Good Practices in Labour Administration

Actions undertaken by the labour administration: the organization of collective bargaining

The case of Hungary

Practices introduced by the Hungarian government to provide services to the users of the labour administration services in the sphere of collective bargaining.

Since 1988 the Hungarian government has set up institutions and mechanisms designed to develop negotiation between social partners.

Firstly, the creation of a tripartite body - the National Interest Conciliation Council (ICC) - enabled a forum to be established for exchanges and negotiations, whose influence has been highly significant, even while the partners themselves were still organizing themselves.

In parallel with the creation of this institution, which was a major innovation in the post-dirigiste scene, certain occupational sectors began to develop the practice of collective bargaining.

In addition, an arbitration and mediation service was set up in 1996 to settle collective conflicts before they reached the point of industria action.

These processes are still at an embryonic stage of their development. they have not spread to all occupational groups nor are they present throughout the country, but remain confined to the national level and to certain sectors at the moment of their privatization. Nevertheless, they illustrate the potential role of the Labour Administration in strengthening previously unknown procedures.

It can but be hoped that the very recent restructuring of the government apparatus, which has led to the disperal of the functions of the Labour Administration between three different Ministerial departments, will reinforce these new practices.

Nota bene: the information provided below applies to the structures operating up to June 1998, when a new government took office and the Ministry of Labour was disbanded.

The establishment of the National Interest Conciliation Council (ICC) (1988)

In 1988, during the final years of the socialist government, a National Interest Conciliation Council was established at the instigation of the government. Its membership represented the various social corporations of the socialist regime. Its objective was to develop mechanisms of social 'concertation' at a time when the central system of wage fixing was being abandoned, and was in particular charged with establishing an institutional framework for negotiating a minimum wage. But "the structure of the ICC did not reflect the then already emerging pluralism and its composition was strongly influenced by the heritage of the past", as M. Lado noticed in "Continuity and changes in tripartism in Hungary", 1995.

In late summer of 1990 the government relaunched this institution and revitalised the tripartite forum as the Interest Conciliation Council (ICC), broadening its objectives, strengthening its organization and opening up its membership to a broader range of social partners. The political and economic considerations were quite likely the same as the ones leading to the establishment of the first tripartite forum two years earlier.

The renewal of the tripartite body was accompanied by a number of changes: it was renamed, all the existing trade unions and employers organisations were invited to join the forum (and they did so), attempts were made to fit the ICC into the macro-level decisions making mechanisms. The role of the ICC was better defined and slightly widened and a new organisational structure was designed accordingly.

The ICC's creation was the result of an agreement between the government and the social partners, and not of a law. Subsequently it was enshrined in the Labour Code and its internal procedural regulations were published in the Official Gazette.

Other bipartite and tripartite forums for interest conciliation have also been established, in particular a Labour Market Committee and, for the civil service, a Public Sector Interest Conciliation Council (specifically for institutions funded by the state budget) responsible for the negotiation of public sector wages and whose deliberations have as their reference point the civil service statute.

The ICC's basic mission is to prevent the outbreak of collective disputes through an institutional framework which encourages the exchange of information and tripartite consultations.

The ICC has the authority to negotiate tripartite agreements on minimal wages and salary scales in the private sector.

It must be consulted in advance on social or economic legislation of interest to the social partners and can examine the bases of such proposals, and it must be consulted on social problems of national importance.

Its agreement must be obtained on decisions relating to the minimum wage, to paid holidays and to collective redundancies.

It lays down the procedures for its own functioning.

The National Interest Conciliation Council has a secretariat and several permanent committees. The Ministry of Labour provides the resources for the secretariat to function and other Ministries are responsible for the funding of the secretariats of its specialized committees.

The ICC adopts its policy positions in plenary sessions, which take place at least monthly, and smaller sessions which are somewhat more frequent. In fact, there is a meeting of one or another of the ICC's bodies every week.

The Labour Market Committee, which was formerly one of the ICC's specialized committees, was transformed in 1997 into the Labour Market Guidance Committee. It is a tripartite body independent of the government, and its mission is to allocate the government's employment policy funds, which are managed by the Labour Market Fund, itself an independent agency.

On account of its specific character, the ICC involves the social partners and the government closely and directly in its management. The employers are represented by nine national organizations, and the workers by six.

The fact that the government is obliged to consult the ICC in advance makes it an unavoidabe link in the legislative process. It also has the power to scrutinize any issue which seems to come within its remit, to pronounce upon such issues, and to make recommendations.

The ICC normally plans its work six months in advance, both for plenary sessions and for the specialized committees. Some items come up regularly, such as government consultation on its forthcoming annual budget, bills proposing changes in public finance, and issues on which consultation is required, such as bills presented to Parliament in the social sphere.

