Observation (CEACR) - adopted 2002, published 91st ILC session (2003)

Protection of Wages Convention, 1949 (No. 95) - Ukraine (Ratification: 1961)

The Committee notes the Government’s reports and the comments made by the Federation of Trade Unions of Ukraine and Ukrainian Employers’ Confederation. It notes the amendments made to section 23 of the Act on labour remuneration which entered into force in July 2002, establishing limits for the payment of wages in kind, which is henceforth only permissible up to a ceiling of 50 per cent of the wage set out in the employment contract, on the understanding that the price of the goods in kind must not exceed their cost price.

Wage arrears in the Voltex company

1. With regard to the comments made previously by the Free Trade Union of the Voltex company concerning the non-payment or the delayed payment of wages in the Voltex silk production industrial complex, the Government indicates that the new management of the factory has adopted practical measures with a view to paying wage arrears. According to the information provided by the Government, wage arrears in 2002 in this factory exceeded 2.17 million grivnas in January and 1.85 million grivnas in July, although the maximum level was reached in April at over 2.78 million grivnas. The company management took the decision to sell property belonging to the enterprise with a view to the payment of the wage arrears and developed a plan for the payment of arrears in accordance with which 0.8 million grivnas in arrears are to be paid before the end of 2002 and the remainder in 2003. The Government adds that over the first seven months of this year dismissed workers received wage arrears amounting in total to 1.08 million grivnas, paid in cash and in kind. The Government also indicates that the payment of current wage arrears takes place, with the agreement of the workers, at the rate of 70 per cent in kind and 30 per cent in cash.

2. The Committee expresses concern at the situation that exists in the Voltex factory, where the problem of the non-payment of wages has persisted now for several years and in which wage arrears have only been reduced very slightly since 2000 at which time they amounted to 2 million grivnas. It recalls that, according to the Free Trade Union of the Voltex company, large proportions of wages are paid in kind and are much lower than the subsistence level.

3. In view of the above, the Committee requests the Government to indicate the conditions under which the payment in kind of 70 per cent of the total arrears took place, and the appropriate measures which have been taken to ensure, in accordance with Article 4, paragraph 2, of the Convention, that such allowances in kind are appropriate for the personal use and benefit of the workers and their families and that the value attributed to them is fair and reasonable. Furthermore, while noting the measures adopted with a view to the total payment before the end of 2003 of wage arrears in this enterprise, the Committee requests the Government to continue informing the International Labour Office of developments in the situation with regard to the enterprise Voltex. It also calls upon the Government to take all appropriate measures to ensure that the total amount of unpaid wages due to workers over many years are paid to them in practice as rapidly as possible, also taking into account the fact that the State is a shareholder in this company to a total of 26.22 per cent of its capital.

Developments in the situation with regard to wage arrears

4. In the information brought to its knowledge, the Committee notes that there has been a clear improvement in the problem of arrears in the payment of wages, although the pace of the payment of wage arrears has not yet reached a satisfactory level. As of 1 August 2002, the total amount of wage arrears was 44 per cent lower than the previous year for the same period and the number of workers who had not received their wages on time had been reduced by 45.3 per cent in comparison with the same period in 2001. According to the latest figures available, the total amount of the wage debt was 2,472,100,000 grivnas in August 2002, constituting only a slight improvement from what it was in the month of April 2002, when it amounted to around 2,510,000,000 grivnas. According to the Government, arrears in the payment of wages due for the period between January and June 2002 amounted to 1,030,000,000 grivnas, which represents a fall of 40 per cent in relation to the amount of arrears for the same period in 2001. The number of workers who have not received their wages on time is 2.45 million, which amounts to 20 per cent of the total number of workers in the Ukraine. The Government indicates that, of these workers, 46.4 per cent suffered delays not exceeding three months and that the wage debt has fallen by 29.2 per cent in the public sector and 50.9 per cent in the private sector in relation to the previous period. In comparison with the amount of arrears in July 2001, the reduction in the wage debt, according to the Government’s report, concerns all branches of the economy and industry, and all the regions of the country.

5. In this respect, the Ukrainian Employers’ Federation considers that since 2001 economic growth has made it possible to achieve a significant reduction in wage arrears in all economic and industrial activities and in all the regions of the country, which has led to considerable progress in the application of the Convention in practice. Wage arrears in the public and private sectors have been reduced, by over 40 per cent and 50 per cent, respectively. Practical measures have also been taken by the Government, the labour inspectorate and the judicial authorities to improve supervision of compliance with the labour legislation. The Employers’ Federation believes that joint action by the Government and employers’ organizations to resolve the problem of wage arrears and ensure the payment of wages in time are the means to comply with the comments of the Committee of Experts.

