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Czech Republic

7. State-Owned Enterprises

The Ministry of Finance administers ownership rights of state-owned enterprises (SOEs).  Potential conflicts of interest are covered by existing Act No. 159/2006 on Conflicts of Interest, and newly adopted Act No. 14/2017 on Amendments to the Act on Conflict of Interest.  Legislation on the civil service, which took effect January 1, 2015, established measures to prevent political influence over public administration, including operation of SOEs.

Private enterprises are generally allowed to compete with public enterprises under the same terms and conditions with respect to access to markets, credit, government contracts and other business operations.  SOEs purchase or supply goods or services from private sector/foreign firms. SOEs are subject to the same domestic accounting standards, rules, and taxation policies as their private competitors, and are not given any material advantages compared to private entities.  State-owned or majority state-owned companies are present in several (strategic) fields, including the energy, postal service, information & communication, and transport sectors.

SOEs are usually structured as joint-stock companies.  They do not report directly to government ministries, but are managed by a board of directors (statutory body) and a supervisory board that generally includes representatives of the government and trade unions (representing employees, both union and non-union, as required by law).  Like privately owned joint-stock companies, the SOEs are fully responsible for their obligations toward third parties, although shareholders are not personally liable for a company’s obligations. SOEs are required by law to publish an annual report, disclose their accounting books, and submit to an independent audit.  Private enterprises and SOEs carry out procurement in accordance with the Act on Public Procurement No. 134/2016, and its addendum No. 147/2017, which is fully harmonized with the existing EU legislation on public procurement.

The Czech Republic has 16 wholly-owned SOEs and four majority-owned SOEs.  Wholly-owned SOEs employ roughly 29,000 people, have USD 6 billion in annual income, and own more than USD 9.8 billion in assets.  There is not a unified, published list of all companies with some percentage of state ownership, but information can be found on individual ministry websites or by directly contacting the ministry who manages the company.

As an OECD member, the Czech Republic promotes the OECD Principles of Corporate Governance and the affiliated Guidelines on Corporate Governance for SOEs.  SOEs are subject to the same legislation as private enterprises regarding their commercial activities.

Privatization Program

According to the Ministry of Finance, as a result of several waves of privatization of formerly state-owned companies since 1989, over 90 percent of the Czech economy is now in private hands.  Privatization programs have generally been open to foreign investors. In fact, most major state-owned companies were privatized with foreign participation. The government evaluates all investment offers for state enterprises.  Many complainants have alleged non-transparent or unfair practices in connection with past privatizations. No privatization program is currently underway.

8. Responsible Business Conduct

The concept of responsible business conduct (RBC) is now widely understood and every year is implemented by more companies in the Czech Republic.  The government understands and supports the concept of corporate social responsibility (CSR).

In April 2014, the Czech government adopted a National Action Plan (NAP) for CSR.  The major goal of the NAP is to establish fundamental principles and to support and encourage CSR, highlighting that CSR should remain a voluntary policy.  In 2015, the Sustainable Development Section of the Quality Council of the Czech Republic created a National Informational CSR Portal that provides businesses, NGOs, representatives of state administration, and the public with updates related to CSR in the Czech Republic.  In 2016, the government updated the NAP to address public tenders and encourage businesses and state administration to consider the potential long-term social and environmental impacts of their procurement decisions instead of deciding strictly based on financial costs. The new NAP (2019-2023) was approved by the government in January 2019.  The new NAP aims to motivate businesses and public administration to voluntarily implement specific CSR projects and create favorable conditions for CSR projects.

Post is not aware of any controversial instances of corporate impact on human rights.  The government strictly and effectively enforces legislation in the area of human rights, labor rights, consumer protection, and environmental protection to protect individuals from adverse business impacts.  Domestic standards are generally very high and in many instances exceed EU-wide requirements. Negligence or failure to comply with this legislation results in serious consequences.

Shareholders are protected by developed legislation that clearly describes legal processes, organizational structures, administration, and management of all business components, including stakeholders.    

