Slovenia: Industrial relations background
As part of our occasional series examining the industrial relations background in central and eastern European countries applying to join the EU, in this feature we look at Slovenia. Industrial relations in this country are characterised by a high degree of centralisation in collective bargaining, a high level of coverage by collective agreement and a co-determination system based on the German model.
This feature is based on research and material prepared by Miroslav Stanojevic, senior researcher, Faculty of Social Sciences, Institute of Social Sciences, University of Ljubljana, Slovenia.
Political context
Slovenia is a country which, along with most central and eastern European countries, has undergone a considerable amount of political and economic upheaval over the past decade. At the end of the 1980s, the major political groupings in Slovenia were the right-wing coalition, Demos; Slovenian Liberal Democrats (LDS), a mixture of market reformers and influential groups strongly oriented towards a model of social market economy; and the Associated List of Social Democrats (ZLSD), the reform-oriented former communist party on the left. The right-wing coalition won a majority in the first free parliamentary elections and formed the government. However, controversies within the coalition caused new elections to be held in 1992, when a wide coalition, consisting of a majority of Liberal Democrats, reformed communists and some right-wing parties formed a new government.
Since then, the most important political party has been the Liberal Democrats, which was returned to power after a third election, this time in coalition with the more conservative Peoples Party. The coalition disintegrated in the spring of 2000 and a new, transitional right-wing coalition took power. It is expected that a clearer picture of the political scene will be formed after the fourth election in October 2000.
Economic development over the past decade
Slovenia was faced with huge economic problems at the end of the 1980s and the beginning of the 1990s. Figures reveal a negative annual rate of GDP growth between 1988 and 1992, with the lowest point reached in 1991. However, after 1993 the trend significantly changed and the Slovenian economy has since experienced growth rates of between 3% and 5%, exceeding the EU average.
Privatisation
The 1992 Law on Ownership Transformation of Enterprises (Zakon o lastniškem preoblikovanju podjetij) allocated 20% of a company's shares to "insiders" - ie company employees - and 40% to funds such as development and pensions funds. The remaining 40% of shares were allocated (by workers councils and boards of directors) to employees or outsiders through public tender. This part of share allocation defined the nature of privatisation in Slovenia. In practice, employees (workers and managers) became majority owners, as a significant part of the former social property was privatised to insiders. Internal buyout was the most widespread privatisation method applied in Slovenia.
At the end of the 1990s, the key owners of Slovenian companies were managers, workers and various state funds. However, according to available research evidence, the portion of workers' shares has been decreasing gradually, whereas there has been an increase in management's ownership share and a concentration of shares in the hands of individual investment funds and state funds. In spite of these tendencies, workers still feature significantly as owners of companies. In the light of this ownership structure, the most important stakeholders in Slovenian companies are managers, groups of employees and investment and state funds.
In comparative perspective, one of the most significant and widely criticised Slovenian peculiarities is a continuing high proportion of predominantly state-owned enterprises. Another characteristic is the relatively weak inflow of foreign investment into Slovenia. The number of foreign-owned companies is significantly lower in Slovenia than in other applicant countries. The key characteristic of these relatively rare companies is their strong export orientation. Most are located in the capital-intensive sector of the economy and managers in these companies are usually Slovenians.
The labour force
Slovenia has a population of two million, with a labour force (employed and unemployed) of approximately 900,000. The activity rate of the population (labour force as a percentage of all persons aged 15 and over) is close to 60% and is above the EU average. The difference is caused by the female activity rate, which is significantly higher than the EU average.
According to data from the Statistical Office of the Republic of Slovenia (results of a 1996 survey), the most important occupational groups among those employed were plant and machine operators (21.1%), technicians (18.1%), workers in craft and related trades (14.7%), clerks (12.4%), services and sales (11.8%) and professionals (10.3%). Taking together the traditional manual worker group of plant and machine operators and the group "elementary occupations" - non-skilled workers (6.4%) - the proportion of traditional labour groups is strong, at 27.5%. In addition, the proportion of the two largest groups (plant and machine operators and technicians) is higher than the European average. The proportion of technicians is comparable to the proportion of employees in Germany, but nowhere in Europe are there so many machine operators (the average is 9.9%).
