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Greece has legalized the reduction of wages by collective agreements

13 March 2012 / 20:03:39  GRReporter
3465 reads

Victoria Mindova

After two years of torment, Greece has finally managed to jump the barrier set by collective agreements and legalized the reduction of private sector wages below the limit of 751 euro. From now on, employers in Greece are allowed to reduce the basic salary of their employees by up to 22% if they are regulated by collective and branch agreements. Labour relations for young people aged between 18 and 25 years will change too. For beginners under the age of 25, the minimum wage will become 510 euro. For young employees already receiving above the minimum wage of 751 euro (valid until now), the employers can reduce their salary by 32%. To the reduced value of the salary will be added, if applicable, the family supplements increased by 10% and those for service for every three years of work.

The government allows businesses and trade unions to agree on the level and terms of the new branch agreements by 14 May this year. If both parties fail to reach an agreement, the reductions provisioned by law may come into effect automatically three months after the old agreements expire. Last year, the government legalized the individual employment contracts, which were not warmly accepted.

The firms that managed to negotiate the salary levels with their employees outside the terms of the collective agreements will not be affected by the new changes. All other employees in the private sector, which were resting until recently on the level of wages set in collective agreements, can suffer reductions in wages.

George Koutroumanis, who admitted that the employment situation in Greece is very hard, announced the changes in the law at a press conference at the Ministry of Employment and Social Security. The number of unemployed in the country exceeds one million people. The payment of wages of over 400 thousand employees in the private sector is delayed by at least twenty days to three months. About 60% of small and medium sized enterprises say they do not know whether they can survive the next year. Under these conditions, Koutroumanis insisted that the liberalization of the labour market and the wages in the private sector would allow the companies to take a breath to reduce wage costs, while retaining existing jobs at the same time. "The reduction of wages is not an obligation but a right of employers and in most cases, they are obliged to implement reductions after negotiations with the employees," said Koutroumanis.

The Minister for Employment said that three conditions must be met in order for the situation in the labour market in the country and the insurance system to start improving. The first one is to stabilize the macroeconomic environment. It does not depend on the particular ministry but on the policy pursued by the country in general. "By making the recent decisions, Greece is back on the road to stabilization, but it will take a long time to become sustainable," said Koutroumanis referring to the completion of the PSI procedure and the approval of the first tranche of the second bailout.

The second condition for stabilizing the labour and insurance environment is reduction of the ministry spending. So far, the costs of the institution have been reduced by 3.2 billion euro. The Ministry has found that about 850,000 insured people had not paid their obligations to funds for more than three years. They have accumulated untaken income for the social security system of 11 billion. "Only two-thirds of this amount can be recovered, or about seven billion euro," admitted Koutroumanis. He explained that the country receives revenues of about 1.2 billion from the coverage of old debts.

Third is the need to reorganize the way of collecting contributions. "It is impossible that some sectors demand higher pensions at the end of their career and do not pay their social insurance correctly," said Koutroumanis. He indicated that the insurance funds of farmers and of self-employed professionals are most irregular in their payments. According to the ministry, only 62% of insured farmers make regular payments to the health and pension funds. Another 55% are loyal contributors to the fund of the self-employed. Until employees begin to fulfil their obligations, as they want to protect their rights, we are not able to guarantee that there will be no reduction in pensions and salaries, the Minister concluded.


Tags: EconomyMarketsLabour relationsWagesGreeceReductionsCuts
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