Challenges and prospects of the remuneration system discussed in Kazakhstan

On July 23, Kazakhstan hosted an international round table entitled “The system of remuneration of labour in the Republic of Kazakhstan: challenges and prospects for improvement” It was organized by the Federation of Trade Unions of the Republic of Kazakhstan (FTURK ) and the International Labour Organization (ILO).

News | 23 July 2021
The event was attended by the Minister of Labour and Social Protection of the Population of the Republic of Kazakhstan Serik Shapkenov,  Head of the Europe and Asia Desk of the ILO Bureau for Workers Activities (ACTRAV) Sergeyus Glovackas, Senior ACTRAV Specialist Raphael Pils, Senior Specialist on Workers’ Activities at the ILO Office for Eastern Europe and Central Asia Gocha Aleksandria, international ILO expert  Harri Taliga, Executive Secretary of the Pan-European Regional Council of the International Trade Union Confederation Anton Leppik, as well as deputies of the Majilis of the Parliament of the Republic of Kazakhstan, representatives of international organizations, foreign national trade union centers, branch trade unions and territorial associations of trade unions of the Federation of Trade Unions of the Republic of Kazakhstan.

In his welcoming speech, Chairman of the Federation of Trade Unions of the Republic of Kazakhstan Satybaldy Dauletalin noted that wages are prerequisite for the  well-being of the people.
 
“There is an urgent need to create a modern, flexible legislative framework in the field of employment, regulation of wages and labor relations. FTURK  believes that the priority area in regulating wage issues should be a consistent increase in the minimum wage and bringing it closer to the international standards,” Satybaldy Dauletalin said.

Sergeyus Glovackas,  Head of the Europe and Asia Desk of the ILO Bureau for Workers’ Activities (ACTRAV), noted the importance of applying the ILO Convention  No.131  in Kazakhstan.
 
“Cheap labour means low-productive and inefficient labour force. Decent work, decent wages are the prerequisite for the prosperity of Kazakhstan,” Sergeyus Glovackas noted.

“Last year, during the first 9 months, a decline in household incomes was remarkable in Kazakhstan. However, the adoption measures in time led to the fact that in the last quarter of last year revenues increased by 125 thousand tenge or by 15% compared to the year before last. Last year, the salary of employees increased by 14 % and reached 215 thousand tenge. The Ministry and the Government are aimed at maintaining the general level of income of the population, preventing a sharp reduction in jobs and wages during the pandemic, aimed at stimulating the employer to increase the income of employees,” the head of the department said.

He paid special attention to the work within the framework of social partnership.

“This year we signed a General Agreement, where we defined our main measures and adopted a roadmap, in which the main point is marked by the issues of raising the minimum wage. Employers are not always ready to raise wages. I think it is a matter of time and we will come to a gradual increase in the level of income of the population, ” the minister stressed.

Anton Leppik, Executive Secretary of the Pan-European Regional Council of the International Trade Union Confederation, expressed the position of the ITUC on achieving a new social contract.

“The crisis has put additional pressure, especially in the low-paid sectors. All this leads to low purchasing power, inadequate social protection and underfunding of public services. The ITUC calls for the achievement of a new social contract based on the provision of high – quality green jobs with proper wages, labor protection and safety, as well as equality in both pay and protection from discrimination,” Anton Leppik said.

He also noted the importance of the FTURK initiative to ratify ILO Convention No.131 in the light of ensuring adequate social protection for all.

“The initiative of the FTURK to ratify Convention No.131 is crucial and necessary. It is important that the issue of fair wages is a key issue on the negotiating table at the national, sectoral, regional and enterprise levels. This will prevent social tension and spontaneous labor conflicts,” the ITUC expert believes.

Christophe Mohr, Regional Director of the F. Ebert Foundation in Kazakhstan and Uzbekistan, pointed out in his speech that workers suffered the most from the global pandemic.

“A decent salary is an important guarantee of a living condition. The salary system is one of the important socio-economic reforms carried out in Kazakhstan,” Christophe Mohr highlighted.

First Deputy Chairman of the Federation of Trade Unions of Uzbekistan Bakhtiyor Makhmadaliyev spoke about the priority areas of work of trade unions of Uzbekistan. “New trade unions are manifested in the creation of legal foundations for social partnership, ensuring the rights of employees to labor protection and safety, timely receipt of wages, as well as in social protection of the population. In the conditions of quarantine restrictions, trade unions provided labor protection and protection of labor rights to more than 4.5 million workers of various professions and provided assistance to about 50 thousand low-income families,” the speaker said.

Bakhtiyor Makhmadaliyev noted the strategic importance of cooperation with Kazakhstan and expressed confidence that it will be enriched with new content.

