Macedonia's Controversial New Labor Law

The government says new workplace rules bring the Balkan country in line with European free market norms. But employees fret they're getting the shaft

D.K., a young law-school graduate from Skopje, has been warned she could be fired several times during her year on the job.

"The pressure at work gets worse every day," she said. "I cry almost every other day. I get sick almost every month from the accumulated stress. I don't know if I'll have a job tomorrow or if I'll get a promotion. My boss is so unpredictable, but I need this job because I want to move out of my parents' house and start my own life."

D.K. is certain that a new labor law passed in September will only make life worse for her and anyone else in Macedonia with a capricious boss.

The measure gives employers more latitude in defining employees' vacation terms and working hours, and it removes a major restriction in the hiring and firing process. A coalition of labor unions representing about 200,000 workers organized protests around the country this fall in response.

But government officials say the law brings the country in line with European norms and makes Macedonia more competitive with its neighbors.

"The law was drafted according to the standards of the World Bank and according to the standards of many states, and it should increase competition among Macedonian companies and those who are willing to invest in the country," Prime Minister Nikola Gruevski said during a recent public address. "We must act according to world standards and we must be competitive and take steps even before other countries."

Specifically, the law stipulates that employees are entitled to at least 20 days of annual vacation, although it does not specify if those are consecutive or working days. It also allows an employer to fire a worker and to hire a replacement the next day. Further, it removes limits on how many third, or night, shifts employers can demand from their workers and gives no preference to a company's laid-off workers if a job opens up in that company.

The government passed the new law without consulting the labor coalition, according to the coalition's spokesman, Pece Gruevski.

Gruevski said labor groups fear the changes will lead to abuse in an economy where workers are largely expendable, thanks in part to an unemployment rate of nearly 34 percent.

He pointed out that the law allows the employer and employee to settle on the amount of vacation time, if any, permitted over the minimum 20 days. The unions see this as a loophole that will allow companies to establish the minimum as the maximum. "There's a real danger of abuse of the law by the employers," he said.

Further, Gruevski noted, prior law allowed employers to assign workers to the overnight shift for up to one week per month. That restriction has been lifted. "What kind of workers we will have? Sick? Tired?" he said.

"We've tried to make the prime minister and his government see some sense, but they don't want to listen. So we must express our disapproval through protests. We'll protest until the government withdraws this law," Gruevski said, although the protests have ended.


For his part, the prime minister insists the new law will benefit workers because it will help Macedonia attract more domestic and foreign investment.

Two months ago, Labor Minister Xhelal Bajrami suggested at a press conference that the legislation is part of Macedonia's shift into the free market. "In the conditions of an open market economy, of course the employer is the person who should say who is going to be employed and who is going to be fired. We can't tell the employers how many employees they should have with regulations. They must decide for themselves."

The Union of Employers has endorsed the new law and has refused to be drawn into a debate.

Although Prime Minister Gruevski said the new law hews to World Bank standards, the bank's representative in Skopje, Denis Boskovski, said his office acted in an advisory capacity only. "We only gave the government the European course of labor standards," he said.

Boskovski said he doubted that changes to the work force alone would be key to attracting foreign investment. "It's very difficult to believe that only the labor force would do that.

The labor force in Macedonia is only one part of the Macedonian economy that could bring investment into the country. The country first must settle other regulations, taxes, to create a good judicial environment," he said.

Several economists and analysts refused to comment, saying they had not yet read the law. But off the record, some agreed with labor leaders that the changes would give employers far more rights than obligations.

"It is especially frightening because there are simply no protective mechanisms for the rights of the workers, and it will certainly not contribute to more foreign investment, when there are so many other things that should be resolved first in order to create a good business climate for foreign investment," said an economics professor.

"There is no mechanism that functions in Macedonia, in terms of protection of employees' rights," said one legal adviser who insisted on anonymity. "There's the possibility of taking a case of abuse of labor to the courts, but it's expensive and offers no guarantees. Employers can do pretty much anything they want with their employees for a lot of reasons, one of which is the huge unemployment rate. That creates a situation in which anybody is seen as easily replaceable, regardless of his personal qualities."

The head of an association of British investors said he had not had time to study the new law.

"During this time of transition it is sometimes a little difficult to keep up with the pace of change in laws, which is a complication on one hand but a sign of progress on the other," said Ray Power, the president of the British Business Group in Macedonia. He said the country's business climate is generally improving but is still hamstrung by bureaucracy.

"We need to start paying closer attention to the actual realization of deals, as investors are starting to complain about the time it takes to do business and are taking their business north of the border to Kosovo, which does give us some cause for concern," Power said.


According to the UN Conference on Trade and Development's most recent World Investment Report, in 2007 Macedonia ranked 63rd of 141 economies in inward foreign direct investment and still lags well behind its potential. Last year the country took in $320 million in FDI, putting it at the bottom of the heap in southeastern Europe.

The World Bank gives Macedonia low marks for relative inflexibility in hiring and firing workers, ranking it 125 of 181 countries surveyed in its Doing Business 2009 report.As part of the government's Invest in Macedonia campaign, the prime minister boasts of a low-cost labor force, but social contributions inflate labor costs by an additional 65 percent.

The only indicators where Macedonia fared more poorly in the World Bank survey were dealing with construction permits and closing a business.

Particularly inflexible, the report showed, are regulations governing working hours. It is also more difficult to hire workers in Macedonia than in neighboring countries; it is easier, however, to fire them.

The opposition leftist Social Democratic Party of Macedonia has said it will introduce a new version of the law with strengthened rights for workers, but the government says it's too late for that.

Last month several towns in Macedonia saw workers' protests. The union coalition estimated that about 10,000 people participated but other estimates put the number at around 5,000. Either way, labor leaders called the protests a success, considering that they took place during working hours.

The unions took the matter to the Constitutional Court last month, arguing that it violates a constitutional provision that prohibits employers from cutting vacation time below a certain range, depending on time worked.

Whatever happens, things will likely remain as they are for workers like 50-year-old Mirjana B., who works in a large company that she would not name for fear of losing her job.

Mirjana said she works two shifts and regularly on Saturdays even though she and her colleagues are not supposed to work then. She receives no premium for the Saturday work because her bosses record it as night work. With the limits on night work now gone, employers could be encouraged to step up such practices.

Mirjana said her family depends on her salary, so she stays put.

Meanwhile, D.K. is looking for another job or hoping to get a scholarship somewhere out of Macedonia.

Before it's here, it's on the Bloomberg Terminal.