Companies gearing up to adapt to new minimum wage rules
Under the legislation passed by parliament in December 2018, the minimum wage will increase to EUR 700 in 2020, excluding any bonuses, after it had already been raised to EUR 667 from EUR 638 net in 2019.
A survey conducted by the Chamber of Commerce and Industry (GZS) among 60 companies from 17 sectors employing 20,468 people showed the new rules would push gross pay up by an average 5%.
Moreover, in 15% of the companies the rise will be more than 9%, Cvetka Furlan from the GZS's legal service said at an event hosted by the chamber earlier this week.
The biggest cause for concern is that the proportion of minimum wage earners would rise from 15% to 45% of all employees, or even 50% and more in some sectors such as cleaning, private security undertakings or the textile industry.
"It will result in an even-steven system, upsetting internal ratios between jobs and employees. This will cause pressure for a restoration of balances," Furlan said, warning that all wages would go up, pushing labour costs up by 15-25%.
With company and employee performance bonuses extracted from the minimum wage, the remuneration systems in companies would change as well.
According to Furlan, companies are preparing for the changes in different ways, depending on their state, the business conditions they operate in, and how much they can afford.
Some of the companies surveyed by the GZS are planning to step up job automation, optimise their operations even further, while some are considering moving production abroad.
To help companies to cushion the impact of the reform minimum wage act, the GZS has proposed a set of proposals to adjust the pay system with an emphasis on "structural change of pay and sensible preservation of pay ratios".
Offering an example, Furlan said that the bonuses typical for a certain position such as those for shiftwork, split shifts, stanndby or difficult or risky working conditions, could be included in base pay for that post.
"In this way the company would avoid extracting bonuses from the minimum wage and the employee would be no worse off. On the contrary, base pay would increase, while the statutory bonuses ... would be calculated on a higher base and would thus be higher."
The biggest proportion of bonuses is for the overall years of service, which too could be included in base pay. The company could then introduce a new bonus for years of service with the latest employer, and in changing the pay system set its amount, let's say at 0.1% of the base annual salary, said Furlan.
"This system has several advantages, the most important of which is levelling the remuneration for employees for the same type of work or in the same job with various lengths of service.
The employer can opt for several pay brackets for one job, in order to reward the workers who have more work experience, more skills etc.," Furlan suggested.
She said the purpose of such a system was not to deny the employees the benefits of the changed rules on the statutory minimum wage.
"A comprehensive approach to pay system reform would increase labour costs in the company more than solely due to the effect of the minimum wage law, while the company will no longer have to pay out top-up payments to the minimum wage.
"What is equally important, the ratios between jobs at various stages of complexity will be preserved," said Furlan.
However, trade unions are sceptical, expressing concern that companies are applying different stratagems to minimise the effect of the minimum wage law.
Lidija Jerkič, the head of the ZSSS trade union confederation, says the unions are still waiting for talks about a new collective bargaining agreement for the corporate sector.
"However, employers have been quick to start changing pay models, not at the level of sectors, but rather at the level of companies, where they are applying options to cut or scrap bonuses," she said.
"Many an employee will be disappointed when they get their pay in February because the employer will have reduced it by then," the trade unionist said.