The ICC's programme of work is regularly published in the government's Official Gazette.

The secretariat of the ICC consists of either officials on secondment from the Ministry of Labour. The secretariats of the various specialized committees are staffed by officials made available by the Ministries or agencies of the corresponding area (such as the Ministry of Labour, the Employment Fund, the Ministry of Finance), and proposed for appointment by the groups themselves.

The ICC has organized numerous training courses and study trips for its members and expert advisors, with significant support from the government's PHARE programme.

The ICC is a tripartite body: its members are representatives of each employers' amd workers' organization. The number of members varies according to changes in its regulations. Each party chooses its own representatives, which raises the question of the representativity of the social partners.

The question of the representativity of the social partners has yet to be resolved. The government has set out a series of representativity criteria for the workers' organizations, but such a system has not yet been laid down for the employers: some mergers are expected among employers' organizations.

Changes in the government have led to changes in the list of organizations deemed to be representative.

The ICC's annual budget is 38m. Forints (SwFr.26,000; US$40,000). It forms part of the Ministry's overall budget and covers wage and operating costs.

The ICC does not produce an annual report such as might be considered an evaluation of its policies.

On the other hand, there are many studies undertaken by independent researchers and journalists.

It should be emphasized that for the last ten years the ICC has been involved in an intense process of reflection and debate which has heavily influenced government decisions on economic and social matters. It could even be said that its interventions, especially those of the Labour Market Committee, have held back desired economic reforms or have stopped the government from taking any decision at all, in cases where this would have required a broad consensus.

It is still too early to evaluate the relations between the new liberal government and this singular institution.

Collective bargaining (1992): The early stages

The Labour Code, as amended in 1992, provides for the independence of each party and does not place particular emphasis on collective bargaining, even if it does create a procedure for the extension of collective agreements. It was only in 1995 that the promotion of collective agreements became one of the Ministry of Labour's priorities. A change introduced into the Labour Code in 1995 contains a reference to collective agreements for the regulation of overtime; the insorporation into Hungarian law of the European Directive on transfers of companies provides for the use of collective bargaining and the transfer of the collective agreement in case of a change of employer.

The Labour Inspectorate has the authority to check that the norms governing collective agreements are adhered to and to ensure that they are registered; the existence of a collective agreement in a company is a criterion for firms' eligibilty to receive employment aid.

The condition for the extension of collective agreements is that they be signed - by workers' and employers' representatives - and that a joint request for their extension be presented.

Collective agreements may be extended by a specialised department of the Ministry of Labour, the Department of Industrial Relations.

Furthermore, this Department keeps a register of sectoral collective agreements, which are the only ones to be deposited and checked. The checking concerns the authenticity of the signatures, but not their legality.

However, the Department has no fixed programme of work. Its limied resources restrict it to the role of keeping a register and do not enable it to promote collective bargaining, especially in the private sector. It works in close collaboration with the labour regulation agency.

Its staff consists of six people whose responsibilities cover all matters related to collective agreements: recording them, advising negotiators, etc.

The Department of Industrial Relations is part of the state administration and does not have a budget of its own.

It has however a specific budgetary allocation in order to computerize it operations and to record collective agreements.

Its main dealings are principally with the social partners. Although the latter are not themselves responsible for the extension procedure itself, their role is nevertheless decisive, whether they seek to impede or to support it. Thus several unions have set up training programmes in collective bargaining for their members.

Although there is no formal evaluation mechanism, it is nevertheless possible to list the achievements of the last ten years.

There is no doubt that Hungary was the first Eastern European country to set up and implement a collective bargaining system.

27 agreements were signed in 1997 in industry. Collective agreements are far more numerous in the public sector: 2,000 in 1997. The extension procedure been tried only in three sectors (electricity, bakery and hotels and catering) and it has only been concluded in two of them. In any case, this outcome was the result of the specific situation of these sectors: since the privatization process had not yet begun,, the social partners ( the state as employer and the unions) had a common interest in preserving as much as possible the existing conditions of employment and pay, since in bakery and hotels and catering it was understood that the extension of a collective agreement would offer protection against a spread of unfair competition through the employment of 'black' labour.

The weakness of employers' organizations, and the fact that they do not seem to be mandated to negotiate collective agreements on their members' behalf, and the problems of union representativity hinder the development of collective bargaining.

However, the social partners and the government do seem to agree on the need to resist 'black' labour: a rapid increase in such practices will only be prevented by a strengthening of collective agreements with the currently judicious level of government support.