“In recent years, relations between the Trade Union Federations of Uzbekistan and Kazakhstan have risen to a qualitatively new level. We have a lot to learn from each other,” he added.

The international standards of the ILO in the field of setting and protecting wages were presented to the participants of the meeting by Raphael Pils, a senior specialist in working with workers, ACTRAV, ILO.

“The ILO proclaims that the social dialogue should be broad, take into account the interests of workers in changing economic conditions,” the speaker said.

According to his opinion, during the Covid-19, the urgency of solving the problem of wage inequality has increased.

In this context, the importance of ensuring the effective application of International Labor Standards, including the ILO Conventions, was noted №26, №131, №95, №173 and other documents.

In addition, the expert stressed the importance of conducting comprehensive and regular consultations of social partners.

Speaking about the key challenges in Kazakhstan, Raphael Pils noted the need to strengthen the role of social partnership, the adequacy of remuneration, taking into account the requirements of employees and monitoring the implementation of the established minimum wage in practice.

Natalia Podshibyakina, Deputy Chairman of the General Confederation of Trade Unions, spoke about the state of wages in the independent states of the region in 2020.

“In 2020, when the world’s labor sphere was under a serious blow due to a global pandemic, workers in the countries of the region often had to choose between losing their jobs, reducing wages or switching to part-time employment. As before, the level of average wages in the countries of the region remains low, insufficient for a full-fledged human life. A significant part of the salary is “eaten up,” Natalia Podshibyakina said.

According to her ideas, the low level of remuneration of most workers in the countries of the region was aggravated by delays in the payment of wages, which are largely associated with the bankruptcy of enterprises.

Director of the Center for Research, Analysis and Evaluation of Efficiency LLP, independent expert Saruar Kenzhebulat acquainted the participants with the analysis of the level of wages in the sectors of the economy of the Republic of Kazakhstan.

He noted a number of problems in the issues of remuneration in 2020, such as the low level of wages in GDP (31%), underestimation of the established minimum wage and VPM, which are 5 and 6.5 times lower than the average monthly salary, respectively.

Among the industries with the largest salary, he noted financial and insurance activities, scientific and technical activities, as well as the field of information and communications.

Among the industries with the lowest salary are agriculture, forestry and fishing, art, entertainment and recreation, and real estate transactions. “There is a significant gap in the size of the average salary by industry, profession and position. “Undervalued” are professions in sectors of the most important socio-economic importance: agriculture, education, health care. In order to reduce the wage gap, it is necessary to establish adequate minimum wages and the subsistence minimum. It is advisable to apply mechanisms for a fair “redistribution” of income between highly profitable and low-profitable sectors,” Saruar Kenzhebolat recommends.

ILO expert Harri Taliga focused on examples of successful experience in setting wages in Europe.

According to his opinion, the key to success in salary negotiations is the activity of trade unions in setting the minimum wage, collective bargaining on tariff rates, etc.

He told about the positive experience of such EU countries as Austria, Denmark, Finland, Sweden, Italy, Cyprus.

“The reflection of wage issues in the collective agreement is the main indicator of the work of the trade union. Only trade unions will provide workers with a fair share of the created social wealth. The ability and willingness of trade unions to carry out effective pressure actions in the negotiation process,” said Harri Taliga.

The expert of the F. Ebert Foundation, the head of the Referat of the Federal Ministry of Labor of Germany, Jan Busch, shared Germany’s experience in improving the wage system.

As he told, since January 1, 2015, a minimum wage has been introduced at the legislative level in Germany, the level of which today is 8.50 Euros per hour. “The introduction of a legal minimum wage has significantly increased wages in low-paid areas. And this was not an encroachment on the labor market and the economic situation of enterprises. German trade unions provide the necessary support for tariff autonomy,” the ILO expert said.

Chingiz Tagiyev, Head of the Department for the protection of socio – economic interests of workers of the Confederation of Trade Unions of Azerbaijan, spoke about Azerbaijan’s experience in solving wage problems.

“According to the data of international organizations, the wage intensity of Azerbaijan’s GDP has significantly decreased and is no more than 20 percent. The Confederation of Trade Unions of Azerbaijan periodically analyzes the state of affairs with wages, brings the results of this work to the social partners. The General Agreement provides for a special section concerning the obligations of the parties in the field of remuneration. The social partners supported our demands and during 2019 adopted 2 social packages, according to which the minimum wage almost doubled, amounting to 125 euros, which ultimately led to an increase in the average salary in the country, which exceeded 350 euros at the end of last year.

