and work organisation, b) expected business developments and their impact on the workers’ economic and social status, c) trends and changes in salaries, d) the extent of and the reasons for the introduction of overtime work, e) the number and type of workers employed, employment structure (the number of fixed- term workers, workers at alternative workplaces, workers assigned by temporary employment agencies, workers temporarily posted to/from an associated company, etc.) as well as employment development and policy, f) the number and type of workers to whom they have given a written consent to an additional job referred to in Article 61, paragraph 3 and Article 62, paragraph 3 of the Labour Act, g) health protection and safety at work policy and measures taken in order to improve working conditions, h) outcomes of inspections of work and safety at work conditions, i) other issues bearing particular importance on the economic and social position of workers. The employer shall be obliged to inform the works council about the above mentioned issues in such a manner in terms of timeliness and at a level of detail so as to enable the members of the works council to evaluate possible impacts and prepare for negotiations with the employer. Article 150 of the Labour Act determines the responsibility to consult the works council before rendering a decision: Before rendering a decision that is relevant for the position of workers, the employer must consult the works council about the proposed decision and must communicate to the works council the information important for rendering a decision and understanding its impact on the position of workers. In cases referred to in the above mentioned Article 149., the employer shall be obliged to enable the works council to organise meetings, upon their request and before their final response to the employer’s intended decision, in order to obtain additional answers and explanations related to their statement. The complete information related to the proposed decision must be delivered to the works council in good time, in order to enable the works council to put forward comments and proposals stemming from the discussion that could have a substantial effect on the decision- making process. Unless otherwise specified by an agreement between the employer and the works council, the works council shall provide the employer with feedback concerning the proposed decision within eight days. In the event of an extraordinary dismissal, the deadline shall be five days. If the works council does not provide its feedback on the proposed decision within the above mentioned deadline, it shall be presumed that it has no comments or proposals. b) The CEA’s response: The Labour Act passed by the Croatian Parliament at its session on 15 July 2014. which regulates employment relationships in the Republic of Croatia as concluded and ratified in accordance with the Constitution of the Republic of Croatia. According to the CEA: by virtue of this Act, Directive 2002/14/EC was transposed into the Croatian legal order.
6.1.2. Who exercises the participatory rights? Have you faced any difficulties? a) Trade Unions' responses: - MATICA: Workers’ councils and trade union commissioners exercise the participatory rights.
44
Croatia National Report
- UATUC: As already mentioned, the rights from the Directive are mostly used by workers' councils, with the exception of the situation when the workers’ council is not organized, in which case the trade union commissioner can take over his rights and entitlements. In practice we have many workers’ councils that function well, and a large part of the employers got into a habit of having obligations toward the workers’ council and fulfilling them, especially those concerning the responsibility for consultation and decision-making. Somewhat worse is the situation with the obligation to inform, where some of the employers do not deliver information regularly to workers’ councils about the business process and other questions about which the workers’ councils should be informed, or they only deliver partial or superficial information. There are, of course, employers reluctant to cooperate with the workers’ councils, but there are not many of them. At the same time, some employers the trade union organization at the employer’s level, or the trade union whose part it represents, decides not to initiate the establishment of the workers’ council, but to take over its function. Even though that solution is, of course, allowed and there are some circumstances in which it can be logical, our experience is that it is better to establish and elect the workers’ councils, and that the workers’ councils function better and more actively in their entitlements comparing to trade union functionaries that took over the function of the workers’ councils. Somewhat worse is, at the moment, the situation with the commissionaires for health and safety for work protection, who could be appointed by the trade union until 2014, and from the last amendment of the Health and Safety at Work Protection Act they could be elected exclusively in the same procedure as for the election of the workers’ councils (which is far from simple). Consequently, in many sectors the number of the commissionaires for health and safety at work protection has decreased, even though we as trade unions do everything we can to encourage the subsidiaries to carry out elections and to help them (with education and preparation of the election directions and forms).
- ITEC: The right to be informed and consulted is enjoyed by the workers' council or the trade union, which has the role of the workers' council according to the Labour Act, in a case when trade unions can take over the rights and duties of the workers’ council, if the workers have not used their right to elect the workers' council.
- CAWTU: Trade unions participate in the elections for the workers’ council, and it can be said that they use their advantage of being more stable organizations compared to ad hoc groups of workers. b) The CEA’s response: In 12 countries across the EU, as well as in in Croatia, the law, provides for both union and works council structures to exist at the workplace at the same time. In Croatia works councils are common. However, it is possible for the rights and responsibilities of the works council to be taken on by the union representative, and there are some signs that this is becoming more common.
7. Collective Labour Disputes56 Collective labour relations are regulated by Chapter IV of the Labour Act (hereinafter: LA).57 Articles 165-191 of the LA regulate trade unions and employer’s associations’ status, while Articles 192-204 of the Croatian LA regulate collective agreements. The basic purpose of collective bargaining and collective agreements is to set salaries and other working conditions
56 This part is an extract of the book chapter Smokvina, Vanja, Laleta, Sandra, The Role of Collective Bargaining in Labour Law Regimes – Croatia in Collective Bargaining in Labour Law Regimes - A Global Perspective (Ed. Ulla Liukkunen), Springer, 2018, (in print) 57 Labour Act (Zakon o radu), OG No. 93/2014, 127/2017.
45
National Report Croatia for an employer, a branch of industry or sector. The secondary objective of collective bargaining and collective agreements is to regulate the relations of the parties to the agreement, to resolve collective disputes, and promote participation of employees in the decision-making process etc.58 LA Article 193 determines the obligation to negotiate in good faith for the persons, who, under the Act on Representativeness,59 may be parties to a collective agreement. Even though not acting in good faith may not have any direct consequences regarding the conclusion of the collective agreement, it could yet be grounds for claiming compensation for damages. According to the available information, so far there have not been any such claims.60 Furthermore, LA Article 196 determines the obligation for the parties and to the persons to whom it applies, to comply with the collective agreements provisions in good faith. A claimant or a person to whom a collective agreement applies may claim compensation for damages he/she suffered as a result of non-compliance with the obligations arising from the collective agreement. It is interesting that the cited provision regulating the obligation to negotiate in good faith and that of the necessary power of attorney for negotiating and concluding a collective agreement (regulated in Article 197, LA) are the only provisions of the LA that regulate the collective bargaining process.61”62 Furthermore, there is also the judicial protection of rights arising from a collective agreement set in the Article 204 of the LA. A party to a collective agreement may seek judicial protection of the rights arising from such an agreement, by a complaint filed with the court with jurisdiction. This provision guarantees judicial protection in cases of collective disputes rights (disputes involving the application of the obligatory part of the collective agreement such as, for instance, the disputes on the termination of the collective agreement or the implementation of the rules on amicable resolution of collective disputes determined in the collective agreement). Since the normative part of a collective agreement is incorporated into all single employment contracts as an integral part of them, if the employer violates the employment contract, employees have locus standi before a competent court (municipal courts as courts of general jurisdiction or before arbitration).63
7.1. Mediation Procedure In the event of any dispute due to termination (cancellation) of a collective agreement, the provisions of Article 219 of the LA on the judicial jurisdiction to prohibit a strike or a lock-out shall be applied, as appropriate. In the event of a dispute which could result in a strike or other form of industrial action, the mediation procedure must be conducted as prescribed by the LA,
58 Grgurev Ivana, Rožman Krešimir (2007), Kolektivni ugovori. In Potočnjak Ž (ed) Radni odnosi u Republici Hrvatskoj. Pravni fakultet Sveučilišta u Zagrebu, Organizator, Zagreb, pp. 561-562, pp. 560-561. in Smokvina Vanja, Laleta Sandra, The Role of Collective Bargaining in Labour Law Regimes – Croatia in Collective Bargaining in Labour Law Regimes - A Global Perspective (Ed. Ulla Liukkunen), Springer, 2018, p. 6. (in print) 59 Act on Representativeness of Employers’ Organisations and Trade Union Organisations (Zakon o reprezentativnosti udruga poslodavaca i sindikata), OG No. 93/2014, 26/2015 60 Rožman Krešimir (2017) Detaljni komentar Zakona o radu. Radno pravo, Zagreb p 1001. 61The bargaining process is a matter of practice, tradition and agreement between the parties and circumstances of each case. In Croatia, the bargaining parties often follow protocol, i.e. rules that regulate the bargaining process (frequency of the meetings, right of the party to the consultations, way of informing the public etc.). Rožman Krešimir (2017) Detaljni komentar Zakona o radu. Radno pravo, Zagreb p 1001. 62 From Smokvina Vanja, Laleta Sandra, The Role of Collective Bargaining in Labour Law Regimes – Croatia in Collective Bargaining in Labour Law Regimes - A Global Perspective (Ed. Ulla Liukkunen), Springer, 2018, p. 6-7 (in print)
63 Gotovac V (2013) Novo kolektivno uređenje kolektivnih pregovora i kolektivnih ugovora u RH. Pravo u gospodarstvu 52(1): 125-186 p 109.
