Observation (CEACR) - adopted 2006, published 96th ILC session (2007)

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

The Committee notes the Government’s report and its detailed replies to the numerous communications received from workers’ organizations regarding the ongoing wage crisis in the country.

The wage arrears situation

1. The Committee notes that, according to the latest statistics provided by the Government, in July 2006, the overall wage debt was 1.1 billion grivnas (approximately US$218 million), which represents a 17.4 per cent decrease compared to the corresponding figures of July 2005 and an almost 85 per cent decrease compared to the record amount (7.2 billion grivnas) reached in 1999. The Government indicates that practically half of the current wage debt is owed by enterprises which are either in the process of being liquidated or have ceased their production in past years, mostly in industry and agriculture. As regards the wage arrears accumulated by economically active enterprises, the Government states that those arrears increased by 28.1 per cent at the beginning of 2006 and by another 10.5 per cent in June 2006. The number of employees experiencing delays in the payment of their wages has increased by 23.5 per cent at the beginning of 2006 and is now estimated to 500,000, the average delay being around three months for 79.2 per cent of those employees.

2. Referring to the particularly complex situation in the coal industry, the Government reports that at the beginning of 2006 the accumulated wage debt increased by 24 per cent and stood in July 2006 at 131.8 million grivnas, or 22.2 per cent of the overall amount of wage arrears of all economically active enterprises.

3. According to the statistical data provided by the Government, labour inspection results confirm that the non-payment of wages remains the most frequently observed infringement of the labour legislation, especially among private companies and agricultural enterprises. The enterprises experiencing wage arrears are subject to specific controls often giving rise to monetary fines and administrative or disciplinary sanctions against the managers of the enterprises concerned.

4. Moreover, the Committee notes the observations of the Joint Representative Body of All-Ukrainian Trade Unions and Trade Union Associations made on 23 January 2006 according to which not only has the wage arrears situation not improved but on the contrary it has considerably worsened. The Joint Representative Body alleges that, compared with the beginning of 2005, there has been a 90 per cent increase of wage arrears in the Sevastopol region, a 73 per cent increase in the Rivne region and a 66 per cent increase in the Odessa region. The Donetsk and Dnipropetrovsk regions are most affected with wage arrears totalling 268 and 106 million grivnas respectively (approximately US$53.1 and 21 million), or 24 per cent and 9 per cent of the country’s total arrears. The Committee further notes the communication of Public Services International (PSI) dated 27 January 2006 fully supporting the legitimate demands of the Ukrainian trade unions and urging the Government to pay all wage arrears and provide compensation for the delays.

5. The Committee notes with concern that the phenomenon of wage arrears proves particularly persistent and continues to defy the Government’s sustained efforts. It also notes with concern that at the Cabinet of Ministers’ meeting of December 2005, the Commission on issues relating to the payment of arrears of wages, pensions, grants and other social benefits expressed the view that the current measures taken by central and local executive authorities to pay off wage arrears are inadequate. The Committee therefore asks the Government to keep it duly informed of the evolution of the situation and to report on any new measures or initiatives aimed at resolving the wage crisis in the country.

The situation in the Lugansk region and the Nikanor-Nova mine

6. The Committee notes that, according to inspection results referred to in the Government’s report, in June 2006 there were no wage arrears in the Nikanor-Nova mine, while in July 2006 a wage debt of 620,000 grivnas (approximately US$123,000) was observed affecting 1,623 workers. The labour inspection services also reported that 257 workers had not been paid their annual leave. The Government adds that the workers in the Nikanor-Nova mine, which is part of the public-owned enterprise Luganskugol, are paid at a rate which is in violation of collective agreements and relevant Ministerial orders fixing the minimum wage for coal-industry workers at 120 per cent of the national minimum wage. The Government states that consecutive meetings held in May-June 2006 have not succeeded in resolving the dispute between the mineworkers and the director of Luganskugol, and therefore the dispute has now been referred to arbitration. The Committee asks the Government to continue to closely monitor the wage situation in the Nikanor-Nova mine, as regards both accumulated wage arrears and sub-minimum wage levels, and to provide detailed information on the outcome of the arbitration process currently under way.