According to the 1995 Labour Force Survey, the largest three groups in the educational structure of those employed were employees with primary school education (20.1%), vocational education (27.9%) and high-school education (28.3%). A fourth group, comprising all those with university education, accounted for 15.4% of employees.
The labour force was reduced significantly in the first years of the transitional period. According to national surveys, the rate of reduction reached 12% in the period from 1991 to 1993. At the end of the same period, the rate of registered unemployment reached 14%. Using ILO standards, the unemployment rate was 9.1%, stabilising at 7% after 1993, slightly below the average unemployment rate in EU. Among the large groups mentioned above, the more traditional labour groups (the lowest educated, machine operators and unskilled workers) experienced the most severe pressure from unemployment. Among the largest groups in the educational structure, the worst pressure was felt by those employees with two or three years of vocational schooling. Up until 1995, those with high-school education experienced some pressure but this disappeared in the second half of the 10-year period. The most educated employees did not suffer undue pressure from unemployment.
Main labour legislation
The 1993 Law on Commercial Companies (Zakon o gospodarskih družbah) defined a one- or two-tier governing structure for companies. Most Slovenian companies subsequently organised themselves as joint-stock companies with a two-tier governing structure consisting of a supervisory board and a board of directors.
There are two laws which regulate labour relations. The Law on Basic Rights of Employment Relationships (Zakon o temeljnih pravicah iz delovnega razmerja) was passed in 1989 by the former Federal Assembly. This law established new contractual employment as the basis for employment relationships and was amended in 1990 and 1991 by the Law on Employment Relationships (Zakon o delovnih razmerjih). Since 1997 a proposal for a new labour code to replace the one which dates from 1989 has been making its way through the parliamentary process, but has not yet been adopted.
The 1993 Law on worker participation in management (Zakon o sodelovanju delavcev pri upravljanju) basically reproduces key features of the German co-determination model. At the beginning of the 1990s, a year after the second elections (see above), its adoption represented a kind of political trade-off between the government and trade unions. Trade unions wanted to influence and control the privatisation process from below and expected that works councils would enable them to reach this aim. At the same time, the government needed trade union cooperation and political support.
The 1993 law allows workers to influence the managerial decision-making process - it stipulates that employee representatives have at least one-third of the seats on supervisory boards in companies with up to 1,000 employees and half of the seats on supervisory boards of the companies with over 1,000 employees. The law also provides for the election of a worker director in companies with at least 500 employees.
A key institution of the co-determination system is the works council, which may be set up in companies with at least 20 employees. In companies with fewer than 20 employees, a workers trustee may be put in place.
This legislation has also enabled the formation of a participative agreement between works councils and boards of directors as an instrument of more precise regulation within companies.
Industrial relations organisations
Trade unions
At the beginning of the 1990s the Slovenian trade union movement was similar in structure to that of its counterparts in most transitional Eastern European societies. The characteristic feature of the structure was ideological and political splits, which divided trade unions into the "old reformed" and "new independent" camps. Since the end of the 1990s, trade unions have not been as strongly linked to the opposing political camps. Instead, it would appear that new cleavages, based on diverging interests of employees in manufacturing industry and the public sector, are emerging.
The 1993 Law on Representatives of Trade Unions (Zakon o reprezentativnosti sindikatov) defines some general criteria relating to trade unions - such as internal democracy and autonomy. It also stipulates the levels of membership required for obtaining legally recognised representative status - in the case of confederations, 10% of workers from branches and in the case of a branch or occupational union, 15% of workers. These conditions have been fulfilled by 16 branch trade union organisations and four confederations (see below).
The four principal trade union organisations in Slovenia are: Free TU (ZSSS), Independent TU, PERGAM and Confederation 90 (K-90). The largest is the "old reformed" ZSSS, of which approximately half of the unionised workforce are a member. Trade union density was around 60% of the Slovenian workforce in 1994. Four years later, trade union membership had fallen to 42.8% of the workforce.