46
Croatia National Report
except when the parties have reached an agreement on an alternative amicable method for its resolution. The mediation shall be conducted by the mediator selected by the parties to a dispute from the list established by the Economic and Social Council or determined by mutual agreement. Parties may finalise the mediation procedure with an agreement. The agreement reached in the event of a dispute related to conclusion, amendment or renewal of a collective agreement shall have legal force and effects of a collective agreement. The agreement reached in the event of dispute over remuneration or compensation, or a part thereof, if not paid by their maturity dates, may be used to agree upon the method and dynamics of their payment (LA, Articles 206-209). Dealing with the number of performed mediation procedures in the last five years, we must point out that there has been a significant drop in the number of mediations, from 137 in 2013 to only 27 in 2016
7.2. Strike or Lockout Article 219 of the LA determines that if a strike or a lockout is undertaken in the territory of only one county, the first instance jurisdiction over prohibition of a strike or a lockout shall have a competent county court, sitting as a chamber composed of three judges. If a strike or a lockout is undertaken in the territory of two or more counties, the first-instance jurisdiction over prohibition of a strike or a lockout shall have the Zagreb County Court, sitting as a chamber composed of three judges. An appeal against such decisions shall be decided upon by the Supreme Court of the Republic of Croatia. A first-instance decision on whether or not to prohibit a strike or a lockout must be rendered within four days following the filing of the request. A decision of the Supreme Court of the Republic of Croatia must be rendered within five days following the submission of the first-instance case.
7.3. Arbitration The parties to a dispute may agree to stipulate that any disputes be resolved not in an ordinary court but by a court of arbitration. In their agreement to bring a dispute before an arbitration body, the parties shall define the issue to be resolved. The arbitration body may decide only upon the issues brought before it by the parties to a dispute. The appointment of a single arbitrator or an arbitration board and other issues related to the arbitration procedure may be regulated by a collective agreement or by an agreement of the parties made after the dispute has arisen. If a dispute concerns the application of laws and regulations or collective agreement, an arbitration body shall base its decision on such law, another regulation or collective agreement. If a dispute concerns the conclusion, amendment or renewal of a collective agreement, an arbitration body shall base its decision on equitable grounds. Unless the parties to a dispute specify otherwise in a collective agreement or an agreement to bring a dispute before an arbitration body, an arbitration award must include the reasons for the award. No appeal is permitted against an arbitration award. If a dispute concerns the conclusion, amendment or renewal of a collective agreement, an arbitration award shall have the legal force and effects of the collective agreement (LA, Articles 209-211).”64 ***** No official data on collective labour disputes are available.
8. Labour Law and the Crisis
64 From Smokvina Vanja, Laleta Sandra, The Role of Collective Bargaining in Labour Law Regimes – Croatia in Collective Bargaining in Labour Law Regimes - A Global Perspective (Ed. Ulla Liukkunen), Springer, 2018, p. 9-10 (in print)
47
National Report Croatia
8.1. Correlation between Labour Market Situation/Indicators and Legislative Amendments The Labour Act of 2014 (Official Gazette Narodne novine No. 93/2014) which is currently in force was adopted on 15 July 2014 and entered into force on 7 August 2014. It replaced the previous Labour Act of 2009, which entered into force on 15 December 2009 and was subsequently amended in 2011 and 2013. Before that, the first labour act since Croatian independence, the Labour Act of 1996, had been in force from 1 January 1996 until 31 December 2009, and it was amended four times through acts on amendments to the Labour Act, once by the Decision of the Croatian Constitutional Court, once through the Act on Pension Insurance of 1998 and once through the amendments of the Insolvency Act. The primary aim of the Labour Act of 2014 was to address the effects of the economic and financial crisis, which started in Croatia around 2010 and has led to negative movements in the labour market: a decrease in employment and an increase in unemployment. However, the negative trends in the labour market, as well as the economic and financial situation in Croatia were not directly connected to the global economic and financial crisis, because the Croatian economy is relatively small and closed. Instead, the negative trends are mostly ascribed to the consequences of the Homeland War (1991-1995), transition and privatisation, as well as the decline of industrial and agricultural activity. So, the labour market was weak even before the start of the economic and financial crisis, and the requisite reforms did not start before the 2011 legislative amendment to the Labour Act of 2009 (mostly concerning the flexibilization of working time). Previous legislation was primarily directed at achieving full harmonisation and implementation of the EU acquis in the field of labour relations in preparation for EU membership. As a consequence, necessary structural reforms were not implemented, and the majority of efforts were spent on refurbishing the existing legislation to ‘look good’ for the EU. In the meanwhile, the repeated criticism from the international organisations (the IMF; the World Bank) was that the labour legislation was too rigid and needs to be changed. The explanation accompanying the draft Labour Act of 2014 (Draft Bill P.Z.E. 606) reports a correlation between the strictness of the employment protection index and unemployment rate. Until 2003, this index (on individual and collective dismissals) was 3.5 points, and 2002 was the year of the highest unemployment rate (22.3 % registered unemployment rate, and 14.8% according to the Labour Force Survey). Since 2003, with the entry into force of amendments to the Labour Act of 1995 (including a cut in redundancy pay and shortening of notice periods), the index fell to 2.7 points and the registered unemployment rate in 2007 fell to 14.8 % (9.6% according to the Labour Force Survey). The Labour Act of 2014 introduced further simplifications of dismissal procedures. The Labour Act of 2014 was in preparation for almost a year before it was adopted. However, some of the novelties it brought were inserted into the draft just before its adoption (e.g. temporary posting of a worker to an employer’s associated company; or maximum duration of additional work of a full-time worker for another employer), with no time for comprehensive debate and analysis of the impact of such legislative solutions. The main labour market indicators preceding the adoption of the Labour Act of 2014 were as follows: employment rate (15-64) decreased from 53.2 % in the third quarter of 2011 to 52.5 % in the same quarter of 2012. The employment rate (20-64) fell from 57.7% to 57.2% in the same period. The unemployment rate increased from 12.2 % in the third quarter of 2011 to 14.5 % in the same quarter 2012. The male unemployment rate increased from 12.5 % to 14.7%, whereas female unemployment grew from 11.9% to 14.3% in the same period. The youth unemployment rate (15-24) grew from 31.3% to 37.6 %. These were the indicators mentioned in the explanation following the proposal of the draft Labour Act of 2014 to the Croatian Parliament (Draft Bill P.Z.E. 606). Flexible forms of employment (part-time, seasonal and agency work) were in decline, and the aim of the new legislation was to address this issue by enabling a uniform
48
Croatia National Report
application of the principle of pro rata temporis not only in relation to salaries, but also other material rights arising from collective agreements or employment rules. It was also meant to boost opportunities to work remotely, given that they were hampered by the outdated rules on safety-at-work; as well as agency work. The objectives of the Labour Act of 2014 were to conduct necessary reforms in order to increase employment, to supress work in the shadow economy and to provide employers with flexibility and workers with security, by introducing the following main amendments: a) Additional work of full-time workers (or part-time workers whose working time with two or more employers equals full working time): max eight hours per week/180 hours per year; consent of employer(s) required. b) Temporary posting of workers to an associated company: max six months (domestic) or 24 months (abroad), written agreement of associated employers required. c) Rearrangement of patterns of working time; redistribution of working time: measure to enhance internal flexibility, lowering labour costs and retaining workers. d) Agency work: guaranteeing salary compensation for agency workers who are currently not working for a user company, such measure aimed at increasing the number of open-ended agency contracts; less favourable conditions for agency workers possible in the event of a collective agreement between the agency or association of agencies and trade unions so prescribed. e) Part-time work: explicit application of pro rata temporis principle to all material rights in connection with the employment relationship – measure to increase part-time employment. f) Flexibilisation of remote working conditions: simplification of formalities in connection with the working time records and types of work performed (adaptation of the safety-at-work rules). g) Simplification of dismissal procedure: concerning duration of procedure, suspension of notice period, redefinition of categories of workers protected from dismissal, compensation of damages in case of court termination of employment relationship, collective redundancies – measures aimed at lowering the index of employment protection strictness. h) Dismissal protection of workers on maternity and parental related leaves: absolute protection from dismissal does not apply in the following cases: the employment contract can be terminated upon the death of an employer who is a natural person; upon the termination of a craft by virtue of law or by the deregistration of a sole trader, as well as in the course of liquidation procedures (winding-up of a company). However, the notice period does not begin during maternity and parental related leave, the effectiveness of the provision on dismissal is therefore questionable. i) Modifications of collective labour relations: to provide for necessary alignment with the legislative solutions from the Act on Representativeness of Employers’ Associations and Trade Unions (Official Gazette Narodne novine nos. 93/14 and 26/15). j) Extension of application of collective agreements: decision of the competent Minister (proposal by all parties; public interest + condition that the trade union has the highest number of members and employer’s association highest number of workers at the level for which extension is requested). k) Amendments regarding minor offences; exclusion of certain provisions from the labour act to be incorporated into special acts (i.e. European works councils, societas europea etc.).
