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Regional update

Multinationals operating in Central and Eastern Europe should soon find the employment environment in the region much more familiar. Most of the countries are pushing ahead with reforms to their labour and pension frameworks. We highlight below some of the moves that have been achieved or are currently in the pipeline.

Czech Republic

Parliament is considering proposals to relax the formalities that apply to expatriates applying for permission to work in the Czech Republic. Among the changes being considered are ones to allow applications for visas and work permits to be made simultaneously and to reduce the standard waiting time for visas. In addition, requirements relating to health cover and minimum financial resources are likely to be relaxed.

The cabinet has agreed a set of financial incentives for older employees to stay in their jobs as a measure to reduce the high level of early retirement.

Estonia

The Government has dropped plans to make employee contributions, to planned second pillar pensions, compulsory. Instead, employees will be able to choose to put 2% of their pay into the plan which is scheduled to be launched in 2002. Where employees do so, employers will contribute 4% of their overall pension charge into the second pillar. If they choose not to contribute, the whole of the employer's 20% will be directed to the first pillar state pension.

Hungary

Social security contributions for employers are to fall by three percentage points in 2001 and by the same amount in 2002 to 27%. Conversely, the Government has announced that healthcare contributions per employee are being increased from HUF3,900 to HUF4,200 in 2001.

The Government has also announced a wholesale review of the Labour Code with a new code being scheduled in early 2001. The review will seek to align Hungary's legislation to European Union labour standards. Additionally it will address issues such as working time, equal pay, and European works councils. Working time is a particularly contentious issue with labour unions looking for a reduction in the statutory working week from 40 to 38 hours immediately and eventually a further reduction to 35 hours. They are also lobbying to have the ceiling on overtime reduced from 300 hours to 200 hours a year. Employers are opposing these proposals. The social partners, however, are having more success in reaching agreement on rules on collective dismissals and employee relocations.

Lithuania

With effect from 1 October 2000, all businesses have to contribute 0.2% of their payroll to a new guarantee fund established to protect employees' pay and redundancy entitlements in the event of insolvency. After five years of debate, the Government has announced that a three pillar pension system is to be introduced. Detailed proposals should be revealed this Autumn.

Russia

Reform of the pension system, put on hold at the time of the financial crisis in 1998, looks set to get under way in 2002. Full details of the mechanisms under consideration will appear over time, but it is understood that the proposed structure will promote individual second pillar pension accounts and provide incentives to encourage the development of private third pillar provision.