Lithuania’s labour code overhaul divides opinions

The new social model is said to provide the opportunity for young parents to better plan their work and family time, however, some proposals, should they come into effect, would make matters worse, critics say.

As an example, the so-called mother days and father days (a possibility for fathers and mothers of underage kids to take one or two days off per month, depending on how many children they have), would be abolished. The Tripartite council (Trišalė taryba, a council consisting of representatives from trade unions, employer organisations and the government) is against such propositions.

Getting ready to protest

Lithuania is often accused of putting off potential investors with a tax system inherited from the Soviet times and quite inflexible labour code. Nevertheless, the new social model, drafted by specialists and aimed at making labour relations more flexible, makes it easier for employers to fire employees and raises retirement age, which has not gone down well with unions.

Leaders of trade unions are convinced that even though work relations in Lithuania are strictly regulated, the private sector operates according its own ‘jungle law’. As a result, many Lithuanians choose to emigrate and work unqualified jobs abroad not because of higher salaries, but because they feel treated with huge disrespect by employers in Lithuania. If all the changes in the new social model are accepted, social tension will rise even more, they say, which might not do any good for the economy.

This is why on 10 September, labour unions are organizing a rally in Vilnius. Previous attempts to reach an agreement that is beneficial to both employers and employees were unsuccessful, they say. Changes to the labour code were discussed in a meeting held in the Tripartite Council on 14 July, but it later emerged that the Lithuanian parliament, Seimas, was presented with a different document than the one discussed with labour unions.

More types of employment contracts

According to one of the authors of the new social model, Dr. Vida Petrylaitė of Vilnius University, in the public eye, the new social model is seen as a big scary bugaboo, but it shouldn’t be. More often than not, people get scared and anxious about the unknown, she says, adding that preparing the document involved a lot of compromise and mutual concessions, with probably more to come.

“The aims of this social model are flexibility of work relations and security through employment and the social insurance system. It is worth noting that when there are more regulations, employees have fewer opportunities to negotiate,“ Ms. Petrylaitė claimed.

In order to increase employees’ negotiating power, a larger variety of job contract types will be introduced. Until now, there were two kinds of contracts – fixed-term and termless. After the Labour Code proposals are implemented, the employer will have more options, for example: an employee might be employed under a Project Job Contract, where wages will be paid for results rather than hours. The Job-Sharing Contract will be another addition. Under its terms, two employees will be able to negotiate to share a job. New additions also include work-linked training, multiple employer and undetermined work contracts.

“Lithuania is behind when it comes to job contracts, but these new job contract types are not there to scare people off. Employers will continue to prefer fixed-term contracts, while new contract types should appeal to students who need to balance their studies and work. These contract types can also be used while looking for a permanent place of work,” Ms. Petrylaitė explains.

Opportunity balance work and family

One of the key principles of the new social model is to give more options to balance family and work, which are very limited in the current Labour Code.

Parents who are raising children will have the opportunity to work from home or agree on flexible working hours. Up to now, a person raising a child of up to three years old could request the employer to set working hours short of the full-time limit. If the person changed their mind, however, and wanted to work full-time after a year, the employer could refuse. If the Labour Code changes are accepted, the employer would not be able to deny the request. If an employee is late to work for even three hours because of objective family reasons, the employer will not be able to punish the employee, according to the new provisions.

“Another positive thing for employees is that employers wouldn’t have the power to force employees to sign non-compete agreements, wherein a person who leaves a job isn’t able to work in a competing business organisation for five years. Now, the maximum term would be limited to two years, but this term would only apply for high-valued positions. For the years when the employee isn’t working, they would receive a compensation of no less than 40 percent of their previous average wage,” Ms. Petrylaitė explained.

Smaller severance packages

Improvements for employees notwithstanding, most proposed changes are to the benefit of the employer. The employer will have easier time firing a worker. If the employee is being fired without any fault of his or her own, it will be enough to notify the employee one month before the end of employment. Up until now, the term of notification ranged from two to four months. New regulations keep notification at two to three months for people approaching retirement age and parents raising children under three. The severance compensation is set at two average monthly salaries or less if the person has worked less than a year in the position.

“It is debatable if a person who worked 20 years at a company is better than the one who is only working for their third year. There are always malignant employees who are hard to get rid of, which means that the person who worked well gets a lesser compensation than the one whose work quality was bad, but they have been in the company for 20 years. These changes are meant to bring more equality among employees and pay them equal severance packages, irrespective of seniority. Labour unions still have the right to negotiate higher compensations,” Ms. Petrylaitė of Vilnius University says.

When reminded that this provision might in fact legitimise inequality, because employees of government agencies cannot negotiate higher compensations, Ms. Petrylaitė says that they have other social guarantees that are not enjoyed in the private sector. Public employees, for instance, can go on strike to fight for their rights.

The limit of work hours does not change in the new Labour Code. Regular working hours are 40 hours per week, 48 including overtime. However, if an employee works in more than one job, they can work up to 60 hours.

A new additional provision will include a mandatory two-week pregnancy and childbirth leave for mothers, while fathers will be able to take a month-long paternity leave not only in the first 30 days after birth, but also throughout a longer period.