8.2. Comparing the Main Labour Market Indicators before and after the Adoption of the Labour Act of 2014, The following trends can be observed: a) According to the 2016 Labour Force Survey, the average number of employed persons was 1,590,000, which represents an increase of 0.3% compared to the previous year. In 2016,
49
National Report Croatia there were 240,000 unemployed (LFS), which represents a decrease of 21.6% compared to the previous year. b) The Labour Force Survey 2016 shows an increase in the rate of employment (15-64) of 0.9% compared to the year before. In 2016, this amounted to 56.9% (it was 52.5 % in the third quarter of 2012). c) Registered unemployment decreased by 15.4% in 2016 compared to 2015. A fall in the unemployment rate was also due to the lower number of newly registered unemployed (10.7% less in 2016 compared to the year before). d) The most important decrease in the percentage of the unemployed was recorded for the younger age groups (around 20% for groups 15-19 and 20-24), whereas only the oldest age group (60+) records a slight increase in unemployment (by 0.8% compared to the previous year). e) However, the most important proportion of new employment is in the field of seasonal work (20.6% of all the newly employed in 2016 were seasonal workers). f) The largest proportion of new employment in 2016 concerned fixed-term contracts (91.7 %), while open-ended contracts accounted for only 8.3% of all new contracts in 2016. g) Part-time work decreased by 5.5% in 2016 compared to 2015. This trend has been fairly continuous since 2007. Generally, employment legislation has not been responsive to the situation in the labour market and vice-versa. A slightly improved situation in employment and unemployment rates in 2016 compared to the period before the adoption of the new Labour Act of 2014 is most likely more connected with economic and industrial growth, than the legislative changes. One factor which also has a significant bearing on the unemployment and employment rate is that since Croatia joined the EU, the trend of emigration of the labour force is stronger than before (e.g. it is estimated that in the last two years, around 130,000 people emigrated to Germany; and around 70,000 to other EU countries).
Comparing the main labour market indicators before and after the adoption of the Labour Act of 2014, the following trends can be observed: a) According to the 2016 Labour Force Survey, the average number of employed persons was 1,590,000, which represents an increase of 0.3% compared to the previous year. In 2016, there were 240,000 unemployed (LFS), which represents a decrease of 21.6 % compared to the previous year. b) The Labour Force Survey 2016 shows an increase in the rate of employment (15-64) of 0.9% compared to the year before. In 2016, it amounted to 56.9% (it was 52.5% in the third quarter of 2012). c) Registered unemployment decreased by 15.4% in 2016 compared to 2015. A decrease in the unemployment rate was also due to the lower number of newly registered unemployed (10.7% fewer in 2016 compared to the year before). d) The most important decrease in the percentage of unemployed was recorded for the younger age groups (around 20 % for groups 15-19 and 20-24), whereas only the oldest age group (60+) records a slight increase in unemployment (by 0.8% compared to the previous year). e) However, the most important proportion of new employment was in the field of seasonal work (20.6% of all the newly employed in 2016 were seasonal workers). f) The largest proportion of new employment in 2016 concerned fixed-term contracts (91.7 %), while open-ended contracts accounted for only 8.3% of all new contracts in 2016. g) Part-time work decreased by 5.5% in 2016 compared to 2015. This trend has been fairly continuous since 2007.
50
Croatia National Report
Generally, employment legislation has not been responsive to the situation in the labour market and vice-versa. A slightly improved situation in employment and unemployment rates in 2016 compared to the period before the adoption of the new Labour Act of 2014 is most likely more connected with economic and industrial growth, than the legislative changes. One factor which also has a significant bearing on the unemployment and employment rate is that since Croatia joined the EU, the trend of emigration of labour force is stronger than before (e.g. it is estimated that in the last two years, around 130,000 people emigrated to Germany; and around 70,000 to other EU countries)
8.3. Evaluation of Social Partners 8.3.1. What were the main changes in the regulation of labour relations and employment relationships between 2007 and 2016? a) Trade Unions' responses: - MATICA: The New Labour Law came into force in 2009 and was changed in 2014. The Law on the Criteria for Participation in the Tripartite Bodies and Representativeness for Collective Bargaining (also known as ֞ ◌ Law on Representativeness”) came into force in 2012 and was changed in 2014. The Law on Promotion of Employment came into force in 2012.
- UATUC: In the cited period the Labour Act (LA) was significantly modified three times. In 2009 this was mainly harmonization with the acquis, in 2013 a change in several legal institutions, and in 2014 a new LA was enacted. During the amendments in 2013 and 2014 employment based on a definite term was liberalized, as well as the organization of working time, and as a result according to the OECD’s index of the EPL, Croatia is now lagging behind most other European countries, including old and new EU Member States. At the same time, several analyses have shown that employers’ ranked the labour legislation as the 6th or 7th key obstacle to business in Croatia, and it is obvious that this question was given too much attention (on the other hand, the realization of the more important, and more difficult reforms was neglected, including the judiciary and public administration). Immediately after the last modifications of the LA the significant increase of the employment on a definite term was noted, with Croatia far exceeding the European average, and in 2015 it was in the first place with its proportion of extremely short fixed-term employment contracts (max three months). In our opinion, the economic crisis was clearly used to additionally transfer business risk from employers to workers, and the misuse of fixed-term employment was stepped up. The key challenge today is to change this trend and make progress towards better quality jobs in Croatia, which includes normative as well as non-normative solutions (the implementation of the laws in practice remains a major problem, among others).
- ITUC: In the period 2007 – 2016 in Croatia two Labour Acts (LA) were adopted. The first was adopted at the end of 2009, and entered into force in January, 2010. Croatia harmonized its national legislation with the acqui communautaire, within the framework of the preliminary negotiations for EU membership. This Labour Act did not introduce significant changes in the system of labour relationships in Croatia. But in 2014, and after the LA was changed in 2013, a completely new LA was adopted that deregulated employment relationships in Croatia to a significant extent. Those changes are accepted as a late solution to the crisis and on-going pressure from employers, but also based on the evaluations given by the American Economic Chamber, World Bank and International Monetary Fund of the rigidity of the labour legislation. It means that it was not until 2014 that the Government actually made a decision to respond to the economic problems, and to the demands of the European Commission and the World Bank by enacting a new Labour Act.
51
National Report Croatia
Deregulation mostly regarded liberalization/mitigation of the: individual and collective dismissal, work on definite time, the flexible working time schedule, as the measure of the employer’s internal flexibility, dismissal because of the workers’ unsuccessful trial period of work, temporary agency work and reduction of the agency workers’ rights compared to the stable employer’s (user’s) workers, an increase in the maximum overtime per year, and overtime allowed. If a worker works overtime, his/her total working time may not exceed 50 hours a week. The overtime per worker may not exceed 180 hours a year, unless otherwise provided for in a collective agreement, in which case it may not exceed 250 hours a year.65
- CAWTU: There were several amendments to the Labour Act; new Act on Health and Safety at Work Protection and the Act on Representativeness were enacted, that we especially emphasise. In general, the legal protection of rights that arise from the employment relationship was lowered. b) The CEA’s response: After a long and intense public discussion, the Labour Act was adopted by the Croatian Parliament on 15 July 2014. Its aim is to increase the number of people employed and to create a legal framework that enables employers to develop more flexible business models and to adapt to market demands, while maintaining employee protection and combating the grey economy. The main amendments are: a) greater flexibility in working hours; b) easier cancellation of employment contracts in certain cases; c) encouragement of atypical forms of employment. The improved labour market flexibility brought about by the new Labour Act.