Overall, two phenomena have characterised Slovenian trade unions over the past decade - the concentration of membership in ZSSS on the one hand and the fragmentation into new unions on the other. The "old reformed" ZSSS preserved its leading position within the trend of declining overall membership, with more than 50% of all union members. The biggest losers in terms of membership were two other competing confederations - PERGAM and KNSS. Their strong position at the beginning of the 1990s was eroded by the growth of new unionism, mostly within the service sector of the economy. These were the only winners in terms of membership during the past decade as, not only did their share of total union membership rise, but they also managed to retain their own membership. With a membership of between 3% and 4%, none of the new unions grew to be as large as PERGAM or KNSS, but taken together these smaller unions account for almost 40% of total trade union membership.
Under the previous system, unions were indistinct associations representing all social categories. Within the past 10 years they have changed from organisations that unselectively represented all working people into organisations representing workers. In the 1990s they lost most members not only from the non-worker (more highly-educated employees and middle- and senior management) groups where there was no pressure from unemployment, but also from marginal workers who were under extreme pressure. The core labour groups (such as those with vocational training and machine operators), who were severely affected by unemployment, remained union members.
Changes in trade union membership structure in terms of level of education clearly reflected this great change. In 1989, the educational structure of trade unions faithfully followed that of the workforce. By 1992, a trend was becoming apparent of a growth in the share of less highly educated members, who at that time made up 55.6% of trade union membership. By 1998 those members with primary or vocational school education prevailed, accounting for 70.6% of all union members.
Within Slovenian companies, trade unions are well organised and relatively influential organisations. A more detailed picture of employee workplace representation will be described later, within the presentation of some key features of Slovenian workplace relations.
Employer organisations
The most influential employer organisation is the Slovenian Chamber of Commerce (Gospodarska zbornica Slovenije). Membership of this organisation is obligatory and it has functioned as the key articulator of employer interests within the Slovenian collective bargaining system since the beginning of the 1990s. However, in the second half of the 1990s it was gradually substituted by new employer associations and is now no longer the exclusive employer representative organisation. The chamber is made up of branch organisations that negotiate collective agreements at branch level in the name of the chamber.
Other employer organisations include the Chamber of Crafts (Obrtna zbornica Slovenije), which represents the interests of small enterprises and independent crafts.
In addition, the Slovenian Employers Association (Združenje delodajalcev Slovenije) was formed at the beginning of 1994. Unlike the Chamber of Commerce, membership of this association is voluntary and it represents a total of 60% of employees in manufacturing industry. It is generally deemed to have improved employer representation and the bargaining position of employers at both national and branch level. Immediately after the formation of the Slovenian Employers Association, a new interest group for small companies, OGISTA, was formed.
All the above-mentioned organisations are legitimate employer representatives and all of them are included in the collective bargaining process (see below). It is expected that a new law on collective bargaining, which is currently in parliamentary procedure, will reduce employer representation in the collective bargaining process in favour of new voluntary organisations.
Tripartism
Slovenia's Social and Economic Council (SEC) was founded in 1994, the result of a political trade-off centred on the consensual acceptance of the 1994 incomes policy. Early in 1994, the government invited the social partners to reach agreement on this policy. In exchange for cooperation, the government accepted the establishment of a permanent tripartite body at national level, as proposed by trade unions. It was envisaged that this body would enable long-term social partner inclusion in the processes of pay determination and a range of other social and economic policies. The SEC is made up of 15 members, five each from the government, trade unions and employers.
The 1994 incomes policy agreement contained the following main points:
The following year, the partners signed the broader social contract, cementing the collective bargaining system as an exclusive and basic instrument of both the formation and the implementation of incomes policy. At the same time, parliament adopted the stance that all laws and policies concerning the interests of the social partners must be discussed by the tripartite body before entering parliamentary procedure.
In the second half of the 1990s, the social partners were not always able to reach agreement. Thus, in 1997 and 1998 the government defined wage policies on the basis of the agreement for the previous year. Presently, the framework of wage policy is regulated by the Agreement on Wage Policy for the period 1999-2000.