Companies are not required to disclose publicly information about their RBC or CSR activities.  Various local NGOs monitor and advise CSR programs, such as the Association for Corporate Social Responsibility, the Business Leaders Forum, Business for Society, and the CSR Committee of the American Chamber of Commerce.  The Association for CSR is the host entity in the Czech Republic for the UN Global Compact, a UN strategic policy initiative for businesses that are committed to aligning their operations and strategies with 10 universally accepted principles in the areas of human rights, labor, environment, and anti-corruption.

The host government encourages local as well as foreign enterprises to follow generally accepted RBC principles on grounds of adherence to the OECD Guidelines for Multinational Enterprises (MNE) and to the United Nations Guiding Principles of Business and Human Rights.  The OECD Guidelines for MNE are actively promoted by the National Contact Point (NCP) and the United Nations Principles are being reviewed at the Office of the Government, with the goal to issue a separate national action plan to secure its implementation. The NCP working group consists of representatives of the government, employer organizations (Confederation of Industry and Trade), employee organizations (Czech-Moravian Confederation of Trade Unions), and NGOs (Frank Bold).  The NCP closely and actively cooperates with other regional NCPs to share best practices, procedures, and experience.

The host government adheres to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas.  The Ministry of Industry and Trade is responsible for implementation and compliance.

The Czech Republic does not have any significant oil and natural gas resources and it is dependent on purchasing these commodities from abroad.  There are no special domestic transparency measures requiring the disclosure of payments made to governments for projects related to the commercial development of oil, natural gas, or minerals.  Payments for extraction of minerals in the Czech Republic abide by the Mining Law, which requires that payments are processed for extracted minerals as well as for mined areas. International trade with oil, natural gas, and minerals is not subject to any special legislation; it follows the general rules of international trade.  The Czech Republic is not an Extractive Industries Transparency Initiative (EITI)-compliant country or an EITI candidate.

9. Corruption

Despite concerns about corruption, U.S. companies have not been significantly deterred from investing in the Czech Republic.  Current law criminalizes both payment and receipt of bribes, regardless of the perpetrator’s nationality. Prison sentences for bribery or abuse of power can be as high as 12 years for officials.  Corruption of public officials is prosecuted on the regional level to ensure that prosecutors have specialized knowledge and avoid bias; the government believes that regional prosecutors know the local environment and actors better than their colleagues on the national level.  There have been several successful cases prosecuting corruption, but cases are often lengthy and face many delays. The 2016 police reform merged the special Organized Crime Police Unit (UOOZ) and the Unit for Combating Corruption and Serious Financial Criminality (UOKFK) into a new body called the National Center for Organized Crime (NCOZ).  NCOZ is now primarily responsible for investigating high-level corruption cases. Anti-corruption laws apply equally to Czech and foreign investors. Criminal procedure law allows for the seizure of criminal proceeds paid or transferred to family members of corrupt officials, although their prosecutions depend on evidence.

Czech law obliges legislators, members of the cabinet, and other selected public officials to declare their assets annually.  The public can view the declarations with limited content on a website, but access to more details remains complicated because it requires a password issued by the Justice Ministry that is only valid for 30 days.

In addition to the financial disclosure law, the Bohuslav Sobotka government (2014-2017) was successful in passing an amendment to the law on public procurement, a law on the register of public tenders, and a law on transparent financing of political parties.  The government failed to enact a debated bill on the public prosecution service that contained measures to ensure stronger prosecutor independence. The amended law on public procurement seeks to counter conflict-of-interest in awarding contracts or government procurement.

The government ratified the OECD Anti-Bribery Convention in January 2000 and the UN Convention against Corruption in January 2014.  According to the 2017 OECD Phase 4 Evaluation Report, the Czech Republic demonstrates its commitment to improvement in the implementation of the Convention; however, it must take significant steps to enforce its foreign bribery laws and its efforts to detect, investigate, and prosecute foreign bribes.  The report calls for better protection of whistleblowers and for better implementation of the criminal liability of legal entities law that has been amended six times since it came into force in 2012. Based on the report, no legal person has been prosecuted for the bribery of foreign public officials.

