This record reviews 2002's main developments in industrial relations in Hungary.
Political developments
2002 was divided into two political periods by the parliamentary elections held in April. The first months of the year were shaped by the policies of the right-wing coalition government led by the Alliance of Young Democrats-Hungarian Civic Party (Fiatal Demokraták Szövetsége – Magyar Polgári Párt, FIDESZ-MPP). This government followed what was widely criticised as a unilateral decision-making style, which did not permit any substantial input by social partners and marginalised national-level tripartite bodies. Between 1998 and 2002, this government also implemented a number of amendments to the Labour Code, which trade unions denounced as anti-union measures. Some of the unilateral decisions were also criticised by employers’ associations.
The main victor in the general election was the Hungarian Socialist Party (Magyar Szocialista Párt, MSZP), which formed a coalition government with the liberal Alliance of Free Democrats (Szabad Demokraták Szövetsége, SZDSZ) as junior partner. MSZP forged an electoral alliance with some of the major trade unions, and enjoyed the support of virtually all union confederations, except the National Federation of Workers’ Councils (Munkástanácsok Országos Szövetsége, MOSZ). In October 2002, local government elections again brought victory for the coalition parties.
In its electoral programme, MSZP promised to spread the dividends of the economic growth of recent years across society; in the field of social policy, this meant a transition towards a full-fledged welfare state. MSZP stressed that it intended to pursue a more consensual style of policy-making. In terms of industrial relations, MSZP pledged to: reinforce the governmental institutional network dealing with labour issues; reconstruct the national-level tripartite social dialogue; reinforce the sectoral social dialogue and collective bargaining; and strengthen the position of workplace-level union sections (HU0206101F).
As for economic policy, there does not seem to have been such a clear break as in the field of policy-making. In early 2000, arguably to balance the impact of the slowdown of the European economies and with the forthcoming elections in view, the FIDESZ-MPP government started to shift towards a demand-side, budgetary spending-driven economic policy. A new wage scale for public administration employees and a steeply rising national minimum wage contributed to a sharp increase in the average wage in 2001. The new MSZP-SZDSZ government, headed by Prime Minister Péter Medgyessy, continued to pursue this budgetary spending policy. A 50% wage increase for public service sector employees and a tax cut on lower wages further propelled wage growth (HU0207102F). In 2002, the average wage increased by approximately 19%, a level unprecedented in modern Hungarian history. On the other hand, inflation was cut to 5.3% in 2002, a record low since the beginning of the economic and political transition in the late 1980s. Nevertheless, low inflation is partly a result of the overvaluation of the currency (HUF), which together with high wage growth has caused a deterioration in the competitiveness of the Hungarian economy. At the same time, in 2002 productivity and GDP increased by between 3.2% and 3.5% only, which was not sufficient to offset the increase in production costs. Moreover, the budget deficit was also at a record high level, at 9.6% of GDP in 2002.
Collective bargaining
A total of 18 multi-employer collective agreements were concluded in 2002 in the competitive sector – as reported to the Ministry of Employment and Labour (Foglalkoztatáspolitikai és Munkaügyi Minisztérium, FMM) – of which only three were signed by sectoral employers’ organisations. The rest typically covered holding companies, groups of successor firms of former state-owned enterprises. Collective bargaining at the multi-employer level thus continued to decline in 2002 - the 18 agreements signed represented a substantial fall compared with the 31 multi-employer wage agreements in 1998. Moreover, their content – in terms of the agreed wage increase – had symbolic value only. The coverage of company-level wage bargaining also decreased in the competitive sector in 2002. A total of 827 wage agreements were concluded in 1999, compared with only 496 new or amended collective agreements registered in 2002.
Pay
The government of the time decided to increase the national minimum wage by 25% to HUF 50,000 (EUR 200) per month as of 1 January 2002, an increase which came on top of a substantial 56.9% rise a year earlier. Wage negotiations in the national-level tripartite body (see below under 'The organisation and role of the social partners') had been practically confined to deciding the amount of the state subsidy given to employers in low-wage sectors in order to compensate for the increase in wage costs, and to drawing up recommendations for the average wage increase. In this latter case, a range of 8% to 10.5% was agreed for 2002.