Within the framework of the SEC, the social partners also regularly discuss proposals concerning new labour legislation. The proposal for a new labour code, which is currently under parliamentary procedure, has been exposed to long debate, as has been the proposal for a new law on collective bargaining. The discussion concerning the drawing up of a new pension system also absorbed a lot of the energies of councillors. This exceptionally complicated and conflictual topic was placed on the council's agenda following a severe pension fund crisis caused by mass early retirements at the beginning of the 1990s.
Collective bargaining and pay determination
The framework of collective bargaining was defined by the basic labour code which dates from 1989. Within this framework, the dominant bargaining level was fixed at the national level. Under the key parameters of income policies defined by government at this time, the new, somewhat awkward, social players started to negotiate collective agreements. Trade unions were in transformation and burdened with internal conflicts and the Chamber of Commerce took on the role of an employers' association, although it was strongly criticised by new political forces as a reservoir of the old economic élite.
At the beginning of the 1990s the explosion of unemployment, numerous plant closures and massive downsizing redefined the bargaining process. In this environment, under the pressure of competing trade unions, with the government afraid of social unrest and with a background of unresolved ownership relations which caused weakness on the employers' side, real wages were growing significantly faster than productivity in the first half of the 1990s.
However, the collective bargaining system in Slovenia remains highly centralised. Almost the whole of the Slovenian workforce is covered by a collective agreement. at either national, industry or company level. The actual structure of collective bargaining is three-tier as follows:
With exception of company collective agreements, all others are valid on registration at the Ministry of Labour and Social Affairs. Usually, between 30 and 40 agreements per year are registered at the Ministry.
The collective bargaining system in Slovenia is highly inclusive. Almost all of the labour force is covered by the provisions of collective agreements, with the general agreements defining minimum standards, upon which agreements at lower levels can improve. The usual explanation for this high degree of coverage is the role of the Chamber of Commerce in the bargaining system. Being obligatory members of the Chamber, Slovenian companies are obliged to respect agreements signed by this body. Contrary to other transitional economies, these and a range of other Slovenian specifics are linked to a relatively centralised collective bargaining system that in transitional societies is quite unique.
As mentioned above, all social partners have, since 1994, been involved in forming the key parameters of incomes policies. The resulting agreements define the general standards for the national economy and are formally reproduced within general collective agreements. The apparent overlapping between the agreements promoted initiatives, strongly supported by the ZSSS trade union, to abolish general collective agreements and implement general standards consensually reached in the SEC directly at sector or branch level. However, numerous smaller trade unions, which are not represented at the national level and therefore not included in the SEC, strongly opposed this initiative because the actual general collective bargaining process is the only way that they can influence national policy.
According to data available for the period after the year 1995, the centralised collective bargaining system has functioned as a relatively efficient incomes policy instrument. The growth of salaries is now under control, with average pay growth close to, or lower than productivity growth (see table).
Table 1: Average gross monthly earnings per person in paid employment, 1995-1998 |
||||
|
1995 |
1996 |
1997 |
1998 |
Earnings (Tolar) |
111,996 |
129,125 |
144,251 |
158,069 |
Index (previous year = 100) |
|
|
|
|
Total earnings |
118.4 |
115.3 |
111.7 |
109.6 |
Real earnings growth |
104.3 |
104.9 |
103.0 |
101.6 |
Source: Statistical office of the Republic of Slovenia. |
Table 2: Key pay statistics for 2000 |
|
Average gross monthly earnings |
Tolar 190,523 |
Average monthly net earnings |
Tolar 120,144 |
National monthly minimum wage |
Tolar 80,783 |
National monthly minimum net pay |
Tolar 53,355 |
Source: Free TU (ZSSS). |
Pay has been growing constantly over the past decade. In 2000 the average salary in Slovenia is Tolar 190,523 (approx. £546.38) a month. See table 2 for more details. There is a national minimum wage, as set out in the 1994 incomes policy (see above). It is currently set at Tolar 80,783 (approx. £231.67) a month gross or Tolar 53,355 (approx. £153) net.
Pay is lowest in the textiles sector and other labour-intensive industries. More profitable sectors, such as pharmaceuticals, define essentially higher standards in their industry agreement. The most successful companies within sectors also have the opportunity to improve pay through company collective bargaining.