In October 2016, the government passed a new public procurement law that introduces new tools for evaluation of tenders that takes into account not only the price, but also the quality of the offer.  The law also requires every contracting authority to post the winning contract on its public profile within 15 working days after the contract has been signed. Furthermore, it increases the threshold for the simplified procedure of construction tenders from CZK10 to CZK50 million (USD 2.5 million), which many NGOs criticized for decreasing transparency because many construction tenders fall under CZK50 million.  The law requires more than one bidder for all procurements and requires bidders to disclose more of their ownership structure in the bidding process, but it also contains some exceptions to those obligations. American businesses have expressed some concerns about such frequent changes in competition policies as obstacles to investment.

The government encourages companies to establish internal codes of conduct that, among other things, prohibit bribery of public officials.  Many companies have adopted such codes but it is not an obligatory government requirement.

An amendment to the Law on the Central Registry of Contracts was enacted in December 2015 and took effect July 1, 2016.  The amendment requires all national, regional, and local authorities and companies to make public all newly concluded contracts valued at CZK50,000 (USD 2,400) or more.  As of July 1, 2017 contracts not posted publicly in the Registry within 30 days will not be acknowledged as effective. The Registry of Contracts has its own government web page in Czech only at:  http://smlouvy.gov.cz  .

Several NGOs such as Oziveni, Transparency International, and Anticorruption Endowment receive corruption reports online.  In 2015, Oziveni introduced a new software GlobalLeaks that enables absolute anonymity to those who decide to report corruption.  While there is not a specific law to protect NGOs involved in investigating corruption, NGO activities are protected under the Charter of Fundamental Rights and Freedom that protects civil society and free speech.

Resources to Report Corruption

Contact at government agency responsible for combating corruption:

Conflict of Interest and Anti-Corruption Department
Anti-Corruption Unit
Ministry of Justice of the Czech Republic
Vyšehradská 16
12800 Prague 2
http://www.justice.cz 
+420 221 997 595
Email: korupce@msp.justice.cz

Contact at “watchdog” organizations:

David Ondracka, Director
Transparency International Czech Republic
Sokolovska 260/143
+420-224 240 895-7
Email: ondracka@transparency.cz
http://www.transparency.cz 

Oziveni
Muchova 13, 160 00 Praha 6
tel: +420 257 531 983
Email: oziveni@oziveni.cz
http://www.oziveni.cz 

Anticorruption Endowment
Nadacni Fond Proti Korupci
Revoluční 8, building A, 5th floor, 110 00 Praha 1
+420 226 209 047
Email: info@nfpk.cz
http://www.nfpk.cz 

10. Political and Security Environment

The risk of political violence in the Czech Republic is extremely low.  Two historic political changes – the Velvet Revolution, which ended the communist era in 1989, and the dissolution of Czechoslovakia into the Czech Republic and Slovakia in 1993 – occurred with minimal loss of life and without significant violence.  The political institutions underpinning parliamentary democracy generally function smoothly. Elections have resulted in orderly and peaceful changes of government.

11. Labor Policies and Practices

A historically strong and well-developed machinery industry, one of the key drivers of Czech exports, requires a wide range of technically qualified staff, including the entire spectrum of professions from manual workers to engineers and designers.  The rapidly growing electronics and information technology sectors are also creating demand for highly skilled workers. Key economic growth and export-driven industries are facing the challenge of demand for highly skilled technical workers that exceeds supply.  Robotic automation and digitalization are also impacting many industries.

The wide availability in the Czech Republic of an educated, relatively low-cost labor force on the doorstep of Western Europe was a major attraction for foreign investors in the 1990s.  While the wage gap continues to narrow and the income convergence process reflects the Czech Republic’s economic growth in recent years, Czech wages still trail significantly those of neighbors like Germany and Austria.  In 2018, wage levels increased by an average of 8.1 percent, according to the Czech Statistical Office. According to Eurostat, the Czech Republic’s unemployment rate was 1.9 percent in February 2019, which is the lowest in the EU, however, unemployment rates vary significantly between regions.

