Adventurous experiment in Belarusian labor policy
The issued Decree significantly toughens the working conditions for both the workers and the managers of the wood-processing enterprises in Belarus. The successful implementation of the Decree provisions depends directly on whether the authorities will be able to keep the balance between coercion and promotion at the industry enterprises.
On 7 December the President signed Decree No. 9 “On the additional measures on the development of the wood-processing industry”.
The issued Decree concerns only the wood-processing enterprises, and only those on the basis of which the investment projects on modernization are being carried out. In other words, the state’s interest expressed in this Decree is to keep the number of employees of the enterprise during the period of modernization, which is likely to be conducted at the budget means. This interest of the state is due to the high labor emigration connected with the decline of the living standards in Belarus after 2011.
It should be noted that the solution proposed to solve this problem is rather radical, and it has already caused a lot of negative assessment in the media. First, the decree transfers all the employees of the enterprises under modernization on the labor contracts with a minimum period of one year. Second, the Decree practically replaces the term of the labor contract of an employee by the period of the realization of the investment project (labor contracts are extended till its completion) and states that an employee may resign only upon the consent of an employer.
The innovation of the Decree is a special rule on the remuneration of the labor: besides the basic salary, an employee of the enterprise under modernization would get some sort of an additional payment, the size of which is determined by the employer. It can be assumed from the statement previously made by President Lukashenko that the purpose of this additional payment is to bring salary at the enterprises of the wood-processing industry to the level of an average wage in the country (equivalent of USD 400-500). Nevertheless, more precise information on the size of these payments does not exist yet.
The most critical public reviews were caused by the provision of the Decree which not only fixes an employee at the enterprise but also obliges him/her in case of resignation, to compensate to the state the additional payments up to the judicial penalties in case of refusal.
Thus, the Decree significantly increases the level of responsibility of a wide range of stakeholders: workers, managers of the enterprises, as well as the local authorities and monitoring organizations. At the same time, the success of the project depends directly only on one factor which is the amount of the additional payments. As their size will be determined individually at each enterprise, one can expect more frequent disputes and conflicts between employees and employers.
Moreover, as it has already been noted, among the Belarusian citizens the most common reaction to the decline in living standards is not to fight with management of enterprises (of a city, a region or country), but to leave for other areas of employment or labor emigration to the neighboring countries. Decree No 9, specifically, is an obstacle to such behavior and may well become a social time bomb of a slow action, especially if the authorities decide to extend this adventurous experiment to other industries.
The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.