Slovenia: Latest developments in working life Q3 2019

A social dialogue crisis, tax legislation changes, and the abolishment of the welfare bonus for work activity are the main topics of interest in this article. This country update reports on the latest developments in working life in Slovenia in the third quarter of 2019.

Social dialogue perceived as being at risk

On 27 September, employer organisations announced that they were withdrawing from sessions of the Economic and Social Council of Slovenia (ESS) over legislative changes that had been filed in parliament – largely by opposition party The Left – without any social dialogue. They claimed that social dialogue had reached its lowest point in the history of Slovenia. ^[1]

Jože Smole, Secretary General of the Association of Employers of Slovenia (ZDS), stressed, that ‘they have never experienced such a rejection of social dialogue as with this government’. ^[2]He noted that social partners only deal with marginal matters and have no say in decisions relating to social and labour legislation. This was the case when an amendment to the law on the minimum wage was adopted in 2018 without the consent of social partners, as well as amendments to the legislation on balancing public finances, labour relations, healthcare and health insurance, and social security contributions. ^[3]

Trade union confederations took a similar stance and Lidija Jerkič, the president of the Association of Free Trade Unions of Slovenia (ZSSS), resigned from her position as ESS president. ^[4] However, the confederations also noted that ‘social dialogue in the past often faced difficult times, but in the key moments always played a positive role that allowed social partners to reach an agreement on the vast majority of important topics’. ^[5]

Prime Minister Marjan Šarec responded quickly to the developments, saying that the government supports social dialogue and that he plans to attend the next ESS session. He also stressed that The Left is not a member of the coalition and therefore the government cannot be responsible for the current disruption of social dialogue.^[6]

Social partners split over government tax revisions

On 3 October, the government confirmed a package of tax revisions that reduce the taxation of labour in favour of higher taxes on capital. The tax bills increase the thresholds for all five classes, with tax rates falling by one percentage point in the second and third brackets (to 26% and 33%, respectively) and the top earners continuing to be taxed at 50%. In contrast, the taxation of capital gains and rental income is envisaged to rise slightly (from 25% to 27.5%).

The government sees these changes as a ‘new step towards tax optimisation’ ^[7] and wants to fast-track them so that they can enter into force at the beginning of 2020. Employer organisations fully support the proposed changes and agree that the tax burden on labour is too high in Slovenia, but also warn that the introduction of a minimum corporate tax of 7% could hit developing companies. ^[8]

Trade unions do not support the reforms as the proposed changes have not been approved in the ESS. According to the ZSSS, only those with the highest wages will be entitled to tax relief, ^[9] while equity income and corporate profits will remain under-burdened. ^[10]

Government to abolish welfare bonus

On 3 October, after 13 hours of heated debate, the parliamentary labour committee accepted the government’s proposal to abolish the welfare bonus for welfare recipients engaged in work activity. ^[11] In August 2019, 9,964 individuals received the bonus, of which 5,412 were in employment, 448 were self-employed and 3,400 were volunteers.

The Ministry of Labour, Family, Social Affairs and Equal Opportunities justified the abolition on the grounds that the bonus and financial welfare allowance combined is too close to the minimum wage, and therefore discourages recipients from actively seeking work. The government will save €16 million by abolishing the bonus and this money will be spent on public works instead. ^[12]

The welfare bonus was introduced in 2011, when the financial welfare allowance was very low (€230). Trade unions and more than 60 non-governmental organisations strongly oppose the abolition of the bonus and warn that it will have the greatest impact on the poorest individuals. ^[13]

• Ministry of Labour, Family, Social Affairs and Equal Opportunities: Izjava ministrice glede ukinitve dodatka za delovno aktivnost

Commentary

Social partners at the ESS agreed upon amendments to the legislation on pension and disability insurance, and labour market regulation, and these amendments were adopted by the government.