In general, pay and working conditions are the main issues around which Slovenian trade unions mobilise at company level. As mentioned above, in companies able to exceed standards defined by industrial wage agreements, trade unions may initiate internal collective bargaining to try to obtain better salaries. However, within less successful companies, which are not able to offer better pay, the trade unions are more concerned with control, to ensure that management adheres to standards set out in sector and general collective agreements.
Individual labour law
Basic individual rights are regulated in the two above-mentioned pieces of labour legislation (the Law on Basic Rights of the Employment Relationships and the Law on Employment Relationships). Employment relationships are regulated by employment contracts within the framework of these laws. The main key areas of individual employment law are as follows:
Workplace relations
Slovenian trade unions are well organised, strongly worker-oriented organisations with a recognised legal presence at workplace level. They are especially well organised in formerly socially-owned medium-sized and large companies. However, as a rule, they do not exist in the new, smaller companies. The trade union density rate is very high in medium-sized and large companies, usually between 70% and 80%. In spite of trade union pluralism, which is accentuated at the national level, one trade union organisation exists as a rule within each Slovenian company, as the demarcation between different trade unions is clear, above all concerning territorial and branch criteria. Nevertheless, there are cases of companies with two and, very rarely, three trade union organisations. In these cases, one trade union organisation always has a significant majority, with smaller organisations rooted within some workshops or departments.
According to a variety of national surveys, cooperation of the unions within companies usually works well. This is in contrast to the beginning of the 1990s, when networks of new trade unions were forming and relationships between the unions were marked by competition and frequent internal conflicts.
The trade unions played an essential role in the formation of works councils. According to the Law on Workers Participation in Management (the law on co-determination), the formation of works councils depends on worker initiatives. After the adoption of this law in 1993, trade unions were the main initiators of the setting up of works councils and assisted in the establishment of works councils within the majority of formerly socially-owned companies (some 75% of companies in 1996). Trade unions are weak or non-existent within these new private companies and work councils are extremely rare. All of the not very numerous foreign-owned companies have trade unions as well as works councils. Slovenian unions still strongly support the works council as the specific, helpful extension of worker representation at plant level. This "dual representation" constitutes a kind of "company unionism" enabling relatively efficient articulation of employee stakeholder interests within Slovenian enterprises.
Industrial conflict
The institutionalisation of industrial conflicts in Slovenia was initiated by the above-mentioned Law on Basic Rights of Employment Relations in 1989, which introduced a basis for a collective bargaining system into Slovenian industrial relations. In terms of additional legislation regulating conflicts, workers are obliged to notify the employer about their intention to strike and to govern industrial action in accordance with the law and accepted rules. Employers are not permitted to use any repressive measures against striking workers who act within the rules. According to the general collective agreement, in the case of its violation, workers on strike should receive 70% of wages for five working days. The strike rules are defined more precisely in sector collective agreements.
The latest sociological surveys reveal a contradictory picture of Slovenian industrial relations in practice. Slovenian trade unions are generally highly cooperative, but they do not hesitate to become involved in open conflicts with managers. A 1999 survey1 looking at over 200 Hungarian and Slovenian companies in the food and metal industry found that Slovenian industrial relations were more adversarial than those in Hungary. Within the five-year period from 1995 to 1999, workers staged strike action in 17% of the Slovenian companies surveyed, compared with 6.8% of the Hungarian enterprises.
However, this does not give the full picture - according to the same survey, it is possible to identify islands of cooperation and high-trust relations within the industrial relations system in Slovenia. Nevertheless, these islands are clearly limited to successful companies, where internal labour markets are usually well developed and which include promotion and training systems for all categories of employees. In the less successful sectors and companies, workplace relations are often overloaded by distrust and even hostility.
More widely, there have been few major conflicts over the past five years. In March 1996 doctors went on strike for three weeks in support of higher salaries. The strike, which revealed doctors union FIDES as a highly militant interest organisation, caused enormous problems within the public health system and finally turned public opinion against the strikers. According to the compromise reached between the government and the union, the salaries should reach the level demanded by the union within a period of two years. However, the government, which has so far not fulfilled its obligations, has been faced with the threat of new strike action by doctors within the past few weeks.