Unemployment insurance and other social safety net programs exist for workers laid off for economic reasons.  Labor laws differentiate between layoffs and firing. Labor laws are generally very strict and favor the employee rather than the employer.

Given record low unemployment, employers are facing labor shortages and some companies have started to rethink investment or expansion plans out of concern they will not be able to find workers to fill new jobs.

Czech law guarantees Czech workers’ right to form and join independent unions of their choice without authorization or excessive requirements.  It permits them to conduct their activities without interference. The right to freely associate covers both citizens and foreign workers. The law also provides for collective bargaining.  It prohibits anti-union discrimination and does not recognize union activity as a valid reason for dismissal. Workers in most occupations have the legal right to strike if mediation efforts fail, and they generally exercise this right.

Strikes can be restricted or prohibited in essential service sectors such as hospitals, electricity/water supply services, air traffic control, the nuclear energy sector, and oil /natural gas sectors.  Members of the armed forces, prosecutors, and judges may not form trade unions or strike. The scope for collective bargaining is limited for civil servants, whose wages are regulated by law. Only trade unions may legally represent workers, including non-members.  Labor dispute resolutions are carried out in civil court proceedings. There were no strikes in the last year that posed an investment risk.

Slovenia

7. State-Owned Enterprises

Private enterprises compete on the same terms and conditions as public enterprises with respect to access to markets, credit, and other business operations.

State-owned and partially state-owned enterprises (SOE) are present across most industries in Slovenia.  The state has never undergone a wholesale privatization program and has retained significant ownership shares in many large companies since independence.  According to a 2013 European Commission report, the government owned stakes, directly or indirectly, in at least 80 companies in 2013, generating one-sixth of value added in Slovenia’s economy and employing eleven percent of the population.  The total book value of the government’s directly-owned portfolio was just over 24 percent of GDP in 2011. SOEs are particularly predominant in sectors of strategic national interest, such as energy, transport, public utilities, banking, telecommunications, and insurance.  Other economic sectors, including retail, entertainment, construction, tourism, and manufacturing, include important firms that are either wholly state-owned or in which the state maintains a controlling interest by virtue of holding the largest single block of shares.

In general, SOEs do not receive a greater share of contracts or business than private sector competitors in sectors that are open to private and foreign competition.  SOEs acquire goods and services from private and foreign firms. SOEs must follow strict government procurement agreements which require transparent procedures available to all firms.  Private firms compete under the same terms and conditions with respect to market share, products, and incentives. All firms have the same access to financing.

SOEs are subject to the same laws as private companies and must fully comply with all legal obligations.  They must submit to independent audits and publish annual reports if required (for example, if the SOE is listed on the stock exchange or the size of the company meets a certain threshold).  Reporting standards are comparable to international financial reporting standards.

Slovenia is an active participant in the Organization for Economic Cooperation and Development (OECD) Working Party on State Ownership and Privatization Practices and adheres to the OECD Guidelines on Corporate Governance for SOEs.

Following OECD recommendations, the government established the Capital Asset Management Agency (AUKN) in 2010 to increase transparency and promote more efficient management of SOEs.  In 2013, authorities transformed the AUKN into the Slovenian Sovereign Holding (SSH), which is charged with simplifying and shortening the administrative process of privatizing state assets.  SSH took over all AUKN portfolios as well as the portfolios of two other smaller state-owned funds. More than 95 percent of SSH funds are invested domestically. SSH is an independent state authority that reports to the National Assembly.  It provides the National Assembly with annual reports regarding the previous year’s implementation of the Annual Plan of the Corporate Governance of Capital Investments. The government then adopts the Annual Plan of the Corporate Governance of Capital Investments based on SSH’s proposal.

