New Labour Code – what do employees need to know?

DELFI / Kiril Čachovskij

The new Labour Code came into power on Saturday. It has been criticised strongly by the President, who nevertheless signed it. The initial iteration of the code was passed by the Social Democrats a year ago and now a barely altered version – by the Farmer and Greens majority. Delfi goes through certain aspects of the Labour Code that will be relevant for all those in employment.

New work contract types

The new Labour Code specifies that work contracts will have to have mandatory conditions (work function, wage payment conditions and workplace), which, when agreed on, mean the contract is formed. Further conditions do not equal the work contract, however they become mandatory when they are agreed upon.

In the work contract, where the wage is no less than two average monthly gross wages (2×817.6=1635.2 euro), it is possible to deviate from the imperative norms present in the code or other norms.

Changes to the mandatory and ancillary conditions, the specified work time regime or moving the employee to work in another location can only be done under the employer’s initiative with the written agreement of the employee. The agreement or non-agreement to work under amended conditions has to be expressed over no more than 5 working days.

It is notable that refusing to work under the amended conditions, employees can be fired at the employer’s initiative. An exception to this is refusal to work for lowered wages.

Beyond typical limited and unlimited duration contracts, the new Labour Code outlines further types: temporary employment, apprenticeship, project work, workplace sharing work agreements, contract of employment with several employers, seasonal work contract.

Unlike before, limited duration contracts can now be made for work of permanent nature, however these situations cannot exceed 20% of the employer’s employment contracts.

Limited duration contracts can now be formed for a maximum period of 2 or 5 years.

Wage changes

The code outlines that a 380 euro minimum wage before taxes can only be paid for unqualified work. According to “Sodra” data, currently the minimum wage is paid to some 79 thousand people. Of these over 21 thousand have unqualified professions, while 58 thousand have qualified ones.

If the latter work full-time, from July 1 their employers will have to raise their wages by at least 1 euro. That said this can be circumvented by reducing work hours or changing the qualified profession to an unqualified one.

If the contracts are not changed and wages remain the same, the Ministry of Social Security and Labour recommends employees to contact their employer and demand a change in contract.

If this fails to help, then it is necessary to contact the company’s labour council or trade union, or finally the State Labour Inspection.

Furthermore the new Labour Code outlines that the wage payment system at a workplace or employer’s company, institution or organisation is based on a collective contract.

Lacking this, workplaces with an average staff count of 20 or more must have its wage payment system approved by the employer, also making it available for review by the staff.

The wage payment system will outline staff categories based on position and qualification, as well as their payment forms and wage sizes (minimum and maximum), basis and regulations for extra payments (bonuses and disbursements), the indexing order of wage payments.

In simpler terms, at least formally, the employer will have to sign a document which outlines what positions are paid what wages and based on what conditions (bar separate negotiations) they are raised or reduced.

Annual leave

From July onward, employees are granted no less than 20 working days or no less than 24 working days, if employed for six days a week, of annual leave.

If the number of working days in a week is smaller or different, the employee has to be granted no less than four weeks of annual leave.

Leave days are now calculated based on working days. Public holidays are not included in the duration of annual leave.

Currently accumulated annual leave (including extended and extra leave) will be granted based on working days from July, every 7 calendar days converting to 5 working days of leave.

When recalculating from calendar days to working days, partial days will count as a full day of leave. In simpler terms, if during the recalculation the number is not whole, the day of leave is rounded to the larger full number. For example 20 calendar days of leave would convert to 15 days of working day leave (20 x 5 / 7 = 14.28 which rounds up to 15).

With the new Labour Code coming into power, employees with unused leave for more than 3 years of work will have the right to make use of it by July 1, 2020.

Leave pay may change

The new Labour Code outlines what the wage is comprised of and the adjusted cabinet ruling specifies how to calculate the average wage to be paid, for example for annual leave.

Unlike before, the calculation of the average wage will no longer include bonuses granted at the employer’s initiative to encourage the employee for good results, their or the company’s, the department or the group of employees’ activities or results.