In September 1996, the employers cancelled the general collective agreement, claiming the radical reduction of different additional payments included in the definition of the minimal wage. The employers' actions caused a severe trade union reaction, culminating in public protest. At this critical point, the government supported the trade unions and, under pressure, employers accepted the general collective agreement for 1997, which retained all the additional payments for the minimum wage which were defined by former agreements.
The second important conflict occurred at the end of 1997, when trade unions from the public sector initiated a public protest against the government's attempts to reduce public expenditure.
Conclusions and outlook
Internal stakeholders are undoubtedly strong in Slovenian companies. The sources of managerial power are traditional but, in the context of a relatively weak position of external owners, the importance and influence of these stakeholders is probably significantly higher than in many advanced market economies. Employees are highly unionised, usually control a large proportion of company shares and are included through various participative institutions in the different stages of the managerial decision-making process. This power structure dictates adversarial relations in some cases, but also the formation of strong internal coalitions in others.
Slovenian officials are currently under huge pressure, resulting from attempts to conform to the formal conditions the EU has defined for all applicant countries. Within the last decade, the country has been constantly criticised because of the slow pace of privatisation, slow adoption of EU standards, obstacles to foreign direct investment and numerous labour market rigidities, in particular a comparatively expensive labour force. However, some analyses suggest that it has been precisely these weaknesses that have positively influenced Slovenian development. The relatively slow speed of change has arguably enabled a soft transition to a market economy. The result has been the preservation of a comparatively high level of social benefits for the population that have reinforced trust between the social partners and a high level of motivation among employees and their identification with companies.
In spite of these criticisms, Slovenia's transition to a market economy could be evaluated as modestly positive so far. Slovenia is still in the group of the most advanced transitional societies and in terms of economic development, it has reached the level of some EU member states. However, the main industrial relations actors are still transitional in nature. Industrial relations institutions are clearly inclined towards a model of a socially-regulated market economy, perhaps being too social in nature, and also in some other aspects not fully in line with EU standards. Actual adoption of EU legislation is overloaded by internal and external political pressures and is highly formalistic and therefore far from securing an immediate full institutional accommodation of the Slovenian industrial relations system to EU standards. In terms of the relative success of Slovenian evolutionary changes until now, this "weakness" could be interpreted as a continuation of the gradualist approach to the EU integration process.
Slovenia in context
Slovenia is small democratic parliamentary republic at the junction of Slavic, Germanic and Roman territories. It borders on the EU (Italy and Austria) and two countries in transition, Hungary and Croatia. Its population is less than two million and is highly homogenous - 90% are Slovenian.
Within the past decade, Slovenia has been placed in the group of so-called "fast-track" EU applicant countries. It has a GDP per capita of US$10,000, closest to the EU average of all the countries in transition. According to this measure, Slovenia is the most developed country in transition, reaching 70% of the EU average.
At the end of the 1980s, the inflation rate in the former Yugoslavia was extremely high. The highest rate (1,300%) was recorded in 1989. After introducing a Slovenian national currency in 1991, the rate was radically reduced to the level of 117.7%. Inflation rose to 200% in 1992 but was successfully reduced thereafter, falling to below 10% after 1995. Inflation is forecast to average 7.7% this year and to fall to 5.5% in 2001.
Unemployment was 14.5% in 1998 and 13.6% in 1999, according to the OECD.
The Slovenian head of state is a President, currently Milan Kucan, who has been in office since December 1992 and was re-elected for a five-year term in November 1997.
The main legislative body is the National Assembly. This body has 90 directly elected members, who serve a four-year term. There is also a Council of State, which has power to delay legislation and is elected for a five-year term. The current President is Andrej Bajuk. Elections are currently taking place to replace a transitional right-wing coalition (see main text). The Slovenian national currency is the Tolar, currently worth £1 = Tolar 348.698 and US$1 = Tolar 241.055.
1The survey is part of a wider project dealing with industrial relations in transitional societies. Questionnaire authors are Carola M Frege (London School of Economics) and Marc Weinstein (University of Oregon). The fieldwork was coordinated by Zoltan Adam (Central European University) in Hungary and Miroslav Stanojevic (University of Ljubljana) in Slovenia.