Observation (CEACR) - adopted 2000, published 89th ILC session (2001)

The Committee notes the Government’s report and the information supplied by the Government to the Committee on the Application of Standards at the Conference in June 2000.

The Committee notes that the Government’s report contains no additional information to that given to the Conference Committee in June 2000, nor does it update the figures given on that occasion. The Committee nonetheless wishes to raise the following points.

Wage arrears by sector

The Committee notes the Government’s indication that, thanks to coordinated efforts, the wage debt in the country has dropped considerably since the second half of last year. For the first time in four years, in January 2000 wage arrears dropped by more than 100 million grivnas (equivalent to 1.8 per cent since January 1999) and the number of employees whose wages were not paid in time dropped by 1.5 million. As to the distribution of wage arrears in the various sectors of the economy, of the total wage debt of 6,399,500,000 grivnas, 35.8 per cent was in the state-owned sector, and 64 per cent in collectively owned enterprises. The Committee notes that the largest increases in wage arrears were registered in the banking, information technology, non-productive public services, housing, commerce and fisheries sectors. The proportion of unpaid wages to total earnings taking all types of enterprises into account was 17 per cent (as opposed to 21.8 per cent in 1998).

With regard to the mining sector, the Committee notes the acute and complicated situation that emerged during the restructuring of the sector, due to long delays in the payment of wages, third party claims and lump-sum allowances. According to data supplied by the State Statistics Committee, wage arrears as of 10 January 1999 amounted to 731.7 million grivnas. It also notes the measures taken by the Government at the end of 1999 to reduce wage arrears in the sector by 6 per cent, which is equivalent to 687.5 million grivnas. In keeping with resolution No. 1699 of 15 August 1999 by the Cabinet of Ministers, the State Labour Inspectorate investigated the payment of wage arrears in kind with food and consumer goods in 69 enterprises in the mining sector and found, following its investigation, that payment of wages in kind was rare. The Committee also notes that the Government prepared a programme to reform enterprises in the sector and improve their financial situation for 2000, which was approved by resolution No. 1921 of 19 October 1999 of the Cabinet of Ministers. The programme is broad in scope and seeks to eliminate tensions arising out of wage arrears.

With regard to the agricultural sector, the Committee notes the Government’s statement that the already very critical situation had been exacerbated by the restructuring of collectively owned agricultural enterprises. The Committee notes the study carried out by the Labour Inspectorate in 427 collectively owned agricultural enterprises involved in the reform. According to the Government, the original intention was to grant lands to the workers in the restructured enterprises in the sector in part payment for wage arrears. However, this actually occurred for only one worker in five, since only 40 per cent of the reformed enterprises that were investigated had legal successors, whereas 60 per cent of those remaining had outstanding legal problems and 43 per cent of the undertakings investigated failed to reach a settlement with their employees. The Committee notes the Government’s statement that, in order to overcome the tensions, a reform programme has been drafted establishing that a legal successor must be designated in order to resolve wage arrears problems.

The Committee observes that, according to the Government’s statement, the main reasons for the wage arrears were the country’s difficult economic circumstances due principally to radical structural transformations, the privatization of state property and the transformation of the agricultural sector. According to the Government, the process of adaptation to the new conditions of the market economy was more lengthy and complex than was originally expected, so the President and Government are pursuing measures to stabilize the economy. The steady growth in gross national product and the increase in industrial output in the second half of 1999 and early 2000 illustrate that the economy is gradually stabilizing and the preconditions for a positive social environment are being created. The new Government has drawn up a programme of activities entitled "Reforms in the name of prosperity", which is the only way of creating the conditions necessary to raise the standard of living and overcome poverty.

Monitoring the payment of wage arrears
and reform of the Labour Inspectorate

The Committee takes note of the information supplied by the Government to the effect that top priority is given to the work of the State Labour Inspectorate of the Ministry of Labour and Social Policy. It also notes the Government’s statement that the Inspectorate has focused on breaches of wage legislation, identifying their causes, preventing further breaches and prosecuting offenders. The State Labour Inspectorate is responsible for overseeing the application of the decrees and orders of the President and Cabinet of Ministers regarding the payment of wage arrears, indexation and compensation for late payment of wages. The Committee notes with interest Order No. 19508/2 of 8 August 1999 issued by the Cabinet of Ministers in response to a presidential request of 4 August 1999, in order to ensure the timely payment of wages in state-owned undertakings, to increase the volume of dividends paid on shares held by the State and to terminate the contracts of heads of enterprises who infringe labour laws. Pursuant to that Order, the State Labour Inspectorate investigated the payment of wage arrears in companies in which the State holds shares, and made some progress including payment of arrears amounting to 43.5 million grivnas, which in some undertakings constitutes full settlement of the wage debt. The Committee nonetheless notes that in most of the companies that were inspected, the State lacks a controlling influence, so the executive bodies are unable to exert a direct influence on the payment of wage arrears.

