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Minister Vizjak: Retirement after 40 years for men and women

Minister of Labour, Family and Social Affairs Andrej Vizjak presented proposals for new pension and labour legislation which will serve as a basis for pension and labour market reforms. As he said in his introduction, this means opening consultations with social partners on the structural reforms which are crucial for overcoming the economic and financial crisis in Slovenia.

Pension reform: retirement after 40 years of employment

With the new proposals for pension legislation the Government aims to establish a system that will be just, transparent and (therefore) financially efficient. The changes are necessary since the ratio between pensioners and people paying contribotions in Slovenia has been continually worsening due to the aging of the population: between 2005 and 2011, this ratio has fallen from 1.67 to 1.53, which makes the pension fund unsustainable.

 

According to the new proposal, after 2018 (at the end of the transitional period), men and women would be eligible for old-age pensions after 40 years of employment. According to Minister Vizjak, the shift in focus from an individual’s age when retiring to the number of years of employment is a step forward on one of the most controversial points of last year’s pension reform referendum.

 

The second crucial change is the elimination from the pension system of all rights that have no basis in paid contributions, thus making it more transparent and just. The transparency of the system will be additionally strengthened by the introduction of informative personal accounts where insured persons will be able to see whether their employer is paying their contributions and how much, making it possible in time to calculate the expected pension on the basis of paid contributions.

 

According to the Minister, it is precisely the linking of pensions to actual contributions and the introduction of informative accounts that are intended to motivate people, especially the young, to enter into and persist in an employment relationship.   

 

Labour market reform: single employment contract, shorter notice periods, and lower unemployment benefits 

The key problems in the Slovenian labour market are, on the one hand, relatively high permanent employment security and on the other hand, undue flexibility in fixed-term employment. By introducing important changes to both these aspects, we will fundamentally intervene in the rigidity of the Slovenian labour market and thus make it possible, especially for the young, to obtain more stable employment, which in turn will give them more security when making plans for the future, stressed Minister Vizjak during his presentation of the labour legislation proposal. 

 

According to the provisions of the new proposal, fixed-term employment would be limited by restricting the share of fixed-term employees working for one employer to 10%. The Ministry thus wants to stimulate employers to take on more permanent employees, while at the same time introducing changes to permanent employment that will eliminate the present rigidity of the system. Thus a single employment contract will be introduced which will include three stages in the process of obtaining permanent employment:

  • a mandatory five-month trial period during which the termination of employment is possible on both sides;
  • a two-year adaptation period, at the end of which the employer must give reasons for firing employees and employees are entitled to severance pay;
  • stable period, which is comparable to the current permanent employment contract, but the maximum notice period would be 90 days and severance payments would be lower.

 

In accordance with the proposal of the Ministry of Labour, Family and Social Affairs, labour market legislation is expected to undergo many changes, with the most crucial one concerning the lowering of the threshold of the welfare trap. In Slovenia, the current ratio between expected pay and unemployment benefit is quite unfavourable, since it does not motivate people to seek work. This is why the new proposal reduces unemployment benefit to 70% in the first three months. Furthermore, (according to one’s employment period) benefit will be paid for a maximum of 18 months. 

 

In order to discuss the proposed amendments to pension and labour legislation, social partners (the Government of the Republic of Slovenia, employers and the unions) will meet tomorrow, Friday 7 September, in the framework of the Economic and Social Council.