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Draft pension and labour market reforms approved

At today's session, the Government of the Republic of Slovenia approved three draft acts which are to serve as the basis for structural reforms that Slovenia must implement in order to overcome the crisis.

Pension system reform urgent for financial sustainability

The existing pension system in Slovenia must be modernised in order to ensure financial sustainability in the coming years. Draft new pension legislation foresees systemic adaptation to new demographic and economic circumstances which could not have been envisaged in the reform in 2000.

The crucial goal of the government proposal is to establish a system based on insurance which is fair, transparent and financially efficient. While the current pension and disability insurance is already based on the insurance principle, it is also founded on the principles of intra- and inter-generational reciprocity and solidarity. Therefore, the Government seeks to eliminate from the pension budget all those rights not based on paid contributions. This will make the entire system more transparent and fair, particularly with the introduction of the informative personal account, which will enable people to monitor data on their insurance basis, paid contributions in individual years and recognised periods of employment.

 

Crucial changes to the pension system proposed by the Government include:

  • Raising and equalising the retirement age of men and women
    Both men and women should be 65 years old in order to quality for an old-age pension. The minimum age for qualifying provided that one has worked for 40 years is 60 years (for men and women; without purchasing additional years). The proposed retirement age for early retirement for both genders is 60 years with 40 years of employment
  • Establishing a more stimulating policy of bonuses for later retirement and more restrictive policy of reductions (so-called maluses) or limiting time bonuses
  • Establishing greater flexibility and a more open procedure for partial retirement
  • Extending the period for assessing pension from the current 18 consecutive most favourable years to 24

 

Labour market reform to introduce flexicurity

At today’s session, the Government also approved amendments to the Employment Relationship Act and Labour Market Regulation Act. Both are part of the reform of the labour market, which is characterised by rigidity and high labour costs, according to the assessments of foreign and domestic institutions.


An additional anomaly of the current situation which the Government seeks to eliminate is the considerable segmentation of the market due to different positions of employees on unlimited and limited duration contracts. Particularly worrying is the situation of the young: whereas the unemployment rate is below the EU average, the share of temporary employment in the group of those aged between 15 and 24 years is the highest in the EU.
One of the challenges addressed by the proposed reform is also population ageing and one of the lowest rates of employment of those aged between 55 and 64 years. The economic crisis has drawn attention to insufficient labour market legislation in the area of protecting the human rights of employees, the lack of an effective system for the exercise of the rights of employees, inspection and prevention of abuse.

 

This has provided the basis for crucial labour market reforms:

  • Reducing the dual system, i.e. the segmentation of the labour market (which is the result of different statuses of those employed on a contract of limited or unlimited period)
  • Rimplifying procedures for dismissals: obligatory advance notification, formal defence argument and offering another, suitable job. In this respect, periods for dismissals (shorter dismissal periods which are longer relative to the duration of employment) and severance pay have changed while considering relevant conditions in international documents
  • Probationary period of employment – the Act introduces termination of an employment contract by the employer if the probationary period of employment was unsatisfactory, with a seven-day notice period
  • Simplifying disciplinary proceedings
  • Public advertisement of job vacancies and the rights of unselected candidates: appropriate updating of current provisions is proposed, considering the possibility of using IT to advertise job vacancies and select successful candidates
  • Inner flexibility: amendments to the Employment Relationship Act specify in greater detail the possibility of assigning tasks to employees which are not part of their job description if this has not been defined in the collective agreement
  • Employment for a definite period, the legal status of managers and authorised representatives: the Act proposes terminating employment contracts of senior managers and defines in greater detail the possibility to conclude a contract of limited duration for performing managerial duties with an employee who is already employed by the same employer for an indefinite period
  • Ensuring greater protection of employees of employment agencies for temporary work
  • Regulating the rights of employees in the case of a transfer a company or a part of a company to an acquirer. The proposal introduces joint and several liability of the transferring employer if the transferor can or may sufficiently influence business decisions of the acquirer. When the transferor is not a major owner of the acquirer and cannot influence the latter’s decision, the Act introduces a subsidiary obligation of the transferor. In addition, the proposal foresees that the combined period of employment at both employers is considered for determining the rights of employees.