However, the new Labour Act introduced significant changes: a) More flexible working hours The new Labour Act allows the extension of working hours to a maximum of 50 hours per week or, if allowed by collective agreement, to 60 hours. Generally, an employee cannot work more than 180 hours of overtime a year unless stipulated otherwise in the collective agreement, although even then the maximum is 250 hours. The employer must submit a written request for overtime work, or confirm an oral request with a written one. However, the employee is still obliged to work overtime if asked to do so by their employer. The Labour Act also introduced the concept of an unequal working hours schedule, which gives the employer the right to modify an employee’s working hours according to current work needs. An irregular schedule must be in place for at least a month and no longer than a year, and the maximum weekly working time including overtime remains 50 hours (or up to 60 hours if a collective agreement allows this). A collective agreement can also detail provisions for a ‘working hours bank’ (a means of recording the accumulation of working hours) so that, during a flexible work schedule period, workers may work for longer than 50 hours and 'bank' their extra hours worked. However, in a four-month period, their accumulated hours must not be higher than an average 45 hours a week. Full-time work is still limited to 40 working hours per week, but the act introduced an exception, which allows full-time workers to conclude an additional employment contract for a maximum of eight working hours per week, up to a total of 180 working hours per year, provided that all the worker's employers agree.
65 Article 65 of the Labour Act, para. 3 and 4:
52
Croatia National Report
Where the nature of business or seasonal work requires it, employers can still re-organise working hours over a period of 12 consecutive months. The act also stipulates restrictions on flexible work schedules for various categories of vulnerable workers. b) Termination of employment contracts The Labour Act sets out provisions for the termination of employment contracts. In addition to already valid methods for terminating employment contracts, the law now allows a contract to be terminated on the following grounds: ba) the death of the employer (if an individual person); bb) the legal cessation of a small business; bc) the deregistration of a sole trader (in accordance with specific provisions). The act stipulates the written form of the agreement of the contract's termination agreement and that of the notice of dismissal. The aim is to balance the protection of workers against dismissal with the needs of employers to take on the workers they really want. However, workers are protected against unfair dismissal where due account is not taken of social considerations. The act sets out grounds for normal dismissal subject to a mandatory period of notice. To facilitate a company restructuring where necessary, an employer is now allowed to terminate an employment contract on economic or personal grounds, irrespective of whether it would be reasonable for the worker to be redeployed or retrained. Where a worker is given a normal period of a termination of ending employment for personal or business reasons, the employer can now cancel the employment contract without being obliged to train the employee for another job. Furthermore, the employer is not obliged to employ the worker even if they have another position available. c) Changes in temporary employment through agencies The new act attempts to improve temporary employment through agencies. Employers are obliged to make sure that assigned workers and employed workers performing the same job at the same organisation are treated equally. This applies to pay and other working conditions including: ca) working time; cb) break and rest periods; cc) safety protection measures; cd) protection of the rights of pregnant workers, parents, adoptive parents and young people; ce) compliance with specific anti-discrimination provisions. Temporary agency employees do not have rights to various monetary benefits such as a Christmas bonus or rights set out in any collective agreement between directly employed workers and their employer. Amending the Act on Labour Law from 2017 introducing different new directives adopted at the EU level in connection with the role of Trade Unions and works councils.
8.3.2. Evaluate these changes in legislation. a) Trade Unions' responses: - MATICA: The main amendments of the Labour Act (2014.) are greater flexibility in working hours, easier cancellation of employment contracts in certain cases and encouragement of atypical forms of employment. Social partners on both sides have expressed their disagreement with the final version of the act. Employers believe the changes are not profound enough to improve the economy, while trade unions are critical of the changes, because no further additional flexibilisation of labour legislation was required. The Law on Representativeness (2012) defined criteria for determining representativeness of trade union associations and employers’ associations for participation in tripartite bodies and
53
National Report Croatia participation in collective bargaining. According to that new law, in collective bargaining the trade union party could no longer be a union that is “willing and able to use pressure to protect and promote the interests of its members” the way it was defined in the Labour Law, but only the union that is “representative” for collective bargaining. This additionally limited the possibility to use the right to strike for those unions whose representativeness had not been established which consequently led to lowering the number of workers who were secured by the right to strike. In May 2012, the Law on Promotion of Employment was enacted, causing numerous debates among social partners. This Law introduced several innovations into the employment system and anticipated exemption from salary contributions up to two years (which currently amounts to 15.4%) for an employer who takes on unemployed people without work experience in professions for which they were trained, as well as the long-term unemployed who have been unemployed for more than two years. This law expanded the circle of people who can benefit from the professional training measure of working without an employment contract, which has been in force since 2010.
- CAWTU: The changes took place as a result Croatia’s accession to the EU and because of the changes in life and legislation (regulation). The additional instance of supranational sovereignty brought new tasks, but also new opportunities. The Act on Representatives (Act on Representativeness of Employers’ Organisations and Trade Union Organisations, op. SL) and the Health and Safety and Work Protection Act influenced essentially, by their new formulations and the functioning of the trade unions. The scope of the trade unions entitled to bargain collectively is narrower; the trade unions are pushed out from the field of health and safety of work protection. There were several amendments to the Labour Act; a new Act on Health and Safety at Work Protection and the Act on Representativeness were enacted, which we especially emphasise. In general, the legal protection of rights that arise from the employment relationship was watered down. The changes of the working time regulation, according to the last change of the Labour Act in practice led to disorientation and manipulation. The uneven distribution of working time is abused in such a way that workers are given the plan for their working time from one day to the next. Some employers deny them compensations, e.g. for overtime, and instead allow them a right to a longer period of rest, and the like. According to the changes in the Health and Safety at Work Protection Act the trade unions are “pushed out” from this field, since the right to appoint a commissioner for the health and safety at work protection was abolished. In changing the terms of representativeness politics has entered into a doubtful constitutional game, based on the seemingly objective criteria, determining that some trade unions, engaged in collective bargaining for years (medical doctors, pilots) should not do it anymore. Besides, it should be noted that there is only one method for the recognition of the representativeness for collective bargaining, while there is a special category, called a right to be represented in a negotiating committee, and not representativeness, for all sectoral or branch collective agreements.
- ITUC: Since the Labour Act has only been applied for a relatively short period of time (it entered into force in August, 2014) and the fact that the Ministry in charge of the labour and pension system does not work on a systematic evaluation of the application of the new LA, it is difficult to evaluate the general trends, but the significant increase in temporary agency work and the shorter procedure of the collective redundancies can be observed. According to the latest data provided by the Ministry in charge of labour in 2016 there were 19,327 agency
54
Croatia National Report
workers in Croatia. 66 We may conclude that the number is growing, since in 2014, according to the assessment provided by the Ministry in charge of labour, there were 8,000 agency workers.67 Collective redundancies are now shorter and the whole procedure is a bit less rigid than it was before the Labour Act which has been in force since 2015. b) The CEA’s response: Social partners on both sides have expressed their disagreement with the final version of the act. In general, employers believe the changes are not profound enough to improve the economy, while trade unions are critical of the changes in working hours and temporary employment with agencies. The CEA holds that the rigidity of the legal regulation of the labour market is one of the reasons for the non-competitiveness of the Croatian economy which, in turn, deters investors from investing in the country.
European Semester – Case Croatia
1. Institutionalization How are social partners involved in the European Semester?
Since the European Trade Union Confederation (ETUC) asks all decision-makers involved in the EU Semester to take account of trade union positions, concrete measures should be taken to facilitate a more influential involvement of trade unions at national level so that consultation will take place in accordance with a suitable format (according to national practices), involving unions in a timely manner, at the appropriate decision-making level and with adequate resources. According to the ETUC in Croatia, as in nine other countries (AT, BE, BG, DK, LT, MT, PL, PT, SI) consultations took place but could be improved.68
2. Impact Role of European Social Partners (ESP). How are ESPs involved in the national process? Role of national social partners
In the Country Specific Recommendation (both those of the Commission and the Council) it is said that: even though the social dialogue structure in Croatia is in place, the actual interaction between the authorities and stakeholders in the policy preparation process is
66 http://www.poslovni.hr/hrvatska/u-hrvatskoj-unajmljivanje-radnika-uzima-sve-vise-maha-337228 (13.05.2018.). 67 Laleta, Sandra, Križanović, Anamarija, Rad putem agencija za privremeno zapošljavanje u hrvatskom, europskom i usporednom pravu, Zbornik Pravnog fakulteta u Rijeci, Vol. 36, No.1, 2015, pp. 305-340, p. 305. 68 ETUC for Growth and Social Progress, Priorities for the Annual Growth Survey 2018, p. 2. Available at: https://ec.europa.eu/info/sites/info/files/en-etuc-for-growth-and-social-progress-2018_en.pdf
55
National Report Croatia limited and mostly confined to the provision of written feedback on the Government proposed measures. In addition, the fragmentation of trade unions limits their overall capacity to engage in social dialogue.69 The Country Specific Recommendations of the European Semester Country Report 2018 for Croatia70 say the following:
Croatia Overall assessment of progress with 2017 CSRs: limited progress CSR 2: Discourage early retirement, Croatia has made limited progress in accelerate the transition to the higher addressing CSR 2: statutory retirement age and align pension • No progress in reforming the pension provisions for specific categories with the system rules of the general scheme. Improve • Limited progress in improving the social coordination and transparency of social benefits system benefits. CSR4: Reduce the fragmentation and Croatia has made no progress in addressing improve the functional distribution of CSR 4: competencies in public administration, • No progress in the public administration while enhancing the efficiency and reducing reform territorial disparities in the delivery of • No progress in harmonising the wage- public services. In consultation with social setting frameworks in the public sector partners, harmonise the wage-setting frameworks across the public administration and public services.
