Businesses reject govt plan to set wages in private sector – paper

Budapest, February 17 (MTI) – Businesses are concerned that a government plan to intervene in private-sector wage agreements to counter possible wage drops as a result of the new 16 percent flat-tax regime could undermine their competitiveness and lead to mass layoffs.

The centre-right Fidesz ruling party recently announced the establishment of a committee to monitor the impact of the new tax — implemented on Jan. 1 this year — on pay in both the public and private sectors, and to ensure that the guaranteed minimum wage is applied and any wage losses are compensated for.

    Trade unionists polled by Thursday’s Napi Gazdasag business daily said the government should not be surprised about any negative effects associated with the changes to personal income tax. These had been foreseen by social players who gave warning to the government at negotiations, they said.

    Ferenc David told the paper that the practice of centrally setting wages had been eliminated in 1992 and replaced by free wage negotiations. It would be detrimental were the state to once again have a say in negotiations where it was neither an owner nor an employer, he said. Further, if parliamentary lawmakers were to put pressure on private companies to raise wages, the independence of businesses would be threatened, he said.

    ”Putting legal enforcement on firms to follow recommendations would be a huge breach of business autonomy,” he added. “This would surely trigger first cuts in non-monetary benefits, then layoffs,” he said.

    Antal Rogan, the Fidesz deputy put charge of the monitoring committee, said earlier that the aim of the committee was to use “public pressure” to enforce the government’s wage recommendations.

    Imre Palkovics, of the National Federation of Workers’ Councils, agreed that forced wage rises would result in mass layoffs.

    ”An 8-percent pay rise would be necessary for wages below a monthly gross 300,000 forints (EUR 1,100), next to 4 percent annual inflation, to keep last year’s net earnings level,” he said. “That would clearly mean job cuts,” he added.

    Janos Borsik, of the Alliance of Autonomous Trade Unions, said “the government shouldn’t be surprised, as unions had protested the unfairness of the new tax regime”. Setting up these monitoring committees is just a way of avoiding admitting they were wrong, he added.

    Prime Minister Viktor Orban on Monday told parliament that it was a matter of urgency to ensure that lower wages as a result of the new tax regime were compensated for by businesses, even in the private sector.

    Unions had expressed concern that net pay for some employees could deteriorate in light of changes to the mix of taxes and contributions, as well as the elimination of certain tax allowances.

    Earlier Ferenc David, head of national business lobby VOSZ, told MTI that government was trying “to shift the responsibility onto the employers of the business sector.”

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