Observation (CEACR) - adopted 2001, published 90th ILC session (2002)

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

The Committee notes the Government’s reports and the information supplied by the Government to the Committee on the Application of Standards at the Conference in June 2001. It also notes the comments communicated by the Free Trade Union of the Voltex Company concerning the non-payment or partial payment of wages due to company workers. Those comments were transmitted to the Government in August 2001 but no reply has so far been received.

According to the allegations of the Free Trade Union of the Voltex Company, since 1994-95 the non-payment or delayed payment of wages has been standard practice at the industrial complex of silk of Lutsk Voltex. The wage arrears have come to affect about 2,000 workers and amount to 2 million grivnas. It is also alleged that wages are sometimes paid in kind, not only partially, and well under the subsistence level. The Committee asks the Government to provide detailed information on the above observations and indicate the measures it intends to take for the rapid settlement of outstanding wage debts in the Voltex Company.

The evolution of the situation with regard to wage arrears

The Committee notes that the Government has been reporting on some positive developments with regard to the settlement of wage arrears, and affirms that the situation has improved in general in all branches, in the public and private sectors of the economy, and in all areas. The Committee recalls, in particular, that in addressing the Conference Committee on the Application of Standards in June 2001, the Government emphasized that in 2000 and 2001, for the first time, a trend of economic recovery had emerged and that the resolution of the problem of wage arrears was closely linked to such economic recovery. According to the latest figures supplied by the Government, the wage arrears in Ukraine as of 10 September 2001 totalled 3,447.8 million grivnas, and thus dropped by 40.8 per cent with respect to the same date in the previous year and by 52 per cent compared to the maximum level registered in August 1999. The number of workers whose wages were not paid in time decreased by 3.89 million persons, or 37.4 per cent, in the course of the year. The ratio of unpaid wages to the total amount of wages, including all types of enterprises, was reduced by more than two times, i.e. 5.9 per cent against 14.3 per cent as compared to the same index of the last year. The Government indicates that the reduction in the arrears of wages has a stable downward trend. For the first six months of 2001 the total amount of unpaid wages decreased by 510.8 million grivnas.

As to the distribution of wage arrears, of the total wage debt as of 10 July 2001, 31.6 per cent was in the state sector, and 68.4 per cent in the non-state sector. The wage arrears in the state sector totalled 1,395.8 million grivnas, and thus dropped by 36.1 per cent with respect to the same date in the previous year whereas in the non-state sector the wage arrears amounted to 3,021.3 million grivnas, which is by 27.8 per cent lower than last year’s total. Available information shows that in the first nine months of 2001 wage arrears were reduced in all regions and in 22 out of the 26 branches of the economy, with the highest rates of decreasing arrears being observed in health care and education where arrears dropped by 70.7 and 78.3 per cent respectively, and in the nuclear power industry and the electric power industry where wage debts dropped by 99 and 52.9 per cent respectively. The arrears of wages were cleared off in full at the hydroelectric stations, the underground railway construction industry, gas industry, fish industry, leather, fur and footwear industry and the metalwork industry. In other sectors the situation improved at a slower pace, for instance, in the coal industry wage arrears decreased by 10.3 per cent since the beginning of the year.

However, the Government recognizes that in certain sectors the situation has considerably worsened. According to the Government’s latest report, compared to the situation as of 10 August 2000, a growth of wage arrears was registered in four branches of the economy, including fishery by 29 per cent, air transport by 47.7 per cent, the insurance sector by 27 per cent and in non-industrial consumer services by 13 per cent. The Government also indicates that in the industrial sector, wage arrears increased in the oil-refining industry by 4.2 times and in the textile industry by 1.9 per cent.

The Committee requests the Government to continue to supply information on the evolution of the situation, especially in those sectors where according to the Government’s report there has been little or no progress in relation to the regular payment of wages.

Monitoring of the settlement of wage arrears

According to the information supplied by the Government in May 2001, the real capacities of the local bodies of the executive authority and self-governing bodies have been used in the effort to tackle the problem of wage arrears, and special committees operate at the regional, city and district level examining on a regular basis, but not less than once a month, the progress reports concerning the process of paying off accumulated wage arrears. These committees exercise particular control over the enterprises of state and communal ownership, state budget-financed organizations and the joint stock companies with the state participation exceeding 50 per cent.

