Observation (CEACR) - adopted 2011, published 101st ILC session (2012)

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

Article 12(1) of the Convention. Payment of wages at regular intervals. Further to its previous comments, the Committee notes the report of the technical assistance mission to Ukraine which was undertaken from 16 to 19 May 2011 as a follow-up to the discussion at the Conference Committee on the Application of Standards in June 2010. The technical assistance mission was mandated by the Conference Committee to further inquire into the causes and extent of the wage arrears problem in order to better understand the situation, to assess the action being taken to redress the situation, and to collect up-to-date statistical information and documentation. The Committee notes the findings, observations and recommendations of the technical assistance mission which are summarized below:

Findings – Wage arrears situation. According to data provided by the Government, the total amount of wage arrears as of 1 April 2011 stood at 1.32 billion Ukrainian Hryvnia (UAH) (approximately €165 million), which represents a 26 per cent decrease from UAH1.79 billion in 2010. The industrial sector continues to be the sector with the highest amount of accumulated wage arrears representing approximately 56 per cent of the total amount. Wage arrears reached their peak in March 2010, then declined by nearly 30 per cent by January 2011 before increasing again to UAH1.32 billion by April 2011. The technical assistance mission therefore considered that while the reduction was real, the Ukrainian economy remained vulnerable to the wage arrears problem.

In terms of the structure of the wage debt, between March 2010 and April 2011, wage arrears declined mainly among economically active enterprises, as opposed to bankrupt enterprises. Even among economically active enterprises, however, wage arrears at State-owned enterprises persisted, representing 32 per cent of the total amount of wage arrears. On the other hand, at both private enterprises and communal enterprises, the amount of wage arrears decreased during the same period by 55 per cent. The technical assistance mission accordingly observed that the Government’s measures seemed to produce results at the local level among communal enterprises and in the private sector while much remained to be done in State-owned enterprises.

Activities of labour inspection services. According to data provided by the State Labour Inspectorate, as of April 2011, 3,483 inspected enterprises experienced wage arrears, the regions most affected being the Donetsk, Lviv and Lugansk regions. In terms of the number of workers, the Kharkiv region is the region with the highest number of workers affected. The State Labour Inspectorate confirmed that the number of violations of the legislation concerning the timely payment of wages and other entitlements increased in the first quarter of 2011 compared to the same period of 2010. As regards the number of industrial action related to wage arrears, the National Mediation and Conciliation Service (NSPP) reported that 49 cases had been filed in 2010, involving 19,200 employees of 102 companies, and 22 cases in the first quarter of 2011, involving 19,400 employees of 26 companies.

Wage situation at the Nikanor-Nova coalmine. Based on the results of direct contacts with both the management and trade unions of the mine, the technical assistance mission concluded that there were currently no wage arrears, and that wages were paid on monthly intervals, except for a practically constant one-month delay. The mission indicated, however, that there was a lack of common understanding between the management and the workers about the methodology for determining the applicable wage rate for miners employed for underground work, in particular because the national law, the general collective agreement and the sectoral collective agreement seemed to establish different minimum wage rates. The technical assistance mission concluded that there is obviously a need for further consultations on the interaction between the Act on enhancing the prestige image of coalminers’ labour of 2008 and relevant general and sectoral collective agreements, and their implications on wage rates. With respect to general working conditions at mines, the technical assistance mission noted with interest the ratification by Ukraine of the Prevention of Major Industrial Accidents Convention, 1993 (No. 174), and of the Safety and Health in Mines Convention, 1995 (No. 176), which was registered on 15 June 2011, and expressed the hope that these instruments would provide useful guidance for the improvement of safety and health standards in the mine industry.

Observations and recommendations. The technical assistance mission noted the decrease of the amount of wage arrears as a positive trend confirming the Government’s commitment to tackle the problem. The Government reaffirmed its decision to include the fight against accumulated wage arrears among its priorities and to devote all its energy to the timely settlement of all outstanding payments. In addition, the social partners, also conscious of the gravity of the problem, seemed to be fully engaged in the collective effort towards the eventual eradication of wage arrears. A tripartite working group was established to guide this effort and propose solutions. The mission was also satisfied that there were no difficulties with the flow of information and that statistics were freely disseminated among all those concerned.

The technical assistance mission noted that some policy and legislative measures were under consideration, including: (i) increasing the liability of managers in case of non-payment of wages; (ii) amending the bankruptcy law to grant first-rank priority to wage claims in bankruptcy proceedings; (iii) drafting new legislation on a wage guarantee fund; and (iv) increasing the number of labour inspectors and frequency of inspections. The mission suggested that supervision and enforcement of the national legislation could be improved by introducing sufficiently dissuasive sanctions against the sense of impunity which currently prevailed, and by strengthening the labour inspection services, which would currently visit one company on average every 36 years. The mission referred to problems with the current methodology for collection of statistical data, namely the coverage of monthly survey of the State Statistics Committee, which excluded enterprises with less than 50 employees and the lack of confidentiality in the process of collecting reports from enterprises. It also pointed out the need for adopting a common definition of the term, “wage arrears” especially as regards the one-month delay in payment of wages, which appeared to be currently perceived at certain workplaces as a normal practice.

The technical assistance mission referred to possible technical assistance and knowledge-sharing activities by the Office concerning, for instance, the establishment and operation of a wage guarantee fund, the reform of the bankruptcy law and the improvement of data collection on wage arrears. More generally, the mission expressed the view that the wage arrears problem was structural and called for a holistic approach as part of an overall wage policy, and accordingly suggested that interrelated issues, including informal wage practices such as “envelope wages”, should also be addressed.

Having duly examined the report of the technical assistance mission, the Committee notes that the discussions with Government officials, members of employers’ and workers’ organizations and academic experts were direct, open and constructive. As regards the general situation of wage arrears, the Committee notes with interest that the overall amount of wage arrears is generally on a decreasing trend, and that monthly wages are now paid on a regular basis at the Nicanor-Nova coalmine. While noting that the Government announced in September 2011 a further decrease of wage arrears to UAH1.1 billion (approximately €100.7 million), the Committee considers that the situation continues to require rigorous monitoring and possible improvements in the methodology of collecting relevant data.

The Committee also notes various measures taken and considered by the Government in consultation with the social partners, including new legislation and policies. In this regard, while welcoming these measures, it recalls its earlier indication that this was not a problem of legislative conformity but rather a problem of effective implementation of existing legislation. It therefore emphasizes the need to take prompt action to adopt appropriate sanctions and to reinforce the labour inspection services. It recalls, in this connection, the indication by the State Labour Inspectorate made during the technical assistance mission that if the number of inspectors was increased to 5,000, the Inspectorate would be able to visit an enterprise every five years.

In the light of the foregoing, the Committee hopes that the Government will take concrete steps, as a matter of priority and based on the recommendations of the technical assistance mission in order to: (i) improve data collection methodology in the field of wage arrears; (ii) adopt sufficiently dissuasive sanctions; (iii) strengthen the system of labour inspection; and (iv) address pending issues which directly impact the wage arrears situation, including, for instance, establishing a wage guarantee institution, revising bankruptcy law and eradicating the practice of “envelope wages”. It also asks the Government to keep the Office informed of any progress made in this area and to continue to provide detailed statistics concerning the overall amount of wage arrears disaggregated by economic sector, region, form of ownership and the (in)active status of economic activity.