6. For its part, the Federation of Trade Unions of Ukraine believes that the problem of the non-payment of wages has not been resolved, at a time when the debts of the state budget have been totally liquidated and the debts of local budgets have fallen by 91.7 per cent. This organization considers that nearly 2.7 million workers are affected by the problem of wage arrears, or 21.7 per cent of the total number of workers. It estimates at 32.9 per cent the proportion of workers who do not receive their wages on time and suffer delays in their payment of over six months, and adds that 40 per cent of the total wage debt concerns wages which remain due for the year 2001.

7. While noting the information provided by the Government and the social partners, the Committee notes that in certain branches of economic activity, such as industry (extraction of coal, lignite and peat) and in certain services, such as health, welfare and education, wage arrears have increased since April 2002. It also notes that the two regions in which wage arrears are the highest, namely Donetska and Luhanska, are also those in which the reduction in the total amount of arrears was the lowest between July 2001 and August 2002, at 19.9 per cent and 28.1 per cent, respectively, and which have even experienced increases in wage arrears since April 2002. The Committee requests the Government to continue providing detailed information on developments in this situation, and in particular on branches of economic activity and regions of the country in which the rates of wage arrears are the highest.

Monitoring the payment of wage arrears and supervising the application of legislation respecting labour remuneration

8. According to the latest information provided by the Government, the situation with regard to wage arrears is still analysed every month by the State Department for the Supervision of Compliance with Labour Legislation, the results of which are submitted to the Council of Ministers and the Presidential Administration of the Ukraine, as well as the Board of the Ministry of Labour and Social Policy. The capacities of ministerial and local bodies and autonomous government agencies also continue to be used in support of efforts to resolve the problem of wage arrears and they are empowered to examine reports by heads of enterprises. A more in-depth supervision procedure has been established for the 270 enterprises which have accumulated the highest wage arrears.

9. The Government recalls in its reports the machinery established to supervise compliance with the legislation on the payment of wage arrears. It indicates that the national legislation provides for disciplinary, administrative and penal liability in the event of violations of the legislation respecting labour remuneration. During the course of 2001, this machinery enabled the labour inspectorate to supervise around 40,000 enterprises, institutions and organizations and to report over 13,000 heads of establishments for violations of the legislation on labour remuneration and to forward the cases to the competent courts, which handed down penalties totalling around 1.3 million grivnas against the heads of these enterprises. The Government adds that labour inspectors themselves imposed 5,670 penalties in the form of fines, totalling over 500,000 grivnas, upon heads of enterprises who failed to comply with their injunctions. In overall terms, administrative action has been taken against 19,279 heads of enterprises for violations of the labour legislation in general, or 48.9 per cent of those who were inspected. According to the Government’s reports, the number of inspections carried out during the course of 2001 was around 30 per cent higher than for the year 2000. Furthermore, for the same period, the number of court rulings imposing penalties on heads of enterprises, following the reporting of violations by labour inspectors, rose by 97.9 per cent. The amount of the fines imposed in 2001 by the labour inspection services also increased substantially by 97.7 per cent, while the courts handed down 6.5 times as many penalties. The Government also provides figures relating to compliance with labour legislation in the first half of 2002, when inspections of 16,584 enterprises led to 6,724 reports of violations of the legislation respecting labour remuneration and the forwarding of the cases to the competent courts. According to the information provided by the Government, the levels of the penalties imposed by labour inspectors and the courts during the first half of 2002 with a view to ensuring compliance with the legislation on labour remuneration rose substantially in comparison with the figures for 2001. During the first three months of the current year, there was a rise of 64.7 per cent in the fines imposed by labour inspectors and an increase of 26.5 per cent in the penalties imposed by the courts.

10. The Ukrainian Employers’ Federation observes that the Government, the labour inspectorate and the judicial authorities have strengthened the application of the legislation respecting the disciplinary, administrative and penal liability of those with political responsibility and of employers for non-compliance with the intervals prescribed for the payment of wages.

11. The Federation of Trade Unions of Ukraine, however, points out that the directives of the Head of State concerning the elimination of the wage debt before the end of 2001 were not given effect to, and that this did not result in severe penalties against the directors of the central and local authorities. The above organization, while noting the increase in the activities of the national labour inspectorate, emphasizes the need to extend its powers and duties with a view to accelerating the payment of wage debts to workers.

12. The Committee notes the progress achieved in the effective supervision of compliance with the legislation on labour remuneration. Nevertheless, it notes with concern the fact that the inspections carried out by labour inspectors found in one case out of three during the course of 2001, and in one case in 2.6 out of 2002, violations of the above legislation. It requests the Government to provide its observations to the International Labour Office on the comments made by the Federation of Trade Unions of Ukraine with regard to the activities of the state supervisory bodies and their results. It also requests the Government to continue providing precise and detailed information on compliance with the national wage legislation, and particularly on the results achieved through the activities of the national labour inspectorate.

