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Hungary deregulation plan seen to boost jobs

The Hungarian government is attempting to introduce incentives to increase the employment rate and help both state and companies save money. Specifically, say some unions, the government wants to cut red tape and the costs of hiring and dismissing workers, thus putting employers’ interests and state budgets before the rights of workers. The government published a new draft of the Hungarian Convergence Széll Kálmán Programme on 15 April 2011, provoking widespread discussion.

Eurofound in its recent article analyzes the prospects of the Széll Kálmán Plan, which aims to help companies and the state avoid going into debt in times of crisis. Included in the plan are government proposals for changes in the way the country’s employment system works.

The plan proposes that administrative burdens and costs related to employment, for both companies and the state, should be minimised. The government believes that if red tape is reduced, legal employment would increase and become more flexible, equal and secure – all common goals of EU employment directives.

However, not all social partners agree that the plan would achieve these goals, the article says.

The government consulted with employers’ organisations over the planned measures, but there has been no general meeting with all parties and this lack of dialogue has concerned the trade unions.

The unions are demanding social dialogue, a comprehensive and precise impact study and consistent announcements from the government before the measures are introduced.

A number of trade unions held a joint forum on 1 May 2011 to emphasise the need for dialogue. They all perceive the new regulations drafted by the government as a threat to employees, the unions and the institution of social dialogue.

National Economy Minister György Matolcsy has only presented an outline of the main measures; the details have not been addressed. Péter Pataky, President of the MSZOSZ union, and fellow confederation representative János Borsik, Chair of the ASZSZ, say that if the government does not intend to negotiate this will lead to conflict at both national and local levels.

The proposals aim to make the hiring of new employees easier and more flexible, with less data collection required and the possibility of ending the requirement to provide monthly notification of earnings and additional costs. Probation periods would be raised from the current three months to six months.

Trade unions say they cannot accept this initiative, even if more extensive collective agreements are introduced.

The plan notes that rules concerning working hours are complicated. Unions say the introduction of a 40-hour working week has been a great achievement, offering employees a good work–life balance, and they cannot agree to its removal.

The plan also reviews bonus payments for night and weekend working and severance payments. Employers could benefit at peak times and save at less busy times. However, employee representatives say this would lead employers to abuse workers.

The plan declares that 100,000 new jobs could be created by reducing qualification requirements, providing an opportunity for unskilled workers. It is cheaper for employers to fill positions with unskilled labour, as a guaranteed minimum wage has only to be paid to qualified workers. However this would bypass an agreement reached with the social partners from the National Council for the Reconciliation of Interests, in December 2010.

Furthermore, it is proposed that unemployment benefit would only be available for three months after a worker was laid off. After that, anyone who hadn't found a job would have to join the public works programmes. The government also plans to redirect the unemployed under retirement age back into the workforce by deregulating the pension scheme to prevent pensions being paid to younger people, and by restricting all related social allowances.

Trade union representatives say Hungary has had a lot of illegal employment. There have been problems concerning the issue of rest times, paid leave and overtime, which the government now wishes to legalise. Unions believe more flexibility in legislation will lead to the exploitation or abuse of employees. Incentives to tighten the system should be introduced only if there is a good supply of jobs, and at the moment the unemployment rate is about 12%.