Position Paper on Social Policy in Croatia

Introduction

The Republic of Croatia shows its interest in acceding to the European Union, accepts the acquis communaitaire, on the basis of article 137 of the Treaty establishing the European Community, and is willing to harmonize its social policy legislation accordingly. The aspects that are going to be addressed concern Labor Law, Employment Policy, Social protection, Social Inclusion. The priority aims of this policy, as it is specified in the EU legislation, are to increase employment and worker mobility, to improve the quality of jobs and working conditions, to combat poverty and social exclusion, to promote equality between men and women, and to modernise social protection system.

Employment and Labor Law

With regard to Labor Law, the Republic of Croatia strives to implement and accommodate the European Union legislation. The Employment Act was adopted in 1995 and was amended in 2003 and 2009. The Employment Act states that weekly working time is maximum 40 hors, with the exception of overtime work of 10 hours per employee a month at most. Daily breaks and daily rest are regulated as required by the acquis.As regards working condition employment is established by a written contract. The legislation provides for the principle of protection of occupational health and safety to all workers regardless of the form or the duration of work. Minors age 15-18 are not permitted to work overtime. Employees who work in harmful occupations may work less than 40 hour per week. Wages must be paid at regular intervals, but not less than once a month. Pregnant women must take leave beginning 28 days prior to the expected birth of the child, and maternity leave may last up to six months, fathers are also entitled to parental leave. Employers with at least 20 employees must permit its employees to participate in decisions that affect their economic and social rights and interests. Croatia adopted in February 2012 Amendments to the Law on Contributions with the aim of making the labor market more competitive. An employment incentive package focusing on providing long- term traineerships for young people has been adopted. Partnership relations between the Croatian Employment Service and private mediation agencies have been established in order to stimulate the labor market.

However, the rate of unemployment is still high, 21% in March 2013 and it represents a serious problem. On the other hand, the Government has been considering the modification of the Employment Law with a purpose to ease the investments and provide more flexibile hiring and firing regulations. As possibile solutions, Croatia considers that dismissal costs must be lowered in order to encourage job creation and hiring. This could be done by removing the requirement that fixed-terms contracts can be used only on exceptional basis(a specific task or the occurrence of a specific event, relaxing the conditions for collective dissmisal). Working hours need to be more flexible so that firms can adjust labor input to seasonal fluctuations in product demand by rescheduling work hours. Wage rigidities can be addressed to promote adjustement of wages rather than employment to the fall in demand for labor. In this way, we will move from protecting jobs to protecting workers.

Social protection

Pensions The pension insurance covers the risk of old age and disability of the insured. The general pension scheme is regulated by the Pension Insurance Act, the Act on Compulsory and Voluntary Pension Funds and the Act on Pension Insurance Companies and Pension Payments. New legislation regulating the second and third pension system pillars entered into force in October 2011. The pension system is based on three insurance pillars: a.Compulsory pension insurance based on generational solidarity b. Compulsory pension insurance based on individual savings c.Voluntary pension insurance based on individual savings The pension formula is the product of personal points (PP), variable pension factor according to the type of pension (PF; 1.00 in case of old-age, early retirement and disability pensions) and the actual pension value (APV): pension = PP x PF x APV. The actual pension value is the determined amount of pension for one personal point. Pension indexation in accordance with the so-called Swiss formula takes place every six months at the rate which represents 50% of the rate of fluctuation of the average consumer price index and 50% of the rate of fluctuation of the average gross salary of all employees in the Republic of Croatia in the preceding half-year period compared to the six months before that (i.e. 50% of the price increase and 50% of the wage increase). Personal points are calculated in accordance with the prescribed formula and basically represent the workers contribution to the pension fund with his/her benefit.

The Government Programme for the mandate 2011-2015 acknowledges that a structural reform in health, pension and social sector is needed to stabilise public finances in a long-term. Guided by the principle security in old-age for everyone, the Government pledges to continue the pension reform by opening up a public debate. Three main directions of reform will concern new pensioners (developing sustainable and fair system for realisation of pension rights), old pensioners (ensuring sustainable pension adjustment system and optimal realisation of pensions from the first pillar) and different categories of pensioners (setting clearer standards for general and preferential systems). Taking account of the Europe 2020 strategies for attaining smart, inclusive and sustainable growth in social, including pension policies can be tracked through the Joint Memorandum on Social Inclusion (JIM) Follow-up Process.51 In May 2011, the Joint JIM/JAP Conference on the continuation of activities and implementation of measures was held in Zagreb. Croatian key priorities are to decrease the disproportion of the labour force skills in the labour market, to improve social inclusion of the vulnerable groups, to develop better monitoring and evaluation system and tostrengthen social dialogue and capacity of social partners. The conclusion was that civil society organisations should play a more prominent role in social inclusion and poverty reduction.

Social Inclusion

National Action Plans on Social Inclusion,or NAPs/incl, are the main channels through which Member States realise the jointly agreed objectives. NAPs/incl follow an agreed structure and cover a two-year period. The first plans were submitted by the 15 EU members in June 2001, and the second in June 2003. The 10 new Member States submitted their first action plans in July 2004, covering the period to the middle of 2006. If social exclusion is conceived primarily as exclusion from the labour market then education is one of the key mechanisms of social inclusion. Setting out from the EUs official poverty line, we find that 17% to 18% of Croatias population has been living in poverty during the last several years. Despite the widespread belief that inequalities in Croatian society are very high, they are not, however, significantly greater than those in other transition countries. The groups in Croatia with the greatest poverty risk are the elderly, pensioners, the unemployed, people with a lower level of education, single-person households, and singleparent families.

EU candidate countries must prepare, in cooperation with the European Commission, a Joint Inclusion Memorandum (JIM) prior to their accession, which will also be a Croatian obligation before joining the Union. A successful policy of inclusion has two pillars: weakening the mechanisms of economic, employment and socio-cultural deprivation, and reducing the risk that the children of the socially excluded will end up being excluded themselves.