A list of SSH’s SOEs is available at https://www.sdh.si/en-gb/asset-management/list-of-assets  .

Privatization Program

In 2013, the National Assembly approved a list of 15 state-owned companies it planned to sell.  To date, the state has sold 11 of these companies, and one is in the final phase of privatization.  The government sold its majority stake in NLB in 2018 while retaining 35 percent of outstanding shares but pledged to sell an additional 10 percent of its NLB shares by 2020.  Foreign investors may participate in the public-bidding processes on an equal basis. However, interested parties often describe the bidding process as opaque, with unclear or unenforced deadlines.

In 2015, the government prepared an asset management strategy that classified state-owned assets as strategic, important, and portfolio assets.  In companies classified as strategic, the state will maintain or obtain at least a 50 percent plus one share.  In companies classified as important, the state will maintain a controlling share (25 percent plus one share).  In companies classified as portfolio, it is not mandatory for the state to maintain a controlling share.  The government reclassified the list of companies in 2017.

SSH publishes online the latest list of state stakes for sale.  It is available in Slovenian at https://www.sdh.si/sl-si/prodaje-nalozb/kapitalske-nalozbe-v-postopku-prodaje  .

8. Responsible Business Conduct

The concept of Responsible Business Conduct (RBC) has become increasingly popular among Slovenia’s business community, but the due-diligence approach is not yet commonly recognized.  However, to raise their public profiles and improve their images among the public, larger international companies have increasingly undertaken activities such as sponsoring sports teams and community events in the name of corporate social responsibility.  Larger Slovenian companies have also focused on developing environmentally-friendly images by implementing green technologies and adhering to high environmental standards.

As an OECD member, Slovenia adheres to the OECD Guidelines for Multinational Enterprises and encourages foreign and local enterprises to follow generally accepted RBC principles, including the United Nations Guiding Principles on Business and Human Rights.  Slovenia’s National Contact Point for the OECD Guidelines is located in the Ministry of Economic Development and Technology: http://mneguidelines.oecd.org/ncps/slovenia.htm  .

Slovenia effectively and fairly enforces domestic laws pertaining to human rights, labor rights, consumer protection, environmental protections, and other laws and regulations to protect individuals from adverse business impacts.  Independent NGOs, labor unions, and business associations promote and monitor RBC and are able to conduct their work freely. The government adopted a National Action Plan on Business and Human Rights in November 2018 to strengthen activities to ensure that human rights are respected in business activities throughout the value chain and encourage cooperation between government, businesses, unions, NGOs, and other stakeholders.  Slovenia is not a signatory to the Extractive Industries Transparency Initiative or the Voluntary Principles on Security and Human Rights, but adheres to the OECD Due Diligence Guidance for Responsible Mineral Supply Chains.

9. Corruption

Slovenia has no bribery statute comparable to the U.S. Foreign Corrupt Practices Act.  However, Chapter 24 of the Slovenian Criminal Code (SCC) provides statutory provisions for criminal offenses in the economic sector.  Corruption in the economy may take many forms, including collusion among private firms or public officials using influence to appoint patrons to the boards of SOEs.

The SCC calls for criminal sanctions against officials of private firms for forgery or destruction of business documents, unauthorized use or disclosure of business secrets, insider trading, embezzlement, acceptance of gifts under certain circumstances, money laundering, and tax evasion.

Articles 241 and 242 of the SCC make it illegal for a person performing a commercial activity to demand or accept undue rewards, gifts, or other material benefits that will ultimately result in harm or neglect to a business organization.

Under Article 261 of the SCC, public officials cannot request or accept a gift to perform or omit an official act within the scope of their official duties.  The acceptance of a bribe by a public official may result in a fine or imprisonment of no less than one year, with a maximum sentence of five years. The law also stipulates the seizure of the accepted gift or bribe.

Article 262 holds the gift’s donor accountable, making it illegal for natural persons or legal entities to bribe public officials with gifts.  Violation of this article carries a sentence of up to three years. In cases in which the gift giver discloses the attempted bribery before it is detected or discovered, punishment may be reduced.