The average wage is calculated by dividing the sum received over the past 3 months and dividing it by the number of working days in the period. The sum received is multiplied by the working days included in the leave.

For example if Jonas earns 500 euro gross and worked 22 days every month, then he will be paid 227.27 euro for two weeks of leave (10 working days plus two weekends). ((500×3/(22×3)x10=227.27)

Terminating the work contract

Intending to leave work without any extenuating circumstances, the employer will have to be warned 20 calendar days ahead of time (unlike 14 working days as is now), they will not have to pay any severance payment.

The employee will be left the opportunity to change their mind over three working days and to withdraw their request to terminate their contract.

If extenuating circumstances exist, the employee can terminate their contract with a warning of at least 5 working days, but only in specified cases – a month of downtime, unpaid wages for 2 months or the need to nurse a family member.

In such cases the employer has to be warned 5 working days ahead of time (unlike 3 up to now) and in such a case the employer has to pay a 1-2 wage size severance pay.

It is no secret that a number of employees departing work do so due to issues with the employer after direct or indirect encouragement. Under civilised circumstances such cases are resolved by terminating the work contract under the agreement of both parties.

The new code outlines that both the employer and the employee can propose to terminate the contract in writing.

The proposal must outline the conditions for contract termination: when work relations end, what the size of the compensation will be, how unused leave days are to be compensated for, compensation procedures and. Etc. If the proposal is not responded to over 5 working days, it is to be held as refused.

Based on work time at the place of employment, the employee could so far only expect to ask up to 6 months wages worth of severance pay (in the case where the employer has to pay when terminating at their own initiative). Furthermore, longer warning deadlines were in place – however many months the employer has to warn prior was to be how many months they should pay for, in theory.

Compared to the old code, now on the deadlines and severance pay sizes are far smaller. From July onward, an employer must warn an employee of contract termination one month ahead of time, if they are not at fault (or two weeks if the employment has been for less than two years).

If little time is left to pension, the deadline is doubled. For those with small children and the disabled it is tripled.

The maximum severance pay where the employer terminates the contract at their own initiative will be the size of 2 months wages (or half the wage, if the employee was employed for less than a year). In other words this is likely to be target when terminating the contract at the agreement of both parties.

Long term employees working at the same workplace over 5 years can seek new long term work disbursements, but only if they are fired at the employer’s initiative. As such those who leave at their own initiative or at the agreement of both parties will not receive the disbursement.

Unemployment and long term work disbursement

If an individual taken out of employment does not find new employment and if they are not a pensioner, student or other individual insured by the state, then after the contract concludes, their health insurance ends. At this point they must pay their own mandatory health insurance payments (34.2 euro per month).

A way out is to register at the labour exchange. By registering there, the unemployed have the right to unemployment benefits paid by Sodra. It is granted if the labour exchange does not offer suitable work or active labour market policy means and if the person has worked for now less than a year over the past 30 months.

That said, unemployment benefits are only start being paid no earlier than the number of months that severance pay was paid for. In simpler terms, if you depart your workplace with two months of severance pay, you can be paid unemployment benefits only from the third month onward. Factually you are only paid in the fourth month because you are paid for the previous month.

These benefits are paid for 9 month. Their size will be calculated as the sum of the constant and variable amount.

The constant amount will be 30% of the current minimum monthly wage (currently 380 euro x 30% = 114 euro), while the variable amount will decrease from 50% (for the first 3 months) to 30% (from 7 to 9 months).

Either way the unemployment benefit size is limited – it cannot exceed 75% of the average monthly wage. Based on data by the Department of Statistics, currently that is 817.6 euro. Thus unemployed individuals can expect at most 613.2 euro unemployment benefits per month at most.

Employees laid off at the employer’s initiative at no fault of their own, who have worked at the same workplace for over 5 years will have access to a new type of long term work disbursement. Sodra will assign it if the employee does not return to the same employer within three months.

The size of the disbursement will be between 1 to 3 wages, calculated based on the average wage of the past 12 months. These disbursements, unlike the unemployment benefits, will have no ceiling.

About Martynas Zilionis 22 Articles
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