Moreover, the Government indicates that the evolution of the situation with respect to wage arrears is analysed monthly by the State Department of the Supervision over the Observance of the Labour Legislation, and that the results of these deliberations are submitted to the Board of the Ministry of Labour and Social Policy, the Cabinet of Ministers and the President. The Cabinet of Ministers examines twice a month the progress reports of the ministers, heads of the other central bodies of the executive authority while reports of the officials in charge are examined weekly at the meetings of the Governmental Commission on the matters related to timely and full payment of taxes and clearing off the wage arrears, pensions, grants and other social benefits. While noting that public authorities consider the rate of settling outstanding wage debts to be unsatisfactory, the Committee requests the Government to provide information on any action undertaken to follow up on previous measures as well as on any new initiative to the same end.

Strengthening of the supervision and inspection machinery

The Government indicates that, with a view to bringing the bodies exercising control over the observance of labour legislation into conformity with the requirements of the ILO Labour Inspection Convention, 1947 (No. 81), further measures were taken to reform the labour inspection services. Concretely, by decision of the Cabinet of Ministers No. 1351 of 30 August 2000, the State Department of the Supervision over the Observance of the Labour Legislation was established within the Ministry of Labour and Social Policy. By decision of the Cabinet of Ministers No. 1771 of 29 November 2000, the Regulations on the State Department of the Supervision over the Observance of the Labour Legislation were approved. Under those Regulations, the main function of the new body is to exercise state control over the observance of the labour legislation and of the legislation on universal compulsory state social insurance by the enterprises, institutions and organizations of all types of ownership, as well as by natural persons making use of employed labour. The Committee also notes the Presidential Decree No. 292 of 7 May 2001 on Urgent Measures Aimed at Accelerating the Payment of Arrears of Wages and the decision of the Cabinet of Ministers No. 959 of 9 August 2001 which regulates staffing matters of the territorial bodies of the Labour Supervision Department.

The Government states that in the course of 2000, state labour inspectors checked 23,178 enterprises experiencing wage arrears. As a result, 3,333 reports on administrative offences of the managers of the enterprises were established and submitted to the courts, and 1,909 fine warrants were delivered. During the first eight months of 2001, 27,878 enterprises were controlled, 8,942 reports on administrative offences were transmitted to the courts and 3,488 fine warrants were issued for a total sum of 752.6 thousand grivnas. In the year 2000 and the first quarter of 2001, the contracts of 222 managers of enterprises were terminated for related reasons. According to the Government, the efficiency of state control over the observance of the legislation in the field of labour remuneration has been improved. While in 1999 state labour inspectors applied administrative sanctions to every fifth manager of the inspected enterprises with wage debts, in 2000 they applied such measures to every third manager, and in the first quarter of 2001 practically to every second manager. As a result of the reinforced measures taken by the labour inspection services, 4,436 cases of wage arrears were settled representing a total amount of 631.9 million grivnas. The Committee requests the Government to continue to supply statistical information concerning inspection results, with special reference to those sectors for which the Government indicates no improvement, and even worsening, of the situation.

Legislative developments

The Committee notes the Government’s statement that the issue of paying off the arrears of wages is closely monitored by public authorities and this has been reflected in the national legislation. The Government also states that through the improvement of the legislation in force the legal parameters of the protection of workers’ labour rights are better defined in the context of the current economic situation and the transition to market-based relations. The Committee notes that the Law of Ukraine on the Procedure of Clearing Off Liabilities of the Payers to the Budgets and State Trust Funds, which came into effect on 1 April 2001, repeals the procedure of making compulsory preferential payment to the budget and grants the managers of enterprises the right to determine the order of priority of making any payment. The new Law contains also a clause providing that own resources of a legal person used for paying off wage arrears cannot be used as the sources of paying off tax debt of a taxpayer by his own decision or by a decision of an exempting authority. The Committee also takes note of the adoption of the Law No. 2050-III on Paying Compensation to the Citizens for the Loss of Part of their Earnings due to Non-Observance of the Periods of their Payment which entered into force on 1 January 2001. By its decision No. 159 of 21 February 2001, the Cabinet of Ministers adopted the Regulations on the Procedure of Compensation to the Citizens for the Loss of Part of their Earnings due to Non Observance of the Periods of their Payment. The compensation for work performed as from 1 January 2001 is calculated on the basis of the wages due (after deduction of taxes and other mandatory payments) multiplied by the increase of the index of consumer prices (inflation index) expressed in percentage points, divided by 100.