The Committee notes that in 1999 the State Labour Inspectorate monitored compliance with labour law in 29,014 enterprises, which represents an increase of 42 per cent over the previous year. In accordance with Order No. 141 of 21 August 1998 issued by the Minister of Labour and Social Policy, the Labour Inspectorate rigorously inspects all enterprises, institutions or other bodies which have accumulated wage arrears. Its efforts have led to the payment of 888.5 million grivnas, which represents 33.2 per cent of outstanding wage arrears, and a decrease in wage arrears in 17 regions of the country. Pursuant to Presidential Order No. 1-14-1834 of 29 December 1999, the Ministry of Labour and Social Policy and the Ministry of Justice drafted and submitted to the Supreme Soviet of Ukraine a bill amending the Penal Code and the Code of Administrative Offences, which was approved in the first reading, in order to increase the liability of heads of enterprises for late or partial payment of wages. The Committee also notes the Government’s reference to a resolution entitled "Further measures concerning the payment of social benefits arrears out of budgets at all levels" proposing that ministries, agencies and regional authorities use additional extra-budgetary sources to pay the wage arrears of previous years, in order to maintain the current tendency towards reducing wage arrears in the public sector. The indicators currently show that the positive trend in the payment of wage arrears will be maintained in the non-budgetary sector. Presidential Decree No. 958/98 of 31 August 1998 on "additional measures for limiting artificial increases in wage arrears" contributed to this trend to a significant degree, by making it possible to slow the rate of increase in wage arrears over a period of one-and-a-half years and to reduce the wage debt across the board to 92 million grivnas (1.4 per cent). The Committee also notes the measures taken by the Government to reduce contributions depending on the amount of wages, such as the preparation of a bill to abolish primary payments to the budget, which has been submitted to the Supreme Rada of Ukraine (Parliament), which will allow enterprises to choose their own payment priorities (for example, timely wage payments ahead of other payments). Lastly, the Government indicates that, although its intention is to decrease the wage debt to an absolute minimum, 65 per cent of this debt is in the private sector. The Government is therefore making efforts to resolve the problem and is consulting the social partners.

The Committee notes the information supplied by the Government to the effect that a new governmental body, the Department of State Supervision of Compliance with Labour Legislation, is to be set up under the authority of the Ministry of Labour and Social Policy, and is to be based on the State Labour Inspectorate.

The Committee notes in particular the specific measures taken by the Government to control the increase in wage arrears, reduce the increase in wage arrears in the mining and agricultural sectors and to foster further measures governing the payment of wage arrears, allowances, pensions, scholarships and other social benefits.

However, like the Conference Committee on the Application of Standards, the Committee expresses its concern about the continued violation of the Convention and the serious situation of millions of workers in Ukraine. The Committee notes that, while in certain sectors there has been some improvement, in others the situation has become worse to the extent that the orderly functioning of the labour market is imperilled. The Committee recalls that the fundamental problem - failure to apply the Convention in practice - still persists. It therefore urges the Government to take the necessary measures to ensure effectively that wages are paid and all wage arrears are settled. It also urges the Government to take effective measures to ensure that sanctions and redress for injury are properly enforced.

In the absence of information showing any other progress in the second half of the current year (2000), the Committee requests the Government to provide information in its next report on the payment of wage arrears, the regular payment of wages and the strengthening of the supervisory and inspection machinery.

Furthermore, the Committee notes the information supplied by the Government on existing legislation concerning Article 3 (payment with promissory notes or coupons), Article 4 (regulation of payment in kind) and Article 15 (sanctions in the event of violations) of the Convention. It nonetheless urges the Government once again to provide detailed information on the measures adopted to effectively apply the provisions of Articles 3, 4 and 15, and Article 11 (treatment of wages as privileged credit in the event of bankruptcy).

The Committee urges the Government to provide all the information requested both on the legislation and on the measures adopted to enforce it. The Committee again asks the Government to provide up-to-date information on the results achieved by the Inspectorate and the enforcement of penalties imposed for breach of wage protection standards.

[The Government is asked to report in detail in 2001.]