“The initial edition of the project scrapped mother’s days and father’s days. I don’t know if it’s the right choice, but as things stand now, the person doesn’t work on such days but still receives an average day’s pay. The employee gets all the benefit, while the employer shoulders the cost. These guarantees also make employers hesitant to hire mothers with small children. The more guarantees a group of people have, the harder it is for them to get a job,” Ms. Petrylaitė thinks.

Retirement age will be raised

The new social model will also include changes in the retirement system. One of the project’s authors, Associate Professor Teodoras Medaiskis of Vilnius University’s Faculty of Economics, says that the changes are necessary to provide pensions that would ensure dignified life. The biggest problem is the fact that the Lithuanian society is ageing, which means that more retired people need to be supported by a shrinking base of workers.

Mr. Medaiskis is sure that the pension system must be reformed, or else Lithuania might face serious social issues.

“Our proposals won’t have a miraculous effect, but without them, the situation could become even worse. The problem of society;s ageing can only be remedied by having more working people, and that can be achieved by providing opportunities to balance family and work, encourage employment and work efficiency,” – Mr. Medaiskis says.

One new proposal is to further raise retirement age in 2026, in case average life expectancy increases as well. By 2026, both men and women will be retiring at the age of 65, like in most European countries, ore six months later than now.

“Otherwise, there won’t be a way to pay pensions. Especially considering that life expectancy is increasing and labour is becoming physically easier. A person may still retire early, but no earlier than three years before the age of retirement, not five. If it were up to me, I would get rid of early retirement altogether, it is an issue to do not with old age, but with unemployment,” the expert argues.

Pensions will not decrease

The biggest changes concern the payment of retirement pensions. Currently, it is done by SoDra, the national social insurance fund which is financed through taxes on the workforce. The proposal is to have the state budget pay the basic pension which would be financed through general taxes. However, there is yet little idea of where the money will come from.

“After paying the basic pension becomes a budget issue, the workforce will become approximately 12 percent cheaper, which gives potential for higher salaries. Since employees would become cheaper, there will be an opportunity to increase salaries, instead of buying another car or yacht,” Mr. Medaiskis enthuses.

According to the new formula for calculating pensions, the total sum would not decrease, even if the average wage went down. According to the economist, there was a proposition to cut pensions in line with decreases in average wage and vice versa, raise them along with growing wages. The Constitutional Court notified that cutting pensions is not allowed, which is why a safer alternative was chosen – the pensions won’t ever decrease, but they won’t increase as fast as average wage.

The unemployment insurance system will also be reformed, because not only are the unemployment benefits paid by Lithuania some of the lowest in the EU, but they are paid for the shortest time, too. The suggestion will be to pay unemployment benefits for nine months.

Calls to arms

Still, Lithuania’s labour unions are very critical of the new social model. The head of Lithuania’s labour union Solidarumas (Solidarity) Kristina Krupavičienė stated that the excuse of bringing in investment is not a good enough reason to make working conditions worse.

“We are constantly reminded that Lithuania needs to attract investment, and that they will never come with the soviet tax system and the lack of flexibility in labour relations. In spite of this, the biggest problem is that labour unions are never consulted on any changes. We discussed one version of the project, while the Seimas received a different one. That is why, on 10 September, we are organising a strike to show what kind of labour relations we, the workers, want,” Ms. Krupavičienė says defiantly.

According to her, Lithuania stands out from all other countries in the EU by having the lowest wages. Even neighbouring Latvia, after going through an even bigger financial crisis, managed to straighten itself and become better than Lithuania in all aspects. The Polish example shows that new job contracts decrease employee security and social guarantees, which is why the new social model might cause serious social problems in Lithuania. Flexible working hours do away with overtime and work on weekends, which should be compensated above ordinary rates.

“There are definite dangers associated with these reforms. We might agree on some proposals, but job contracts and the employer’s ability to fire employees at any time seem unfair, and we will fight against that,” Ms. Krupavičienė insists.

No work ethics on employers’ part

According to the head the union representing Lithuania’s education workers, Audrius Jurgelevičius, the most pressing problems in the country’s labour market concern work ethics. Once these are dealt with, only then can we start changing the Labour Code, he says.

Many young Lithuanians are emigrating because they do not want to – nor do they have to – face the arrogance of Lithuanian employers, he believes. People are more willing to work unqualified jobs abroad than be disrespected by employers in their own country.

“Labour relations are regulated in our country, but we all know that private businesses have their own law of the jungle that prevails, and now they want to liberalise the law even further. Is it normal that 90 percent of all workers [who went into unemployment] left of their own free will during the crisis? For some reason, everything is done to benefit the businesspeople, while everyone forgets that a business cannot prosper if employees are not alright,” Mr. Jurgelevičius insists.

Employers will have even more power to manipulate their employees when social guarantees are cut. There is no clarity about the aim of the new regulations whatsoever, he adds.

“Authors of this social model cannot guarantee that the economic situation will improve and unemployment will fall, so what’s the point of it? To create civil unrest?” he says.