Social Dialogue is not yet a well-developed practice in Croatia. Formally, Croatia has an established social dialogue structure in the form of a National Economic and Social Council. Social partners are invited to provide written contributions before the adoption of National Reform Programmes (NRP) and other relevant legislative initiatives. However, the interaction between the authorities and the stakeholders is generally limited, and mostly restricted to the provision of written feedback on some of the Government proposed measures. Another inhibiting factor is that fragmentation seems to be central to limiting the overall capacity of trade unions to engage in social dialogue.71
69 2018 European Semester: Country Specific Recommendation / Commission Recommendation – Croatia. COUNCIL RECOMMENDATION on the 2018 National Reform Programme of Croatia and delivering a Council opinion on the 2018 Convergence Programme of Croatia, Brussels, 23.5.2018 COM(2018) 410 final, p. 3. Available at: https://ec.europa.eu/info/sites/info/files/file_import/2018-european-semester-country-specific- recommendation-commission-recommendation-croatia-en.pdf 2018 European Semester: 2018 European Semester: Country Specific Recommendation / Council Recommendation – Croatia on the 2018 National Reform Programme of Croatia and delivering a Council opinion on the 2018 Convergence Programme of Croatia, 9192/18 - COM(2018) 410 final, 15 June 2018., p. 6. Available at: http://data.consilium.europa.eu/doc/document/ST-9430-2018-INIT/en/pdf 70 COMMISSION STAFF WORKING DOCUMENT Country Report Croatia 2018 Including an In-Depth Review on the prevention and correction of macroeconomic imbalances, 7.3.2018 (SWD(2018)209 final), Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2018) 120 final}, p. 11. Available at: https://ec.europa.eu/info/sites/info/files/2018-european-semester-country-report-croatia-en.pdf 71 Ibid, p. 34.
56
Croatia National Report
Commitments Summary assessment 2017 Country-specific recommendations (CSRs) CSR 4: Reduce fragmentation and improve Croatia has made no Progress in addressing the functional distribution of competencies CSR 4 in public administration, while enhancing efficiency and reducing territorial disparities in the delivery of public services. In consultation with social partners, harmonise the wage-setting frameworks across the public administration and public services. • In consultation with social partners, No Progress in harmonising the wage-setting harmonise the wage-setting frameworks frameworks across the public administration across the public administration and public and public services. The new legislation on services. public sector wages has been postponed several times. The aim of the law is to achieve greater harmonisation of wages across the public administration through the introduction of common wage grids and job complexity coefficients, based on more consistent job descriptions and competences frameworks.72 Europe 2020 (national targets and progress) Employment rate (age group 20 – 64) target The employment rate in Croatia has been set in the NRP: 65.2 % slowly and steadily increasing (from 58.3% in 2013 to 65.6 % in Q3 2017). Even though Croatia has achieved the national target, its employment rate is still among the lowest in the EU and well below the EU average.
Part 1. Thematic Factsheets: Labour Market and Skills73 1.1. European Semester: Thematic Factsheet – Active Labour Market Policies – 201774 Long-term unemployment, which stood at 2.6% in the EU in 2008, increased significantly during the period since 2008 and reached 5.1% before dropping to 4% in 2016 in all Member States (see Figure 1). Increases have been particularly strong in Greece, Spain, Croatia, Portugal, Italy, Cyprus and Ireland, contributing to a growing divergence between Member States over this period. (p.3) Member States perform very differently in respect to long-term unemployment, with rates in Q4-2015 at the lower end (below 30%) in Denmark, Finland, Sweden and the UK, and over 55% in Bulgaria, Ireland, Greece, Croatia, Italy, Portugal and Slovakia. Some Member States with high unemployment spend a relatively small proportion of their GDP on labour market
72 Ibid, p. 57. 73 Available at: https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/eu- economic-governance-monitoring-prevention-correction/european-semester/thematic-factsheets/labour-markets- and-skills_en 74 Available at: https://ec.europa.eu/info/sites/info/files/european-semester_thematic-factsheet_active-labour- market-policies_en_0.pdf
57
National Report Croatia services and active measures (particularly Bulgaria, Slovakia, Cyprus, Croatia and Greece). (p.4)
Annex: Statistical Indicators Table 1 – Long-term unemployment rates for the EU, the euro area and in the individual Member States in 2014 and 2015 by gender Gender Women Men Time 2015 2016 2015 2016 EU-28 4.5 4.0 4.5 3.9 EA-19 5.6 5.1. 5.5. 4.8. HR 10.5 6.5 10.1 6.8
Table 2 – Long-term unemployment (12 months or more) as a percentage of total unemployment, by gender (%) Gender Women Men Time 2015 2016 2015 2016 EU-28 47.6 46.2 48.6 46.7 EA-19 51.0 49.8 51.3 49.6 HR 61.3 47.2 64.8. 54.0
1.2. European Semester: Thematic Factsheet – Employment Protection Legislation – 201775 The concept of labour market segmentation implies that (at least) two 'segments' coexist in the labour market. One segment of the workforce comprises workers with stable employment relationships, protection against dismissal and full access to social protection. Another segment is characterised by workers with one or more of the following: • non-standard employment contracts (Beyond the traditional distinction between employees and self-employed workers, there exist 'atypical' forms of employment such as on- demand, on-call, casual, intermittent or agency work, project contracts, job-sharing, lending and pool arrangements, and crowdsourcing. The list is almost endless and varies according to the specific Member State. In addition, civil law contracts have been increasingly used in some Member States to regulate the provision of what are in effect work services.) providing limited or no protection against dismissal; • unstable employment relationships and poor career prospects; and • (frequently) limited access to social protection because people have paid social contributions for shorter periods. (p.3) The combination of high proportions of fixed-term employees and low transition rates towards permanent employment is particularly worrying in countries such as Poland, Spain and France. Proportion of temporary workers among total employees, age group 20-64 (2016); EU-28 cca 12% Top: Poland 22% and Croatia 21% and transition rates from temporary to permanent contracts (2015) EU-28 cca 26% Croatia 38% (p.4)
75 Available at: https://ec.europa.eu/info/sites/info/files/european-semester_thematic-factsheet_employment- protection-legislation_en.pdf
58
Croatia National Report
1.2.1. A combined reading of hiring and separation rates provides an insight into labour market turnover. When both are high, the labour market is considered more dynamic and flexible (e.g. as in the case of the Scandinavian and Baltic countries). However, high hiring/ separation rates could be also an effect of the widespread use of temporary contracts. This ambiguity is partly reflected in the case of Spain, the Netherlands, Portugal and Cyprus. TOP: Sweden – Hiring rate cca 20.5%; separation rate cca 8%; Denmark: Hiring rate cca 20%; separation rate cca 12%; Croatia: Hiring rate cca 15.5%; separation rate cca 7%.
1.2.2. Long tenure periods, especially for prime-age individuals, may also be a sign of static labour markets in which workers remain stuck in their jobs and do not move between more productive firms and sectors. This might be relevant in particular where long tenure coexists with a high proportion of temporary workers (e.g. in France, Croatia, Italy, Portugal, Slovenia). Top: Italy: cca 12,5% EU-28: cca 10,5%; Croatia: cca 11% (p. 6.)