Only 10 multi-employer agreements out of the 18 concluded in 2002 contained provisions relating to annual wage increases. These agreements more or less followed the recommendations set at the national level, stipulating an increase of between 7.7% and 10.7% for average wages. The agreed wage increases thus had symbolic value only.
Of the 496 new or amended company-level collective agreements registered in 2002, only 370 contained provisions relating to pay increases. Nonetheless, in contrast to multi-employer agreements, company-level agreements represented a real advantage for employees in terms of wage increases. On average, the agreed increase was 11.0%, slightly higher than the maximum recommendation issued by the national tripartite body.
Following the parliamentary elections, a new round of wage negotiations began in the public sector in July, based on the election programme of the incoming MSZP-SZDSZ government, which promised a 50% wage increase on average for public service employees. A national agreement was signed by the National Labour Council of Public Employees (Közalkalmazottak Országos Munkaügyi Tanácsa, KOMT) on the implementation of the new income policy package, followed by eight subsectoral agreements signed by the respective trade union federations and ministries on how to distribute available extra resources (HU0208102F). Although these sectoral and subsectoral agreements are recommendations for local governments and other institutions running public service institutions and cannot be regarded as collective agreements with legally enforceable status, they have a major impact on the fair and negotiated distribution of available funds.
In November 2002, the national tripartite body reached an agreement on wage increase recommendations for sectoral and company-level bargaining in 2003, and on the level of the statutory minimum wage (HU0212105F). The agreement recommends a 4.5% wage increase in real terms, and provides for the statutory minimum wage to be frozen at the current level.
Working time
Beyond wage regulation, working time flexibility was a central issue for collective bargaining in 2002. Following an amendment of the Labour Code in 2001, which reformed the rules governing the organisation of working time, in 2002 the renegotiation of company-level provisions concerning overtime, rest breaks, the organisation of working time, annualised working hours, and on-call work took place in many companies.
In Hungary, regular working time is virtually regulated by the Labour Code, as it is rarely an issue for sectoral or company-level collective agreements. The 40-hour statutory working week has not changed since 1992, though a minor decrease in annual working time took place in the 1990s due to the introduction of new bank holidays. Working time was an important issue in the late 2002 tripartite negotiations over pay increases for 2003 (see above). In exchange for making concessions to the employers in the area of wage increases, unions demanded the reduction of statutory normal weekly working time from 40 hours to 39.5 hours in 2003, and to 38 hours by 2006. In November 2002, the Prime Minister announced that the government supported the demands of trade unions to reduce statutory normal weekly working time gradually from 40 to 38 hours in the current parliamentary term (HU0212102N). Subsequently, there was a tripartite agreement in principle to support the reduction of working time in the long run, and to begin negotiations over the issue with a view to reaching an agreement by June 2003 (HU0212105F).
Job security
Job security was not a priority issue in collective bargaining during 2002. However, restructuring and privatisation was a prominent theme, which has significant implications for job security. For example, In November 2002, the government announced plans for the privatisation of the Dunaferr steel mill, the country's largest remaining state-owned manufacturing firm. At the same time, Dunaferr management proposed severe wage cuts for the coming year. Trade unions at the company objected to both plans and threatened a strike (HU0212103N). Similarly, in October 2002, IBM announced that it was to close its Hungarian hard-disk manufacturing facility, located in Székesfehérvár, employing 3,700 people. In early November, an agreement was signed between IBM and the local trade unions and works council concerning the rules for the redundancy process (HU0211103N).
Equal opportunities and diversity issues
Equal opportunities is still rarely an issue in collective bargaining in Hungary.
Legislative developments
In 2001, the FIDESZ-led government introduced a major amendment of the Hungarian Labour Code to transpose the EU Directive 93/104/EC on certain aspects of the organisation of working time. The amendment, however, caused clashes between the government and trade unions. Trade unions claimed that the government intended to flexibilise the rules concerning working time and to reduce wage costs under the pretext of adoption of the working time Directive. The MSZP-SZDSZ coalition government which came to power after the April 2002 elections revised the Labour Code, and Act XIX of 2002 partially restored the pre-2001 regulations concerning working time and set higher minimum standards in certain areas than stipulated by the Directive (HU0210101F). The 2002 amendment of the Labour Code also substantially extended the rights of workplace-level trade unions and the duties of employers in terms of information and consultation (see below under 'Employee participation').