Thus, Azerbaijan has made dramatic progress in fulfilling its obligations. It should be noted that today the country is leading in both indicators among the CIS countries,” Chingiz Tagiyev said.

Deputy of the Mazhilis of the Parliament of the Republic of Kazakhstan Ekaterina Smyshlyaeva focused on some problematic issues in the field of remuneration of labor in Kazakhstan.

“When assessing the level of wages, we need to move away from median values and comparisons, and focus primarily on the consumer basket. At the legislative level, there is a need to review approaches to determining the employment status and accounting for employees, ” the deputy believes. She said that currently the deputy corps is working on establishing the branch affiliation. “The deputies, together with the FTURK, are constantly working to identify and restore fair wages,” Ekaterina Smyshlyaeva said.

Among the problematic issues, she also noted the need to review the system of labor rationing, as well as the adaptation of national and sectoral qualification frameworks to the realities of the labor market.

Doctor of Economics, Director of the Kazakh Research Institute of Labor Serikzhan Bereshev in his speech focused on a number of inconsistencies in labor legislation on wage regulation.

“In accordance with the Labor Code, at large and medium-sized enterprises, the wage system should be regulated in a collective agreement. And only if the trade unions refuse these measures, then this issue is taken by the acts of the employer. Practice shows that basically all the provisions on remuneration are developed by the employer. Representatives of employees at the enterprise may not be aware that the legislation gives them such opportunities. Unlike the employer, at the legislative level, trade unions are deprived of the opportunity to invite independent experts to participate in collective negotiations with the employer,” the director of the Research Institute has said.

Besides he also added the importance of developing social partnership on wage issues.

“The FTURK should initiate legislative reflection of wage issues before the social partners. Today, the minimum wage has broken away from all economic indicators. Wages are a contractual category, so it is urgent to adopt Convention No. 131 and reflect it in the General Agreement,” Serikzhan Bereshev told.

Executive Director of the KAZENERGY Association Lyazzat Akhmurzina touched upon the issues of social partnership from the position of the employer.

“The Association is a full-fledged social partner and a signatory for several years of an Industry agreement in the oil and gas industry, as well as a signatory of the last General Agreement. The main requirements for the organization of wages at the enterprise are to ensure real wage growth while reducing the costs of the enterprise per unit of production and to guarantee an increase in the remuneration of each employee as the efficiency of the enterprise as a whole increase,” Lyazzat Akhmurzina noted.

According to her ideas, the Sectoral Agreement on Social Partnership in the oil and gas, oil refining and Petrochemical industries of the Republic of Kazakhstan for 2020-2022 notes that the social partners recognize mutual responsibility for implementing a policy of increasing the wages of industry workers by increasing production efficiency.

“Currently, a Working Group has been established to bring the Industry Agreement in line with the General Agreement. Also, the parties of the social partnership are considering the issue of making changes to the Industry Agreement, in terms of compliance with the basic principles of remuneration,” Lyazzat Akhmurzina said.

Chairman of the NGO “Kazakhstan Branch Professional Union of Education and Science Workers” Aigul Mukasheva spoke about the system of remuneration of public sector employees.

“Representatives of employees have serious questions that cause alarming moods. In particular, due to the commercialization of public services in the field of education, healthcare, and culture, the scope of application of the considered remuneration system is narrowing. The country is systematically reorganizing state institutions into state-owned enterprises on the right of economic management, non-profit joint-stock companies and other legal forms. This process deprives hundreds of thousands of employees engaged in the provision of socially significant services of the status of civil servants. Trade unions, together with social partners, try to preserve guarantees and benefits through the terms of collective agreements and social partnership agreements. Thanks to the development of social partnership at the sectoral level, many problematic issues are being solved,” Aigul Mukasheva said.

She expressed gratitude to the leadership of the FTURK for their support in solving the issues of public sector employees.

The chief specialist on workers ‘activities, the ILO Bureau for Eastern Europe and Central Asia, Gocha Alexandria, in turn, noted the importance of countries’ compliance with ILO standards, regardless of the ratification of its documents.

He noted the importance of the availability and access of trade unions to effective ways of resolving collective labor disputes, such as consultation, mediation, arbitration and strike.

“International standards require that trade unions have access to the negotiation mechanism. When negotiations reach an impasse, employees should feel the effectiveness of mechanisms for resolving collective labor disputes, including wage issues. If the right to strike is secured, then the motivation for workers to join a trade union is high. The right to strike is part of the freedom of association guaranteed by the ILO Convention No. 87,” said Gocha Alexandria.

As a result of the discussions, the participants of the round table adopted a package of recommendations aimed at solving urgent problems in the field of wage regulation.