The State Prosecutor’s Office is responsible for the enforcement of anti-bribery laws.  The number of cases of actual bribery is small and generally limited to instances involving inspection and tax collection.  The Prosecutor’s Office has reported that obtaining evidence is difficult in bribery cases, making it equally difficult to prosecute.  In 2010, the government established the Commission for the Prevention of Corruption (CPC), an independent state body with a broad mandate to investigate corruption, prevent breaches of ethics, and ensure the integrity of public officials.  The CPC is not part of Slovenia’s law enforcement or prosecution system, and its employees do not have traditional police powers. However, the CPC has broad legal powers to access and subpoena financial and other documents, question public servants and officials, conduct administrative investigations, and direct law enforcement bodies to gather additional information and evidence within the limits of their authority.  The CPC may also issue fines for violations.

In 2011, to combat Slovenia’s ongoing problems with corruption and non-transparent procedures in public procurement, authorities established a new government-wide Public Procurement Agency under the Ministry of Justice to carry out all public procurements over established EU thresholds, including goods and services above EUR 40,000 (USD 45,272) and projects above EUR 80,000 (USD 90,544).  By law, the National Review Commission provides non-judicial review of all public procurements.

Corruption remains an ongoing problem, although its prevalence is relatively limited and there is no evidence that corruption has been an obstacle to FDI.  The small size of Slovenia’s political and economic elite contributes to a lack of transparency in government procurement and widespread cronyism in the business sector.  Several prominent national and local political figures have been charged or tried for corruption in public procurements. Slovenia convicted its first senior public official for accepting a bribe in 2001 and its first member of parliament in 2010.  In 2008, investigators accused several public officials, including the prime minister, of accepting bribes from the Finnish defense contractor Patria related to an armored personnel carrier procurement. Although three defendants, including the former prime minister, were convicted in 2013, the convictions were annulled on appeal.

The CPC has instituted a new system for tracking corruption in public procurement at the municipal level and has discovered numerous violations since implementation.  The CPC also operates with a broad mandate to prevent and investigate breaches of ethics and integrity involving holders of public office. The president of Slovenia appoints the leadership of CPC, which reports to the National Assembly.

Slovenia ratified the UN Anticorruption Convention in 2008.

Slovenia is a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Boris Stefanec
President, Commission for the Prevention of Corruption
56 Dunajska cesta
1000 Ljubljana, Slovenia
Telephone: +386 1 400 5710
Fax: +386 1 400 8472
Email:  info@kpk-rs.si
Web: www.kpk-rs.si/en  

Contact at “watchdog” organization:

Alma Sedlar, Ph.D.
Acting President
Transparency International Slovenia
Vožarski pot 12, 1000 Ljubljana
Telephone: +386 1 3207325
Email:
info@transparency.si

Assistance for U.S. Businesses:  The U.S. Department of Commerce offers several services to U.S. businesses seeking to address business-related corruption issues.  For example, it may assist U.S. companies in conducting due diligence as part of the company’s overarching compliance program when choosing business partners or agents overseas.  The U.S. Foreign Commercial Service may be reached through its offices in major U.S. and foreign cities, or through its website at http://www.trade.gov/cs  .

The Departments of Commerce and State provide worldwide support for qualified U.S. companies bidding on foreign government contracts through the Commerce Department’s Advocacy Center and State’s Office of Commercial and Business Affairs.  U.S. companies may report problems encountered in seeking such foreign business opportunities, including alleged corruption by foreign governments or competitors, to appropriate U.S. officials at the U.S. Embassy and the Department of Commerce Trade Compliance Center’s “Report a Trade Barrier” website at http://tcc.export.gov/Report_a_Barrier/index.asp  .