The organisation and role of the social partners
The perceived anti-union policy of the previous right-wing government placed on the agenda the closer cooperation, or even amalgamation of the six national trade union confederations, but until 2002 had not achieved any lasting change in the union structure. However, in July 2002, the Trade Unions’ Cooperation Forum (Szakszervezetek Együttműködési Fóruma, SZEF) and the Confederation of Unions of Professionals (Értelmiségi Szakszervezeti Tömörülés, ÉSZT) – both confederations representing a variety of groups of public employees – agreed to set up the Union of SZEF – ÉSZT (SZEF-ÉSZT Unió, Unió). Unió is a cooperation framework, which provides a forum to develop common policies for the two confederations and design joint activities, especially in the fields of education, information and international affairs. Each confederation, however, is retaining its own legal entity and autonomy in representing the interest of their members.
The National Association of Hungarian Trade Unions (Magyar Szakszervezetek Országos Szövetsége, MSZOSZ), the largest union in the competitive sector, set up a new structure at its congress in November 2002, based on six newly-founded clusters of sectoral federations. There are hopes that the more coherent structure might enable the federations to respond to the challenges of the market economy and to the requirement to develop a sectoral-level social dialogue (HU0212101N).
On 27 July 2002, on the initiative of the government, together with employers’ organisations and trade unions, an agreement was concluded to renew cooperation within the framework of a reformed tripartite National Interest Reconciliation Council (Országos Érdekegyeztető Tanács, OÉT) (HU0206102N). The previous tripartite body, the Interest Reconciliation Council (Érdekegyeztető Tanács, ÉT), was dissolved in 1999. According to the agreement, the competence of OÉT is considerably wider than that of the previous forum, and covers all issues related to the world of labour, including discussion over national economic policies, labour market development, tax and social security systems. The agreement also provides for the establishment of a separate national-level interest reconciliation forum for the public sector - the Public Service Interest Reconciliation Council (Közszolgálati Érdekegyeztető Tanács, KÉT). KÉT will be composed of the government, representatives of public sector unions and local government associations.
Industrial action
In early 2002 there were a number of protest actions staged by public service unions demanding wage increases. The income measures of the incoming government (see above under 'Political developments'), however, represented an important step towards redressing the wage gap between the public and the private sector of the economy and to satisfying employees and their unions in the public sector (HU0207102F). Nonetheless, a couple of smaller demonstrations were held at the end of the year by discontented groups of public employees left out of the income measures package. On the whole, 2002 was an especially quiet year in terms of industrial action.
Employee participation
The Labour Code of 1992 institutionalised works councils and separated the responsibilities of workplace-level unions from those of works councils. Information and consultation rights, previously exercised by unions, were practically transferred to works councils. Since 1992, union confederations had been demanding a strengthening of the legal underpinning of workplace union sections. In 2002, MSZP put this issue onto the legislative agenda. Act XIX of 2002 re-established the duty of employers to consult with local trade union sections over measures which affect employees or a group of employees, especially in the event of reorganisation, contracting-out and privatisation. On the other hand, the Act repeals an amendment made by the previous right-wing government, which authorised works councils to conclude a workplace agreement with the legal effect of a collective agreement if there was no union section at a given workplace. The strengthening of local union sections, however, further questions the role of works councils in an environment of decentralised bargaining and union structures (HU0210101F).
Telework
The penetration of telework is relatively low in Hungary, and collective agreements, in general, do not yet include special stipulations for teleworkers.
Vocational training
The MSZP-SZDSZ government plans a comprehensive amendment of the 1993 Act on Vocational Training in order to make the vocational training institutional network more suitable to deal with the challenges of life-long learning and the shift to an 'information society'. The new system would be more flexible and differentiated and aims to help the dynamic, knowledge-driven growth of the economy. Social dialogue on the planned new act started during 2002 within the tripartite OÉT.
