Observation (CEACR) - adopted 2005, published 95th ILC session (2006)

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

The Committee notes the Government’s report and the detailed information communicated in response to its previous observation. Regarding the wage arrears situation in the Nikanor-Nova coalmine, the Government states that the labour inspection services of the Lugansk district carried out repeated inspections in the period 2003-05 and reported a number of violations relating to the regular payment of workers’ wages. Among other irregularities, the inspection revealed that wages are paid once a month in contravention of section 115 of the Labour Code; wages are not paid for the three days before the beginning of a period of leave in contravention of section 21 of the Act on leave; and also that only a part of the company’s turn-over is used to pay wages although section 97(5) of the Labour Code provides that workers’ wages must be paid as a priority before any other payments can be made by the employer. According to the latest statistics, the wage debt continued to increase, and in March 2005 stood at 9.7 million grivnas. Moreover, the Government indicates that administrative proceedings had been initiated against the three acting directors of the mine who had been appointed in the last three years for failure to put an end to violations of labour legislation and also for non-implementation of compliance orders issued by labour inspectors.

The Committee notes with concern that the wage crisis in the Nikanor-Nova coalmine appears to be out of control despite the changes in management, regular controls, and imposition of sanctions. It asks the Government to step up its efforts to contain the further deterioration of the wage debt before it reaches critical proportions. The situation seems all the more distressing as, according to the Government’s account, the problem is not always related to liquidity difficulties but rather to mismanagement of available resources. The Committee further recalls that in some earlier comments the Workers’ Union of the Nikanor-Nova coalmine had indicated that the wage rates applied at the enterprise were much lower than the statutory minimum pay rates depriving the entire population of the town of Zorinsk of a decent level of living. The Committee requests the Government to look into these allegations and provide full particulars in its next report together with up-to-date information on the evolution of the wage arrears situation in the coalmine in question.

Moreover, the Committee notes the information supplied by the Government in reply to the comments made by the Confederation of Free Trade Unions (KSPU). According to the workers’ organization, the figures provided by the Government showing a downward trend in wage arrears are questionable as in August 2004, the total amount of the wage debt exceeded 2 billion grivnas (approximately US$450 million), including 796 million grivnas in the coal industry. Based on the statistics communicated by KSPU, the wage arrears in certain mining companies amounted to eight times, ten times and even 32 times the monthly wage bill and totalled from 12 million grivnas (US$2.2 million) to 67 million grivnas (US$12.6 million). The KSPU further alleges that employers persisted in the practice of paying workers their entire wages in goods and products produced at their own factories. It also criticizes existing insolvency legislation which provides that if the value of assets of an undertaking following liquidation is insufficient, workers’ wage claims are deemed to be settled.

In its reply, the Government acknowledges that wage arrears is a widespread and long-standing problem but specifies that in only ten months in 2004, the total amount of those arrears fell by 1 billion grivnas, or 57.5 per cent, to 763 million grivnas and the number of state-employed workers not receiving their wages on time fell by 890,000 or 68 per cent. With reference to the situation in the coal industry, which the Government describes as “extremely tense”, the Government indicates that state-owned enterprises have been provided with interest-free loans from the budget in order to pay off wage debts, and as a result arrears in the coal industry have fallen by 455 million grivnas, or 79.4 per cent, to 118 million grivnas. It adds that timetables for enterprises to clear their current wage arrears by the end of the year were drawn up by central and local executive authorities in consultation with trade unions and that additional sources of funding were being sought for this purpose. As regards the partial payment of wages in kind, the Government insists that payment in kind currently takes place only in agriculture, forestry and fisheries, i.e. in those sectors or industries in which payment in kind is customary and also one of the principal material incentives for workers.

While noting the Government’s explanations, the Committee considers that the wage situation in the country remains a source of serious concern. As the Committee has emphasized in the past, every effort should be made to prevent a “culture” of deferred payment of wages from infecting the national economy as a whole, and also that effective corrective measures should seek not only to remedy current deficiencies but most importantly to guarantee with a reasonable degree of certainty that phenomena of this nature and this scale would not be experienced again in the future. The Committee therefore asks the Government to continue devoting the necessary time, energy and resources to the supervision and control of the wage crisis, especially in the sectors where firm action is most needed, such as the mining industry, and to keep the Committee informed of all further developments in this regard.

In addition, the Committee notes the communication of the Confederation of Free Trade Unions of the Lugansk Region (KSPLO), which was received on 17 August 2005 and forwarded to the Government on 20 October 2005, regarding the social situation in the Lugansk region and in particular the problem of non-payment of wages by the state-owned Nikanor-Nova mine. The Committee requests the Government to transmit for its next meeting its observations in this regard so that it may examine in detail the points raised in this communication.

With respect to the possible establishment of a wage guarantee fund for the settlement of workers’ wage claims in the event of the employer’s insolvency, the Government refers to a draft bill concerning the protection of workers’ financial claims in the event of the employer’s insolvency which is now in the process of revision following the 2004 presidential elections and the ensuing Government change. According to the Government’s report, certain government agencies have recently raised objections to the creation of the fund and have expressed reservations as to the availability of adequate budget funds and the additional expense which employers would incur as a result. The Committee understands that the Government has taken steps, in consultation with its social partners and with the technical assistance of the Office, to examine the possibility of setting up a wage guarantee institution in line with the provisions of Convention No. 173 for the protection of future workers’ claims arising from bankruptcy or insolvency situations. The Committee would appreciate receiving more specific information on the current state of revision of the draft bill and recalls that the advisory services of the Office are at its disposal in this regard.

[The Government is asked to reply in detail to the present comments in 2006.]