Guidance on the U.S. FCPA:  The Department of Justice’s (DOJ) FCPA Opinion Procedure enables U.S. firms and individuals to request a statement on the Justice Department’s present enforcement intentions under the FCPA’s anti-bribery provisions regarding any proposed business conduct.  The details of the opinion procedure are available on DOJ’s Fraud Section Website at http://www.justice.gov/criminal/fraud/fcpa  .  Although the Department of Commerce has no enforcement role with respect to the FCPA, it supplies general guidance to U.S. exporters who have questions about the FCPA and international developments concerning the FCPA.  For further information, see the website of the Office of the Chief Counsel for International Counsel, U.S. Department of Commerce, at https://ogc.commerce.gov/  .

Exporters and investors should be aware that virtually all countries prohibit the bribery of public officials and prohibit officials from soliciting bribes under domestic laws.  As party to various international conventions, most countries are required to criminalize such bribery and other acts of corruption.

10. Political and Security Environment

Except for its brief, 10-day war of independence from Yugoslavia in 1991, there have been no significant incidents of political violence in Slovenia since independence.

11. Labor Policies and Practices

Slovenia’s unemployment rate has fallen steadily since 2014 and reached a ten-year low of 4.4 percent at the end of 2018.  Although inflation remains low at about two percent, private sector contacts report it is increasingly difficult to find qualified staff, which might be expected to put upward pressure on wages and salaries.

Although significantly lower than its 2013 high of 25 percent, Slovenia’s youth unemployment rate remains relatively high at 15 percent.  To address this problem, authorities implemented “Youth Guarantee 2014-2015,” whereby every young person aged 15 to 29 years is eligible for an employment offer (including apprenticeship), on-the-job training, formal education, or a short form of institutional or work-based training, within four months of registering with a government-sponsored employment service.  Based on its initial success, the government budgeted 300 million euros for the 2016-2020 Youth Guarantee program.

Slovenia fully harmonized its labor legislation with the EU in 2004.  In line with this legislation, Slovenia maintains strict rules on issuing work permits to non-EU applicants.  The 2001 Employment of Aliens Act introduced a quota system for work permits and simplified the procedure for obtaining such permits for foreigners who have worked and lived in Slovenia for an extended period.

Slovenia’s wage-setting practice follows the “social partners” model, designed to contain upward pressure by centralizing wage decisions.  In practice, however, high wage expectations have pushed Slovenia’s wage levels above those of its neighbors in the Western Balkans. Despite these pressures, Slovenia’s well-educated labor force and position as a productive transition economy allows it to remain competitive in niche markets.

In 2003, Slovenia adopted an Employment Relationship Act that defines a full-time workweek as 36 to 40 hours (made up of six to eight-hour days, including a 30-minute lunch break).  The act increases protections for critical working groups (including women and children) and eases the conditions under which an employer may terminate employees. Amendments to the act adopted in 2013 further ease the conditions for termination of employment.  Slovenia’s labor force performs well in higher value-added activities that utilize its skilled technicians and engineers at a competitive cost. Despite the introduction of policies offering greater labor market flexibility, however, labor market rules and regulations remain quite rigid, and investors find that laying off workers is more difficult than in the United States.

Low unemployment and demands from public sector unions have placed upward pressure on wages.  In November 2015, the National Assembly endorsed a motion sponsored by trade unions to exempt bonuses for night, weekend, and holiday work from the minimum wage and force employers to pay these wages separately.  The National Assembly approved legislation in December 2018 to phase in a ten percent minimum wage increase over two years, from its previous after-tax level of EUR 638 per month (USD 722) to EUR 667 (USD 755) in 2019 and EUR 700 (USD 792) in 2020.  In addition, the National Assembly agreed to exempt some salary bonuses from taxation. Given such rapid increases in the minimum wage, Slovenia has lost its cost competitiveness in many sectors.

In December 2018, the government initialed an agreement with public sector unions to increase salaries, pensions, and bonuses for most public employees, averting fears of public sector strikes while increasing public expenditures by EUR 308 million in 2019-20.  Several public sector unions rejected the agreement as insufficient however, including those representing judicial workers, accountants, municipal traffic wardens, soldiers, and some healthcare workers.

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