1.2.3. Activity to reform employment protection legislation has been particularly intense in countries that had both large accumulated imbalances and stringent job protection legislation before the crisis. These include Spain, Croatia, France, Italy, Portugal and Slovenia. Croatia completed the labour law reform started in 2013 by adopting the Labour Act in 2014. This facilitates the use of some forms of non-standard work and simplifies dismissal procedures. (p. 13) More generally, a number of Member States have tightened limits on fixed-term contracts, and more specifically on the use of temporary agency work (e.g. Denmark, France, Italy, Slovakia, and Slovenia). By contrast, others have facilitated access to fixed-term contracts (e.g. the Czech Republic) and temporary agency work (e.g. Greece, Lithuania). Some (e.g. Croatia, Italy, Portugal,) have increased the duration or renewal opportunities for fixed-term contracts in order to encourage job creation. (p. 14) Table 1 — Strictness of employment protection, OECD indexes Protection Protection Specific Regulation of of requirements on permanent permanent for collective temporary workers workers dismissal forms of against against employment individual (individual) and dismissal collective dismissals
EU-28 2.47 2.21 3.12 2.28 HR 2015 2.30 2.32 2.25 2.88
1.3. European Semester: Thematic factsheet – Wage developments and wage-setting systems – 201776 In 2014-2016, wages evolved, on average, in line with productivity (Figure 2). However, the aggregate picture conceals wide differences across countries. Notable divergence between wage growth and productivity took place in the Baltics, Bulgaria and Slovakia (where wage growth was faster than productivity growth) and Croatia, Malta and Portugal (where wage growth was slower). (p.2.)
76 Available at: https://ec.europa.eu/info/sites/info/files/file_import/european-semester_thematic-factsheet_wage- developments-wage-setting-systems_en_0.pdf
59
National Report Croatia
60
Croatia National Report
(p.10)
61
National Report Croatia
62
Croatia National Report
(p. 13 + 14)
63
National Report Croatia
Part 2. European Semester Documents for Croatia 2.1 Economic Forecast for Croatia – Summer 2018:77 Following the unexpected slowdown in the last quarter of 2017, real GDP growth edged up only slightly in the first quarter in 2018, mainly thanks to robust private consumption and recovering investment. Nevertheless, and despite mixed signals from high frequency indicators, positive labour market developments and survey data suggest that domestic demand will fuel a growth pick up over the rest of 2018. Overall, real GDP growth is expected to moderate slightly over the forecast horizon to 2.6% in 2018 and 2.5% in 2019. Labour market conditions continue to improve. Wages are projected to continue rising, as labour shortages become more apparent in the tourism and construction sectors. The unemployment rate should continue falling mainly thanks to rising employment, as outbound migration flows slow down. In the first five months of 2018 inflationary pressures remained contained, despite rising energy prices. Strong consumer spending and rising wages are expected to eventually drive consumer price inflation up to 1.6% in 2018 and 1.8% in 2019.
2.2. European Semester 2018: Country Report – Croatia78 The labour market continued to improve, but participation remains very low. In 2017, the unemployment rate fell to 11.1 %. (p.2.) Wage pressures and higher energy prices set the scene for a modest rebound in inflation. Tightening labour market conditions and wage increases in the public sector are projected to raise the cost of labour in both 2017 and 2018. This, coupled with rising energy prices, pushed inflation up to 1.3 % in 2017, after more than three years of negative or stagnant price dynamics. The headline inflation rate is projected to keep increasing slightly, with core inflation outpacing it and picking up towards the end of 2019. (p. 5)
2.2.1. Labour Market The labour market continued to improve in 2017, but labour utilisation remains chronically low. Despite moderate improvements in the aftermath of the economic crisis, both the activity and the employment rates, respectively at 71.7 % and 65.6 % in Q3 2017, were among the lowest in the EU (an average 78.2 % and 72.6 % respectively). The shrinkage of the labour force was driven by negative migration flows and an ageing population. Also as a result of this shrinkage, the unemployment rate has been on a rapidly shrinking path and is projected to have dropped to around 11.1 % in 2017, from 17.6 % in early 2014. The proportion of young people who are not in employment, education or training has decreased, but remains very high, as does the youth unemployment rate and the rate of long-term unemployed. With outbound migration pressures expected to ease and stable employment growth, the unemployment rate is projected to fall below 8 % in 2019. In 2017, new recruitment on permanent contracts increased, but the proportion of temporary contracts in total employment remains sizable. Despite low labour utilisation, the tightening labour market has resulted in renewed wage growth. The nominal compensation per employee has decreased
77 Available at: https://ec.europa.eu/info/sites/info/files/economy- finance/ecfin_forecast_summer_12_07_18_hr_en.pdf 78 COMMISSION STAFF WORKING DOCUMENT Country Report Croatia 2018 Including an In-Depth Review on the prevention and correction of macroeconomic imbalances, 7.3.2018 (SWD(2018)209 final), Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN CENTRAL BANK AND THE EUROGROUP 2018 European Semester: Assessment of progress on structural reforms, prevention and correction of macroeconomic imbalances, and results of in-depth reviews under Regulation (EU) No 1176/2011 {COM(2018) 120 final} Available at: https://ec.europa.eu/info/sites/info/files/2018-european-semester-country-report-croatia-en.pdf
64
Croatia National Report
every year since 2013, but it is projected to have increased by 2.5 % in 2017. Coupled with modest productivity growth, unit labour cost is projected to have increased by just over 1%. Wages are expected to continue increasing, following upward pressures from the legislated increases in the public sector, as well as from workforce shortages in several key sectors, such as tourism and construction. (p. 6.)
Over recent years, Croatia has taken measures to reform the labour market, but the challenge of low labour participation has not been addressed. Two successive reforms, implemented in 2013 and 2014, enhanced the flexibility of the labour market. In particular, they facilitated the use of fixed-term contracts and flexible types of work (distance work, part-time work, seasonal work and agency work), and simplified in various ways the procedures for terminating employment contracts. The challenge of low labour utilisation however has still not received an adequate response, as measures encouraging longer working lives and a streamlining of pension provisions have not yet been carried out. In 2015, the assessment of disability claims was harmonised and moved to a new Single Expert Evaluation Body. (p.9.) Country Specific Recommendation (CSR) Progress: Croatia Overall assessment of progress with 2017 CSRs: limited progress CSR 2: Discourage early retirement, Croatia has made limited progress in accelerate the transition to the higher addressing CSR 2: statutory retirement age and align pension • No progress in reforming the pension provisions for specific categories with the system rules of the general scheme. Improve • Limited progress in improving the social coordination and transparency of social benefits system benefits. CSR4: Reduce the fragmentation and Croatia has made no progress in addressing improve the functional distribution of CSR 4: competencies in public administration, • No progress in the public administration while enhancing the efficiency and reducing reform territorial disparities in the delivery of • No progress in harmonising the wage- public services. In consultation with social setting frameworks in the public sector partners, harmonise the wage-setting frameworks across the public administration and public services. p. 11
2.2.2. The 2017 Tax Reform This reform is expected to benefit only certain types of households. The reform, which most notably cut personal income tax rates and raised the personal tax allowance, is projected to have decreased the tax liability for all households that were subject to income tax and increased the number of households that pay no tax. Simulations project that the gains from the reform are largest at the lower end of the wage distribution in the cases of single earners and two earner households with no children or one child. The tax wedge for a single worker (average wage) is projected to have decreased by 0.5 pp, with larger decreases for those earning 67 % and 50 % of the average wage (-2.3 pp and -1.2 pp, respectively). Decreases in the tax wedge for a two-earner households with two children are slightly larger at average wage level (-1.5 pp). However, the tax wedge for this household type does not decrease at lower wage levels (67 % and 50 % of average wage), as these incomes were not taxed before the reform. Significant increases in the (non means-tested and non-capped) child tax
65
National Report Croatia allowances mean that the gains will have been highest for larger families at the upper end of the earnings distribution. The reform is projected to increase inequality and provide limited support to employment. Although the tax burden and tax wedge were already low before the reform, the reduction of the tax wedge should benefit employment. However, the increase in the dependent spouse allowance could decrease incentives to work for second earners. Since households in the lowest deciles of the overall income distribution are unlikely to benefit from the reform, the Gini coefficient, which measures income inequality, is projected to increase. (p.21)
2.3. Labour Market, Social Policies and Education79* The unemployment rate in Croatia has been falling considerably over the past year, but labour utilisation remains low. The unemployment rate decreased from 13.4 % in 2016 to 11.1 % in 2017. The drop was the result of the combined effect of increases in the employment rate and in the activity rate. However, at 65.6 % in Q3 2017, the employment rate was still one of the lowest in the EU; the activity rate was 71.7 %, compared to the EU average of 78.2 %. Between Q3 2016 and Q3 2017, the rate of long-term unemployment (LTU) decreased to 3.9% of the labour force (-1.5 pps), moving closer to the EU average of 3.3 % (Croatia has undertaken measures to implement the Council Recommendation on the integration of the long-term unemployed into the labour market. However, challenges still remain, including the establishment of the Single Point of Contact (SPOC) for the beneficiaries.). Overall, the chronically low labour utilisation in the Croatian economy continues to weigh on potential growth and on the country's adjustment capacity. There are also large territorial disparities in labour market outcomes. Based on 2016 registered unemployment data by county (Croatian Bureau of Statistics), the highest unemployment rate was almost four times the lowest rate. Most counties with the highest unemployment rates were located in the eastern and central parts of the country.