New forms of work
The 2001 amendment of the Labour Code which transposed the EU working time Directive brought about fundamental changes in this field. One of its major novelties was enabling collective agreements to stipulate annualised working time, provided that the workplace concerned met certain criteria. In order to enhance flexibility, the amendment introduced new rules for non-standard work arrangements, such as standby (on-call) service, posting employees, temporary reallocation of job content and temporary transfer of an employee to another employer. The statutory limitation on annual overtime hours was raised to a maximum of 200 hours, or up to 300 hours by collective agreement. Following the 2002 general election, the new government further amended the Labour Code by Act XIX of 2002 to meet the demands of trade unions, which opposed flexibilisation measures. With regard to working time flexibility, the Act secures, as a general rule, the eight-hour day and 40-hour week and ensures that Sunday is a rest day, together with a 48-hour weekly rest period. Furthermore, it has augmented the entitlement of employees to receive pay premia for working in afternoon shifts, during the night or on Sundays (HU0210101F).
In collective agreements renegotiated since the new Act, the general use of a two- to six-month reference period or 'time frame' for averaging hours seems to be a novelty. However, contrary to expectations, the recent modifications of collective agreements do not amount to a breakthrough in working hours patterns. Several collective agreements limit the yearly days of reallocation, posting, transfer and standby service, as well as defining procedural rules for using non-standard types of work. The new possibilities for cumulating days of rest and shortening the rest time between work shifts also appear in the agreements signed in certain companies.
So far, no statistical data are available on the use of flexible working time patterns, and it is not known whether the extent of 'atypical' forms of work changed in 2002. Preliminary case studies and survey results indicate a recent proliferation of temporary agency work, which was also extensively regulated for the first time by the 2001 amendment of the Labour Code.
Other relevant developments
In July 2002, an EU PHARE project was launched to set up bipartite committees to promote sectoral social dialogue and collective bargaining - a level almost completely missing from the Hungarian national industrial relations system. The programme’s purpose is to establish sectoral committees in 18 different industries to provide appropriate fora for social dialogue on sectoral policies as well as to prepare the Hungarian social partners to play an effective role in the EU-level sectoral social dialogue. The project has mobilised employers’ organisations and trade unions across the economy and genuine bipartite contacts have been more vigorous since the project began (HU0212106F).
Following the elections, the MSZP-led government re-established a Ministry responsible for labour issues. The previous FIDESZ administration disbanded the Ministry of Labour in 1998, and distributed its responsibilities among various ministries. The newly-established FMM is headed by Peter Kiss, who was also Minister of Labour between 1994 and 1998. The main responsibilities of the ministry are to oversee employment policies, vocational training and macro-economic and social policies relating to labour market processes. A further responsibility is to ensure equal opportunities and fight discrimination of any kind in the employment context. It is also entrusted with developing programmes to facilitate the integration of Roma people into the labour market.
Outlook
2003 will represent a major challenge for the social partners. The need to contain inflation and the budget deficit along with the requirements to enhance the competitiveness of the economy, and likely further legislative concessions to labour, will test the capacity for cooperation between the social partners and the government and the ability of the government to maintain its consensual policy-making style. Growing tension and difficult wage bargaining can be expected, especially in the public utility and in the public administration sectors (HU0302101N).
Similarly, an intensification of disputes is foreseeable in the private sector, due to plant closures and relocations. Increasing wage costs and changes in the world economy may result in further job cuts in exporting companies, especially in foreign-owned manufacturing. If channels of job creation are unable to compensate for job losses, Hungary will be facing rising levels of unemployment on the eve of accession to the EU in 2004.
In the field of social dialogue, the establishment of sectoral committees (see above under 'Other relevant developments') would be a major institutional novelty. There is little doubt that the current negotiations between the social partners and the government as well as the experiences of the first committees will shape the future of the Hungarian industrial relations system. However, many open questions remain. Unions are hoping to convert sectoral committees into bargaining fora, and the government has expressed its support for strengthening sector-level social regulation. However, given the lack of support from the employers’ side, the adoption of a sector-level wage determination regime, similar to the current practices of a majority of EU Member States, is uncertain. Much will depend on a forthcoming amendment of the Labour Code, which might redefine some of the basic principles of the Hungarian industrial relations system. (László Neumann, András Tóth and András Pulai, Institute of Political Science, Hungarian Academy of Science)