13. The Committee notes that certain improvements have been achieved with a view to resolving the problem of wage arrears that the country has been experiencing for a number of years and the reduction by 44 per cent in the amount of wage arrears in comparison with the previous year. In view of the information brought to its knowledge, the Committee is however bound to express its concern at the persistence of the problem of wage arrears throughout the country and in all sectors of the economy. It notes that in practice, since April 2002, there has been a slowing down in the payment of arrears, and even an increase in arrears in certain sectors since that date. The Committee recalls that sustained efforts and an open dialogue with the social partners are necessary to bring an end to the phenomenon of wage arrears. It therefore urges the Government to continue unceasingly and as a national emergency its action against the disastrous consequences of the problem of wage arrears, which continues to place nearly 2.5 million workers and their families in great hardship in their everyday existence. It also requests the Government to continue to keep it informed of any new developments in this respect.

Legislative developments

14. The Government states in its report that the problem of the payment of wage arrears is under constant supervision by the leaders of the country and that action is being taken at the legislative level. Since the Government’s previous report, the Act on labour remuneration has set limits on the payment of wages in kind, which is now only authorized up to the ceiling of 50 per cent of the wage and the allowances paid in kind must be deducted from the wage at a rate which does not exceed the cost price. The Government states that in practice payment in kind is principally found in the forestry and fishing sectors and that the list of goods prohibited for the purposes of payment in kind by Order No. 244 of the Council of Ministers of 3 April 1993 limits the practice of the payment of wages in kind.

15. According to the Federation of Trade Unions of Ukraine, the new provisions respecting the payment of wages in kind differ substantially from those which were in force previously and should result in a reduction in the proportion of wages paid in kind and contribute to increasing the cash income of the population from wages. The Federation notes, however, that the Act respecting the elimination of the debt relating to wages and other forms of remuneration, the objective of which is to accelerate the payment of debts in this field, has been vetoed for the fifth time by the Head of State. It adds that up to now the legislation has not given priority to the payment of wages over other compulsory payments, despite several parliamentary initiatives to this effect. Since September 2001, the Supreme Council of the Ukraine has on three occasions adopted the Act respecting the priority payment of wages but, once again, the Head of State has used his veto to block the promulgation of the text. Nor has the issue of the exceptional payment of wages to workers in the event of the bankruptcy or liquidation of enterprises benefited from a legislative solution, with the result that in such cases, according to the Federation, the workers do not receive the whole of their termination allowances or their wage arrears. In consequence, the Federation of Trade Unions of Ukraine urges the adoption of a law giving priority to the payment of wages, as well as a legislative solution to the issue of the exceptional payment of wages in the event of the bankruptcy or liquidation of enterprises. On this subject, the Federation states that its President, a member of the Supreme Council of the Ukraine, took the initiative of submitting for examination by the Council a Bill providing for the exceptional payment of wages in the event of the bankruptcy or liquidation of enterprises intended to bring the national legislation into conformity with the Convention.

16. In this respect, the Committee recalls that, under the terms of section 31 of the Act respecting the renewed solvency of the debtor or confirmation of bankruptcy, the payment in whole of the debt constituted by the wages is given second place after the acquittal of the debt constituted by the loan and the payment of the expenses of the liquidation procedure. Under the above Act, where the assets of the bankrupt enterprise are insufficient, the wage claims of workers are considered as being settled. As it has done in the past, the Committee is bound to express its concern at this provision which does not give adequate guarantees to workers and would result in their wage claims not being settled in the event of the bankruptcy of enterprises. Furthermore, while noting the comments of the Federation of Trade Unions of Ukraine concerning the Act respecting the priority payment of wages adopted by the Supreme Council of the Ukraine, but vetoed by the Head of State, the Committee urges the Government to take the necessary measures to afford the workers real and effective protection of their wages in the event of the bankruptcy of enterprises, in accordance with the spirit and letter of Article 11 of the Convention.

Other provisions of the Convention

Article 12, paragraph 1, in conjunction with Article 1 of the Convention. The Committee notes that, by virtue of section 16 of the Act respecting local state administrations, the latter exercise control, each within its area of geographical competence, over the payment of wages on time and in proportions which must not be lower than the amount of the minimum wage in force in the country. The Committee recalls that, in accordance with Article 1 of the Convention, the term "wages" means remuneration or earnings capable of being expressed in terms of money and fixed by mutual agreement between the parties to the employment relationship or by national laws or regulations. As a consequence, unless the workers have been recruited at the level of the minimum wage, the wage which must be paid to them and to which they are entitled is not the minimum wage, but the wage set out in their contract of employment. The local authorities responsible for compliance with the legislation on the payment of wages therefore have to ensure that the wage that is paid to workers is paid on time and is in practice the wage to which they are entitled, and not only the minimum wage established for the country, unless the latter wage is the wage set out in their contract of employment. The Government is requested to take all the necessary measures to bring this provision of the national legislation into conformity with the Convention.