2.3.1. Low Employment Low participation and low employment are widespread across age groups and genders, while vulnerable groups are particularly affected. The activity and employment rate of both men and women are well below EU average. Men recorded the second lowest employment rate in the EU, while the employment rate of women is 10 pp lower than for men (56.6 % and 66.2 % respectively). Discouragement, skills gaps, care responsibilities as well as multiple pathways to early exits also represent important barriers.
2.3.2. Active Labour Market Measures These measures are insufficiently targeted at vulnerable groups. In 2016 the participation of unemployed persons in active labour market measures (ALMPs) was very low, at 7 %. In early 2017, new ALMPs were announced, but from a preliminary evaluation, they do not seem to address the difficulties in entering the labour market for the long term unemployed and the low-skilled80. At the same time, the Croatian Youth Guarantee scheme is showing some promising results: it reached more than half (54 %) of NEETs aged 15-24 in 2016 (EU average 42.5 %), and 18 months after leaving the scheme, 68.3 % of participants were in
79 pp. 31-38 80 From January to September 2017, the majority of participants in ALMP measures were in "Traineeship for work without employment" (32.5 %) or public works (30.4 %). The first measure tends to favour young beneficiaries with a higher education level who are more likely to find a job without any intervention (the so called "creaming" effect), whereas the impact of public works on employability of, primarily, older workers was evaluated as small or even negative (Bejaković et al., 2016). Only 1.3 % of all ALMP participants took part in educational programmes providing the opportunity to acquire additional skills needed to enter the labour market.
66
Croatia National Report
employment. Regarding passive measures, the duration of unemployment benefits (relative to the qualifying contribution period) is short in Croatia, and the coverage (less than 15 % of the eligible population) remains low (European Commission, 2017a). From 2017, there has been a decrease in the number of newly recruited employees on temporary contracts and a sharp increase in new permanent contracts. The pick-up in economic activity and the improving conditions on the labour market favoured an increase in permanent contracts (Graph 4.3.3). In Q3 2017, however, temporary employees as a percentage of total employment still stood at 22.5 %, against an EU average of 14.8 %. As far as self-employed workers are concerned, in 2016 their share in total employment decreased to 12 %, of which the largest group were farmers (30%).
2.3.3. Wages After years of wage moderation, wages have started growing again. Both nominal and real (GDP deflated) wage growth was negative in 2013 and 2014, followed by a slight increase in 2015. In 2016, nominal wages decreased marginally, while real wages stabilised as inflation was negative. Between 2014 and 2016, Croatia was amongst the EU countries with the highest gap between productivity and real wage growth, which supported cost- competitiveness gains (European Commission, 2017j). In 2017, the negotiated increase in public wages, combined with the improving economic conditions and the further tightening of the labour market put some upward pressure on wages. Nominal wages started growing again, at a projected rate of 2.5 % for the year as a whole, and are expected to continue growing at the same rate in 2018 and 2019. As inflation has turned positive, real wages are projected to have increased by 1.3 % in 2017 and to continue growing at a moderate rate of 0.4 % over the forecast horizon, remaining below productivity growth. The authorities have adopted changes to the minimum wage. At the end of 2017, the gross minimum wage was raised by 5 % to EUR 456, which corresponds to 42.9 % of the gross average wage in Croatia. In order to minimise the impact on labour costs, the base on which the employer contribution is calculated was cut by 50 % for those workers that have been employed for a period of more than 12 months on the minimum-wage, which risks creating an important low wage trap. In 2016, the coverage of the minimum wage was relatively low (6.6 % of the employed) and its incidence most pronounced in the poorest counties of Croatia as well as in a few sectors.
2.3.4. Public Administration and State-owned Enterprises The adoption of the announced legislation to harmonise wage setting for civil servants across the public administration has been further postponed. Initially planned to cover wage-setting in the public sector as a whole, the new legislation will be enacted in two steps, first covering civil servants only, and in a second stage, public sector workers. Greater harmonisation of wage-setting across the public administration would be achieved through the introduction of common wage grids and job complexity coefficients, based on more consistent job descriptions and skills frameworks. According to the authorities, the new legislation would also cover areas of the employment relationship of civil and public servants that are currently negotiated through collective bargaining. In the meantime, however, the basic collective agreement regulating the rights of civil and public servants was renegotiated in December 2017, with validity until 2021. The collective agreements for six sectors expired in 2017 and are still due to be renegotiated. As far as state-owned enterprises (SOEs) are concerned, no further steps have been taken in setting up a coordinated system for collective bargaining.
2.3.5. Social Dialogue Social Dialogue is not yet a well-developed practice in Croatia. Formally, Croatia has an established social dialogue structure in the form of a National Economic and Social Council.
67
National Report Croatia
Social partners are invited to provide written contributions before the adoption of National Reform Programmes and other relevant legislative initiatives. However, the interaction between the authorities and the stakeholders is generally limited, and mostly limited to the provision of written feedback on some of the Government proposed measures. Another inhibiting factor is that fragmentation seems to be central to limiting the overall capacity of trade unions to engage in social dialogue. (p.34)
2.3.6. Pension System The Croatian pension system continues to face medium and long term challenges. In 2017, the ratio of contributing workers to pension beneficiaries was at 1.2, reflecting unfavourable demographic trends, but also the existence of numerous pathways to early retirement and a still low statutory retirement age, especially for women. In 2016, only 38.1 % of people aged 55- 64 were employed and only 14.8 % of all pensioners had 40 or more qualifying years. The average duration of working life is one of the lowest in the EU (32.1 years in 2016). In 2016, the aggregate replacement ratio of pensions (0.39) was significantly lower than the EU average, resulting in a higher at risk of poverty rate for people aged 65+ (26.5 % vs 14.6 % EU in 2016). The 2018 Aging Report (forthcoming) projects that by 2070 the public pension expenditure as percentage of GDP will further fall by 3.8pp. Ensuring pension adequacy in the future will require increased pension contributions and/or longer working lives.
ANNEX A Overview table Commitments Summary assessment 2017 Country-specific recommendations (CSRs) CSR 4: Reduce the fragmentation and Croatia has made no Progress in addressing improve the functional distribution of CSR 4 competencies in public administration, while enhancing the efficiency and reducing territorial disparities in the delivery of public services. In consultation with social partners, harmonise the wage-setting frameworks across the public administration and public services. • In consultation with social partners, No Progress in harmonising the wage-setting harmonise the wage-setting frameworks frameworks across the public administration across the public administration and public and public services. The new legislation on services. public sector wages has been postponed several times. The aim of the law is to achieve greater harmonisation of wages across the public administration through the introduction of common wage grids and job complexity coefficients, based on more consistent job descriptions and competences frameworks. (p. 57) Europe 2020 (national targets and progress) Employment rate (age group 20 – 64) target The employment rate in Croatia has been set in the NRP: 65.2 % slowly and steadily increasing (from 58.3% in 2013 to 65.6 % in Q3 2017). Even though Croatia has achieved the national target, its employment rate is still among the lowest in the EU and well below the EU average.