The establishment of a Mediation and Arbitration Service (MAS)

Created by the ICC on 1 July 1997 (see the regulation published in the government's Official Gazette) after a long period of preparatory work dating back to 1993, and supported by a European Union PHARE programme, this institution has the task of resolving labour disputes. Its objectives are to speed up the solution of these disputes, to contribute to the preservation of social peace nationwide and in the different occupational sectors, and also to encourage the development of an industrial relations culture in Hungary.

Its ability to intervene is based in principle on the submission of joint requests of the parties to a dispute. It maintains a list of qualified mediators and arbitrators, trained by the Service itself. It may also make recommendations in a bid to prevent conflicts.

The MAS is not strictly speaking an autonomous institution, but rather a specialized agency within the ICC.

The creation of the MAS was not a response to the number of strikes, which were particularly few during the transition period, but rather it constituted a recognition at the political level of the need for a professional conciliation and arbitration body.

The remit of the MAS does not include intervention in personal legal disputes, which fall within the remit of the labour tribunals, which are themselves submerged by cases despite the introduction in 1997 of the possibility of mediation in personal conflicts before they reach the courts.

The social partners are closely involved in the oversight of the MAS, insofar as it is placed under the direct supervision of the ICC, to which it reports, but they are not permitted to intervene in its operations.

There is no obligation on parties to conflicts to have recourse to the MAS , and the MAS cannot intervene of its own volition, although it can offer assistance.

This accounts for the slow growth of MAS's activity: the novel character of this institution explains the small number of cases dealt with in its first two years of operation.

The MAS has informal, but constant, links with the Ministry of Labour, especially the Labour Regulation Department, without prejudice to the rules guaranteeing its operational independence.

Registered mediators are independent and receive no instructions, so as to maintain their impartiality.

The 98 experts registered in 1998 on the list of mediators underwent a selection procedure handled by a tripartite commission which examined 360 applicants, and satisfy demanding criteria: a university degree and five years' experience in industrial relations or labour law. After their recruitment they undergo further specialized training. Usually they have a professional activity of their own and act as mediators when called upon by the MAS. Their remuneration cannot exceed eight days' work per dispute. They are governed by professional confidentiality.

The resources available to the MAS are modest, in spite of the significant effort made by the government at the time of its establishment: its operations are undertaken by two full-time officials, a Director and a secretary paid by the Ministry of Labour. This staff manages the work of the Service and prepares an Annual Report to the ICC.

The State has set aside a budgetary item for the MAS. This contribution is approved by the ICC. This budget, amounting to some US$45,000 per year, is enhanced by resources from bilateral and multilateral technical cooperation, and pays the salaries of the two permanent officials and the honoraria of arbitrators and mediators, as well as administrative costs.

The National Audit office oversees the proper expenditure of these funds.

Evaluation of the functioning and effectiveness of the MAS is undertaken essentially through its Annual Report, which is presented to and debated by the ICC, and is published.

In its first year of existence, the MAS's levell of activity was lower than expected (18 cases examined and 6 submitted to mediation in 1996); in fact its main activity that year consisted of setting up and training the network of conciliators and arbitrators.

Since then, the Service's conciliating activity has grown as it has become better known: 89 cases were examined in 1997, of which 62 related to collective agreements.

In most cases these, however, requests made unilaterally by the unions, and the service tried to change them into joint union-employer requests.

As in the case of the extension of collective bargaining one should look the causes of this low level of activity, and especially of the reluctance of employers to reach agreement with employees, even when negotiations are conducted under the aegis of a tripartite body.

The Annual Report reached the conclusion that only with patience and time will the MAS be able to exert significant influence on industrial relations in Hungary.

Before concluding, particular mention should be made of the role of the National Audit Office:

This is the body responsible for the accounts of all labour conciliation bodies, thoug its remit extends far beyond the labour sector.

It oversees, on Parliament's behalf, the activities of the tripartite organs

Its role has the same importance as the Constitutional Court with respect to oversight of the new democratic institutions, except that it is mainly concerned with overseeing the propriety of public expenditure (monitoring the correctness of expenditures, the lack of corruption, etc.) much more than with its impact.

On this basis, the Audit Office severely criticized the Labour Market Fund, because its members - the social partners - had not limited themselves to deciding the principles and broad direction of the Fund, but had also intervened directly in its operations, taking decisions about the allocation of resources which in the end restricted the government's freedom of action in deciding employment policy. The Fund's operating mechanisms were therefore changed in 1996 in order to restoire effective decision-making power to the government.

Conclusion

We can see how in Hungary the last ten years have winessed the birth and deepening of an industrial relations system. To be sure, the process has yet to be integrated broadly with day-day-day industrial relations, especially at the local level. But at the national level, its development in the framework of specialized institutions, constantly reinforced by the Labour Administration and the international community, is an example to all countries in transition.