Reforming Serbia’s Labor Laws a Top Priority for Economic Growth

SAM Labor Law Event Nov. 2012 (6)

In Serbia, an inflexible and outdated labor code has been a major inhibitor for the competitiveness of domestic companies and, in turn, the Serbian economy as a whole. Reform of this legislation was the focus of a recent event hosted by CIPE partners the Serbian Association of Managers (SAM) and the Center for Liberal Democratic Studies (CLDS) in Belgrade.

The event gathered close to 100 participants from government, private sector, civil society, and media to discuss the key barriers and recommendations for possible solutions for improving labor legislation and reducing red tape.

Following consultations with regional chambers of commerce and influential businesspeople, reform of Serbia’s labor code quickly became a top priority in CIPE’s current joint project with SAM and CLDS. The project aims to build the capacity of the Serbian business community to meaningfully participate in the policy making process with government.

Based on discussions and consultations with the major stakeholders, SAM and CLDS drafted a policy paper which will be the basis of an ongoing advocacy effort and continued dialogue with policymakers. The policy paper lays out several different labor relations models from around the world and then goes on to describe the current system in Serbia.

“The present labor legislation has shifted the balance between rights and responsibilities in favor of employees and to the disadvantage of employers. In the long term, the result is lower employment and a less efficient economy. If Serbia wants to embark on the road to a real economic recovery, one of the reform areas should also include labor legislation. The [European Union] has already taken steps to this effect.”

SAM and CLDS note that the restrictive nature of the legislation leads to lower employment. This is mainly due to the fact that its extensive regulations make it nearly impossible for employer and employee to make arrangements, even when there are mutual interests and benefits for doing so. As a result, more casual and off-the-books types of work arrangements are common, leading to a growing informal sector out of sheer necessity.

Meanwhile, European Union members have been going through the process of liberalizing their labor code since the early 2000s. Many of the provisions still adhered to in Serbia have been abandoned by EU member states. As Serbia’s leadership points their future trajectory towards EU integration, government will need to take the private sector seriously as an equal partner in tackling shared challenges and creating opportunities for economic growth and stability.

David Mack is Program Assistant for Southeastern Europe and the Caucasus at CIPE.

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