7. In this connection, the Committee notes the communications of 26 September 2005, 4 November 2005, 14 February 2006 and 5 July 2006 in which the president of the Confederation of Free Trade Unions of the Lugansk region (KSPLO) transmits detailed information on the working and living conditions of those employed in the Nikanor-Nova mine. According to the KSPLO, coalmine workers in the Lugansk region continue to suffer from systematic violations of the labour legislation, in particular the delayed payment of wages or the non-payment of legally binding increases of the minimum wage and, as a result, they and their families have to endure constantly deteriorating living conditions. In its replies, the Government refers to its continuing efforts to resolve the wage crisis, especially through the intensification of inspection visits, the imposition of fines or the possible initiation of criminal proceedings against managerial staff and, more generally, the placing of the entire coal industry under close scrutiny. While noting that the situation with respect to wage arrears is getting slowly stabilized, the Committee requests the Government to provide detailed particulars on the settlement of past wage debts and, most importantly, on the sums paid in compensation for the injury suffered as a result of the delayed payment.

The payment of wages in kind

8. The Committee notes with interest that the maximum permissible percentage of the wages which may be paid in kind under section 23 of the Wages Act, 1995, as amended, has been reduced from 50 to 30 per cent. According to the Government’s report, at present, the partial payment in kind is limited to rural areas and is mainly practised in forestry and fishing. A multi-year study on methods of cashless payment of wages demonstrates that this method is no longer used when signing new employment contracts while manufactured products are sometimes offered to workers free of charge as a bonus. Noting these explanations, the Committee requests the Government to confirm that the earlier practice, whereby enterprises were allowed to settle wage debts by “selling” part of their own production to their employees at an agreed price and accounting those sales as salary received, is now definitely abandoned without exception.

Protection of wage claims in the event of the employer’s insolvency

9. The Committee notes with interest the ratification by Ukraine of the Protection of Workers’ Claims (Employer’s Insolvency) Convention, 1992 (No. 173), which was registered on 1 March 2006. It also notes the Government’s reference to Act No. 2597-IV of 31 May 2005 which amends section 31 of the Act on the debtor’s liquidation or bankruptcy and grants first rank privilege to workers’ wage claims thus giving effect to Article 8 of ILO Convention No. 173. The Committee would appreciate receiving a copy of the above Act.

10. Moreover, the Committee notes the Government’s reference to new draft legislation amending previous laws on the regular payment of wages aimed at reinforcing the criminal and administrative sanctions for those responsible for delayed payment of wages. Noting that the draft bill has already received the Government’s approval and will be submitted to the Parliament shortly, the Committee asks the Government to transmit a copy of the new legislation as soon as it is adopted.

11. With regard to the possible establishment of a wage guarantee institution, the Committee notes the Government’s view that such measure is believed to be premature for the time being because of the lack of public funds to finance a guarantee institution and also because of the need to diminish labour costs for employers. The Government adds that the acceptance of Part III of Convention No. 173 dealing with the protection of wage claims through a wage guarantee fund could be envisaged after the adoption of the draft law on a single social security contribution and of other legislative instruments which are designed to improve the financing of the social security system. The Committee requests the Government to keep it informed of any further developments in this respect.

Request for technical assistance

12. The Committee notes the Government’s request for ILO technical assistance in view of the persistent difficulties encountered in the practical application of the Convention. The Government indicates that it would welcome the technical support and expert advice of the Office in two main areas: first, preparing for the eventual acceptance of Part III of Convention No. 173 and the setting up of a wage guarantee fund; and, second, enhancing the enforcement of ratified Conventions Nos. 81 and 129 concerning labour inspection. The Government suggests targeted activities such as the organization of a national seminar on wage guarantee funds, legal counselling in drafting relevant legislation, and the establishment of a permanent training centre for labour inspectors. The Committee recalls that certain activities of a similar nature have already been carried out in collaboration with the Office with positive results, such as the National Tripartite Conference addressing the problem of non-payment of wages and the establishment of a wage guarantee fund in Ukraine, which was held in February 2004. The Committee trusts that the Government will continue to draw upon the advisory services of the International Labour Office and therefore invites the Government to submit to the competent services of the Office concrete proposals for prioritized, collaborative and result-oriented activities in the field of the protection of wages and labour inspection.