Croatian trade union files first lawsuits over public wage hike in warning to government

By bne IntelliNews November 24, 2016

Four members of the Union of Croatian Education Workers have filed the first lawsuits demanding compensation after the government failed to company with a public wage hike agreement signed in 2009. 

A seven-year old agreement between the Croatian government and public trade unions requires the government to raise public sector wages if the country’s GDP growth exceeds 2% on average in two consecutive quarters, which happened last year. However, pay hikes have not yet been introduced and the government does not have the resources to raise salaries. 

The four teachers filed the lawsuits against the government with the Zagreb municipal court on November 23, Total Croatia News reported.

Each teacher is demanding HRK5,000 (€664) plus interest and court fees from the government to compensate their losses in the first ten months of this year, Zeljko Stipic, head of the Union of Croatian Education Workers, said on November 23.

If all public workers go to the courts, the Croatian government could face a total compensation demand of more than HRK1bn, according to local media reports. The total compensation amount will increase by about HRK100mn each month, according to Stipic.

The Croatian economy grew 2.8% y/y in the third quarter of last year and 1.9% y/y in the last quarter. As a result, conditions were met for a public wage hike.

In March, the Croatian government held its first round of talks with public sector trade unions on public sector pay, but there was no agreement and the talks were put on hold after the previous government collapsed in July. Croatia’s new coalition government, which came into power last month, has not yet managed to pass a proposed tax reform or the 2017 budget in the parliament.

“The latest meeting was held in July, when the government said they could not do anything since they were just a caretaker government,” according to Vilim Ribic, president of the Association of Trade Unions.

The first four lawsuits covering the first ten months of this year were filed as a warning to the government, Stipic said, adding that union members will file more lawsuits with the Osijek and Split courts.

However, other trade unions criticised the Union of Croatian Education Workers’ move to file lawsuits. Branimir Mihalinec, head of the Independent Union of Employees in Secondary Education, thinks that the lawsuits were unnecessary because the negotiations with the government have started and it still remains to be seen how they will proceed, according to Total Croatia. Ribic accused Stipic of trying to promote himself.

Ribic said back on September 21 that trade unions would take legal action to demand about HRK7bn of compensation if they could not reach an agreement with the new government on a public sector wage hike by the end of this year. “The actual amount for the compensation to be demanded at the court would depend on calculations and interpretations of whether the GDP has been growing by 2% in the first quarter of next year,” Ribic also said.

About 180,000 employees in public services and about 63,000 employees in the civil service have the right to a wage hike, according to Ribic.

However, the government does not have the resources for a wage hike. Zagreb aims to cut the budget deficit to 2% of GDP in 2017. A wage increase of 6% planned for 2016 as per the 2009 wage agreement and the delayed cancelation of loyalty bonuses would add an additional 0.65% of GDP to spending in 2016 that could hamper Croatia's fiscal consolidation plans, said the World Bank in its Europe and Central Asia economic update.

Croatia’s average net monthly wages declined by 0.86% m/m and 0.28% y/y in nominal terms to HRK5,624 in September from HRK5,573 in August, the statistics office said on November 23. The average gross wage also decreased by a nominal 1.55% m/m from HRK7,764 in August to HRK7,644 in September.

Croatian salaries were on an upward trend last year supported by changes in personal income taxation legislation. The previous Croatian government led by the then PM Tihomir Oreskovic increased the minimum gross wage by 3% to HRK3,120 as of January 2016.

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