In addition, the Committee notes the Decree of the Supreme Rada No. 2293 III of 15 March 2000 regarding the State of Implementation of the Law on the Remuneration of Labour at the Enterprises, Institutions and Organizations of all Forms of Ownership which fixes the time limits of paying off wage arrears and determines the tasks of the various executive bodies in this field. It notes, in particular, that the Supreme Rada qualified as insufficient the work accomplished so far and called upon the Cabinet of Ministers to ensure that all wage arrears be settled before January 2002 at the latest and not allow this phenomenon to happen again in the future. Finally, the Committee notes the adoption of the Act to amend the Penal Code and the Code of Administrative Offences of 21 September 2000, with the aim of amplifying the penal and administrative liability of employers for untimely payment of wages and other social benefits. The Committee would appreciate receiving copies of any legislative or regulatory texts which may not have been transmitted to the Office in previous reports.

While noting the Government’s ongoing efforts to control and eventually eliminate the problems of income insecurity and wage arrears which severely handicap the national economy in its transition process, the Committee is nevertheless obliged to express its concern about the fact that the phenomenon of wage arrears persists throughout the country and concerns all sectors of the economy. All the more so as despite the Government’s commitment, increased awareness and mobilization of means, wage arrears continue unchecked in certain economic sectors. The Committee recalls that putting an end to the accumulation of wage arrears calls for sustained efforts, an open and continuous dialogue with social partners and a wide range of measures, not only at the legislative level but also in practice. As it has been pointed out on numerous occasions by the Committee but also other ILO supervisory bodies, the fact that the national legislation is in conformity with the requirements of the Convention does not suffice in itself to ensure that the Convention is satisfactorily applied, unless the legislation is effectively and strictly enforced. The Committee understands that the problem of delays in wage payment is symptomatic of a transition economy, but once again stresses that this cannot stand as a valid excuse year after year for the continued failure to honour employment contracts by paying workers regularly their dues. The Committee urges the Government to continue relentlessly its fight against the disastrous consequences of the problem of wage arrears which strains the lives of almost 5 million workers and those of their families.

The Committee notes the Government’s statement to the effect that the question of eradicating the phenomenon of wage arrears is set as a priority objective of government action in 2001. It also notes that the Government hopes that the ILO would provide advice and technical assistance to resolve this problem. The Committee can only encourage the Government to avail itself to the fullest extent possible of the expert advice and technical services offered by the Office in designing and implementing appropriate solutions to the problem of wage arrears. The Committee urges the Government to tackle the problem of liquidation of accumulated wage debts as a matter of national urgency and continue to report on any further developments in this regard.

Other provisions of the Convention

The Committee recalls its previous observation in which it requested the Government to supply detailed information on the measures adopted to effectively apply in practice the provisions of Articles 3, 4, 11 and 15 of the Convention. With respect to Article 4 on payment of wages in kind, the Government indicates that under article 23(3) of the Wage Act of 24 March 1995, the partial payment in kind is exceptionally allowed under a collective agreement at prices not lower than cost prices, but it is prohibited to replace cash payment by goods listed in the Decision of the Cabinet of Ministers No. 244 of 3 April 1993 regarding the List of Goods Prohibited as a Means of Payment of Wages in Kind. The Government indicates that the payment in kind is additionally regulated in article 19(4) of the Law on Enterprises. According to the Government, this form of payment is practised more often in agriculture and partially in forestry and fishery. Neither the General Agreement between the Cabinet of Ministers and the Confederation of Employers and the trade unions associations nor the sectoral agreements provide for payment of wages in kind. This is only provided for by a sectoral agreement between the Ministry of Agrarian Policy and the central committee of the trade unions of the workers of the agricultural and industrial complex. Between January and April 2001, the amount of wages paid in kind was reduced, the volume of wages paid in kind constituting 6 per cent of the total amount of wages.

Regarding Article 11 of the Convention, article 21(2) of Act No. 2343 of 14 May 1992 on Bankruptcy provides that the liabilities to workers of an insolvent enterprise come second among priority claims. The second rank privilege is also recognized by article 31(2) of the Law on Restoring Solvency of a Debtor or Declaring Bankruptcy which also provides that salaried employees and wage workers, or organizations representing them, may initiate bankruptcy proceedings at a local merchant’s court. As regards Article 15(c) of the Convention, the Committee notes, as mentioned above, that by virtue of Act No. 1979-III of 21 September 2000, section 133 of the Penal Code as well as section 41 of the Code of Administrative Offences were amended and now provide for stricter penal and administrative sanctions against employers for non-compliance with the requirements of labour legislation concerning the regular payment of wages, pensions and other social benefits.

The Committee again urges the Government to intensify its efforts in order to collect and communicate full information on the implementation of the Convention in practice, especially with reference to the payment of wages in kind, the preferential treatment of workers’ wage claims in the event of bankruptcy or judicial liquidation of an enterprise, and sanctions imposed for violations of the labour legislation on wage protection.

[The Government is asked to report in detail in 2002.]