68
Croatia National Report
2.4. Assessment of the 2018 Convergence Programme for Croatia, Brussels, 23 May 201881 Positive labour market developments are projected to continue as employment increases and the unemployment rate goes down to 10% in 2018 and 7% in 2021. (p. 3) Real GDP growth in 2017 was noticeably weaker than expected by the previous Convergence Programme (2.8% compared to 3.2%), mostly on account of lower than projected investment and government consumption. By contrast, employment grew more rapidly while compensation of employees and inflation were lower than expected. The projected growth rate in 2018 remains the same as in the previous programme, but with substantial revisions in demand composition. Employment growth projections are very similar in the two projections, but the spring forecast projects a slightly stronger reduction in the unemployment rate in 2018 and 2019, due to lower anticipated labour force growth. (p. 4) On the expenditure side, the programme considers the full annual impact of the wage increase agreed in 2017 in the public sector, but does not quantify it (the Commission's estimate is 0.34% of GDP). Similarly, the full year effect of several laws expanding social benefits (Act on war veterans' rights, Act on maternity and parent benefits) is included, but not quantified. (p. 8) However, given the recent trend of growing employment and social contributions as well as the Government's recent payment, which decreased the stock of arrears in the healthcare system, these risks seem more pertinent in the medium and long term. Risks outlined by the programme, which seem more pertinent in the short term, relate to potential liabilities arising from issued guarantees, particularly in cases of companies which are currently under restructuring. (p. 11-12)
2.5. 2018 European Semester: Country Specific Recommendation / Commission Recommendation - Croatia82
COUNCIL RECOMMENDATION on the 2018 National Reform Programme of Croatia and delivering a Council opinion on the 2018 Convergence Programme of Croatia, Brussels, 23.5.2018 COM(2018) 410 final83 Croatia's potential growth remains insufficient to enable a durable adjustment and overall there has been little progress in implementing policy measures to address the chronically low labour utilisation and slow productivity growth. Competitiveness and investment remain hindered by a restrictive business environment and the fragmentation of the public administration weighs on efficiency in public services. (p.2)
2.5.1. Labour Market, Vocational Education and Training Programmes The Croatian labour market continued to recover in 2017. Yet employment and activity rates remain substantially below the EU average, hampering potential growth. To date, the statutory pensionable age is 62 for women and 65 for men. The convergence and increase in the statutory retirement age is slow, with both sexes stipulated to reach a pensionable age of 67 only in 2038. In addition, older workers can benefit from many pathways to early retirement and the pension system includes a number of special pension schemes providing more
81 Available at: https://ec.europa.eu/info/sites/info/files/economy-finance/11_hr_2018_cp_assessment.pdf 82 2018 European Semester: 2018 European Semester: Country Specific Recommendation / Council Recommendation on the 2018 National Reform Programme of Croatia and delivering a Council opinion on the 2018 Convergence Programme of Croatia, 9192/18 - COM(2018) 410 final, 15 June 2018. Available at: http://data.consilium.europa.eu/doc/document/ST-9430-2018-INIT/en/pdf 83 Available at: https://ec.europa.eu/info/sites/info/files/file_import/2018-european-semester-country-specific- recommendation-commission-recommendation-croatia-en.pdf
69
National Report Croatia favourable conditions for retirement. The care responsibilities of women contribute further to their low labour market participation. The resulting low average duration of working lives implies low current and future pension adequacy and risks of poverty in old age. The measures announced to encourage longer working lives have not yet been implemented. The labour market relevance of vocational education and training programmes appears limited, as suggested by the fact that more than half of the registered unemployed are vocational education and training graduates. Better coordination between public authorities and employers is needed to improve the identification of skills needs. The adult education system aiming to foster inclusion in the labour market is characterized by a large and unevenly distributed number of providers across the country, and learning programmes that are not properly assessed. Participation in adult education and educational programmes offered as part of active labour market policy measures are critically low. (p. 3-4) Lack of coherence in the wage-setting frameworks in the public administration and public services impede equality of treatment and the Government's control over the public wage bill. (p.4) Discourage early retirement, accelerate the transition to a higher statutory retirement age and align pension provisions for specific categories with the rules of the general scheme. Deliver on the reform of the education and training system to improve its quality and labour market relevance for both young people and adults. Consolidate social benefits and improve their poverty reduction capacity.
2.5.2. Social Dialogue Even though the social dialogue structure in Croatia is in place, the actual interaction between the authorities and stakeholders in the policy preparation process is limited and mostly confined to the provision of written feedback on the Government proposed measures. In addition, the fragmentation of trade unions limits their overall capacity to engage in social dialogue. (p.3)
Part 3. Croatian Social Partners and the European Semester84 3.1. How are social partners involved in the European Semester in Croatia? Are there formal or informal procedures? If so, what is their scope (e.g. consultations)? During the last three years the following practice was established: the EC Annual Report for Croatia was usually presented and discussed by the Economic and Social Council (ESC; Gospodarsko-socijalno vijeće). After this, several thematic meetings with social partners on particular fields of reforms were held during March and the beginning of April. Usually there are five meetings (labour marker and pension system, the reform of state government, social security compensations, health, and education), on which the relevant ministries represent their reform programmes and social partners have the possibility to discuss and send the written statement later on. The Ministry of economy has been coordinating this procedure for the last two years, because it coordinates the preparation of the National Reform Programme (NRP) as a whole. At the end of the procedure the text of the NRP is usually discussed once again at the ESC.
3.2. What is the involvement and impact of European social partners on the processes of the European Semester (e.g. in the case of analysis of the processes affecting Croatia, the Country Specific Recommendation)?
84 The answers are only from Union of Autonomous Trade Unions of Croatia.
70
Croatia National Report
European Social Partners (in our case, European trade union confederation – ETUC) strive to coordinate the process of inclusion of national social partners in the consultations on European Semester (ES) and to open the additional channels of communication towards the EC. The ETUC coordinates the network of national contacting persons for the ES that usually meet at the European level twice a year, in order to discuss the ETUC’s and national priorities, as well as the consultation procedures. Every year the ETUC collects and sends to the EC the opinions of the national headquarters on the most important reforms in the form of a consolidated document. In addition, the ETUC organizes several meetings per year for the representatives of the EC (mostly DG EMPL) on which we can apply and get a chance to present our priorities and discuss the opinions of the EC to the Country Officers.
3.3. What is the impact of the Croatian social partners on the European Semester's processes in the EU and Croatia (in respect to the Annual Growth Survey, the Country Report and the National Reform Programme)? How are the Croatian social partners involved in the implementation of it? At the European level we have an influence through our voice determining the ETUC's priorities, and through the channel the ETUC has opened for additional consultations with the EC's representatives in charge for Croatia. Formal procedures for national consultations on the NRP was previously described. In general, our influence is very limited, and during the last three annual cycles of consultations we have, in my opinion, not influenced the content of the NRP at all. The additional problem is that the Government - because of the lack of its own capacities for the creation and the realization of reforms - writes to the NRP at the last moment (and not based on the national priorities defined in advance), and as a result the documents that we get at the consultative meetings are very brief, general and sometimes not structured clearly. There is mostly talk in very general terms about the direction of the reforms, or, conversely, only very small, concrete measures that do not represent serious reforms (e.g. the rising of the means test for the child benefit for this year) are represented. The measures are usually represented but without any real interest in regard to the discussion and the analyses of the alternatives. Our written statements are responded to with the written answers that always contain an explanation for the reasons why our proposals have been overruled and why the Government is sticking to its initial proposal. We cannot influence the Annual Growth Survey (AGS), and the County Report only to a minimum extent, as the result of the consultations with the Commission in the preparation procedure (which organizes and enables us ETUC), nor do we have any influence over the CSRs. We can influence the implementation to such a degree that we could influence the particular fields of the public policies without the European Semester and NRP. In other words, the implementation of the NRP is not the issue of social dialogue afterwards, contrary to some legislative reforms emerging from it (e.g. pension laws), but they would pass the ESC and consultations with social partners anyway, with or without the social partners.
3.4. How has the evaluation of the Croatian Country Specific Recommendations been published so far (e.g. employment policy, economic policy instruments, working conditions, flexibility, wages, new forms of employment, collective bargaining, and realistic reflection regarding domestic reforms)? We do not have any special opportunities to give our opinion on the CSR except, again, in the consultations with the Commission that organizes the ETUC or during the missions of the Commission that visit Croatia which also include the meetings with the social partners.
71
National Report Croatia
The recommendation given in the last few years did not significantly influence the collective bargaining system. Despite the recommendations concerning the wage setting system in the public administration given a few years ago, which give rise to the proposal of settling the collective bargaining system in the public sector (harmonization of the duration of the contract and the foundation of the central body for the coordination of the collective bargaining), after the initial ideas of the Government, there were no further efforts in that direction. In regard to the fact that the Labour Act, as well as the Act on Representativeness have not been revised recently, the European Semester did not influence the collective bargaining system in the private sector. In the last several years, the most problematic field of reforms was the pension system, i.e. the Commission insisting on accelerating an increase in the age of retirement (which we regarded as unjustified, taking into account the difference in the expected life span between Croatia and the old Member States that has raised or will raise the boundary above 65). Despite this measure having been announced in the last three NRPs, it has still not been implemented (but maybe it finally will be this year). After the reform of the Labour Act in 2013, the Commission has not particularly insisted on further flexibility of the employment legislation. As regards the recommendations of the Commission on the other fields, especially educational reform, the reform of the social benefits system and the public administration reform, we support the opinion of the Commission, about the poor or missing advancement of the Croatian Government in the implementation of those reforms (or, what is worse, in giving up the planned ambitious reform measures).
72