Lithuanian government approves labour code reform

“We approved draft amendments to the Labour Code and to the pension and social insurance system, which, once adopted, will ensure a real, not paper, protection to employees and will create the conditions for creating more jobs and attract investors. We can no longer delay reforming labour relations and social insurance,” Prime Minister Algirdas Butkevičius said in a press release.

The prime minister told reporters later in the day that some proposals from the experts who developed the social model had not been accepted.

For example, employees in the education and health sectors will continue to have longer vacations than other workers and some people will be able to have a shorter working day. Also, the draft proposes to leave the standard 40-hour working week and to allow the employer and the employee to agree on an individual daily schedule.

The government also proposes to change the pension calculation rules by introducing an automatic indexation of pensions based on payroll growth. Also, the pension insurance rate would be reduced by 1 percentage point for 12 years annually.

Social Security and Labour Minister Algimanta Pabedinskienė told reporters that pensions might start to rise in early 2016.

“Pensions will never be cut, no matter if there is a crisis or not. A certain reserve will be accumulated for this purpose,” she said.

The government also proposes to liberalize dismissal of employees, to shorten the minimum period of notice of employment termination and to reduce the legally-required severance pay to one month’s salary.

The social model is made up of amendments to the Labour Code and around 40 other pieces of legislation.

Trade unions criticize plans to cut wages, to simplify employment termination procedures, to curtail severance pay and some other measures. Meanwhile, employers say that the proposed labour market liberalization would help create a considerable number of new jobs and give jobs to some of the currently unemployed.

There were 1.463 million employed people in Lithuania in the first quarter of this year.