At the meeting of the Cabinet of Ministers on May 8, 2018, the amendments proposed by the Ministry of Economics in the Labour Law were supported allowing to provide for a lower supplement for overtime in the generally binding general agreement which can not be below 50% of the hourly rate specified in the general agreement, provided that it envisaged a significant increase in remuneration in the relevant sector.
By proposing such amendments to the law, the aim of the Ministry of Economics is to promote the conclusion of general agreements, especially in the construction sector, which, together with electronic time recording, would be the most effective tool for curbing the shadow economy and the unofficial “envelope” wages, while ensuring a higher level of protection of the rights and interests of employees.
We recommend that such a specific overtime wage be limited to a generally binding general agreement, namely, one concluded in accordance with the procedure provided for in Section 18, Paragraph four of the Labour Law, namely, a general agreement concluded between employers employing more than 50% of the employees in the relevant sector or whose turnover of goods or volume of services is more than 50% of the turnover of goods or the volume of services in the relevant sector, and one which is binding on all employers in the said sector and applies to all employees employed by the said employers.
General agreements shall be concluded by representatives of employers and a national-level trade union being the organization representing the interests of employees. Such a mechanism for the closure of a general agreement will ensure the reaching a balanced agreement that will strike an effective balance between the interests of employers and those of employees.
The general agreement have been recognized as an effective instrument for the improvement and development of a particular sector. Together with the entrepreneurs in the construction sector, we have come to the conclusion that the existing regulation, which sets the overtime supplement of 100% from the first hour of overtime worked, could hinder the sectoral agreement on raising the minimum wage. Namely, in a sector characterized by seasonality and high volume of work precisely in the middle of the season, raising the minimum wage twice, overtime rates would quadruple compared to the situation before the general agreement. This will create a huge additional financial burden for entrepreneurs. Consequently, it must be possible for both parties to agree on a sector-specific regulation that takes into account and balances the interests of both parties.
It is well known, the Association “Latvijas Būvuzņēmēju partnerība” (Latvian contractor’s partnership) is working actively on concluding a general agreement in the construction sector on the minimum wage levels in construction related professions and initiating the process of signing a sectoral generally binding general agreement. One of the issues of regulation in the general agreement is the conditions for paying overtime. The construction sector has high levels of shadow economy. Although the shadow economy in the construction sector has been decreasing in recent years, it is still significantly higher than in the economy generally.
The contractors' partnership has proposed a conclusion of a sectoral general agreement on minimum wage levels in construction related professions providing for a significant increase in the minimum wage in the sector. The contractors' partnership has pointed out that the current regulation on overtime pay is hampering the provision of complex work pay solutions.
Until now, a generally binding general agreement has been concluded only in the railway sector in Latvia. Given the fact that only one sector has a generally binding general agreement concluded, it must be acknowledged that the traditions of the closuring general agreements have not been sufficiently developed.
Most often, the subject of a general agreement is the issues of remuneration of employees, including minimum wage levels, in addition to social guarantees. For example, in certain Scandinavian countries, statutory acts do not set minimum wage levels, as these are determined in the general agreement in the relevant sector. The general agreement also applies for the determination of the minimum wage in cases where the statutory minimum wage is substantially lower than the average wage in the sector.