Employment 2020

Last Updated September 08, 2020

Bosnia & Herzegovina

Trends and Developments


Authors



dmb legal has been established with the aim to provide the highest-quality legal services to foreign and local investors in Bosnia and Herzegovina in the areas of business law, corporate, regulatory, competition and employment law. The firm also provides services to international organisations and foreign embassies. The firm embraces the idea that its primary task is to offer tailor-made solutions to clients, appropriate for their commercial and business needs. The firm is located in Sarajevo and has seven outstanding lawyers who combine their extensive experience in practising law in Bosnia and Herzegovina with unique understanding of the market. The width of dmb legal's experience allows it to be a principal adviser to many clients both in everyday business matters and in complex legal and commercial projects. The firm's long-term clients include Sberbank, Inditex Group, Molson Coors Group, Asseco SEE group, Bingo, Cimos, Qatar Airways, Vakufska Banka.

Introduction

Bosnia and Herzegovina is a complex country consisting of two administrative entities, the Federation of Bosnia and Herzegovina (FBiH) and Republika Srpska (RS). While RS is a single administrative unit, FBiH is further divided into ten cantons. There is also a self-governing administrative unit, the Brčko District of Bosnia and Herzegovina. All these different administrative units have their own unique competencies. Employment regulation is the competency of two entities (FBiH and RS) and the Brčko District of Bosnia and Herzegovina. Since the vast majority of economic activity in the country is located in two entities, FBiH and RS, this analysis discusses trends and developments in the two entities, with focus on issues arising as result of the COVID-19 pandemic.

Legal Issues Facing Employers as a Result of COVID-19

Although both entities in Bosnia and Herzegovina have fairly recent employment regulation (the Labour Laws for both entities were adopted in 2016 with only a few amendments since), the detail and quality of such regulation leaves a lot to be desired. Although problems in implementation of employment regulation have been evident for quite some time, the COVID-19 pandemic clearly exposed these deficiencies.

The deficiencies mostly relate to the lack of adequate regulation of issues that became of the utmost importance in management of the workforce under the extraordinary circumstances caused by the pandemic outbreak. Some of these issues include regulation of work from home, remuneration to employees when they are on paid leave due to termination of work process – downtime (the so-called "waiting for work period") and use of annual leave. 

Working from home

In particular, the Labour Laws of both entities provide for the possibility to conclude an employment contract related to working from home. The laws regulate the content of such an employment contract (eg, the obligation to regulate conditions of work and the supervision of employees, use of their own means of work and remuneration of costs, etc). However, COVID-19 forced a significant number of employees who previously worked regularly in their employer’s premises to start working from home, even after the end of the mandatory lockdown. Such employees did not have employment contracts that would cover this type of work and, in many cases, under the current circumstances it was not possible to execute one. Therefore, the question arose as to whether such work could be regulated by a separate (unilateral) decision of the employer.

Although the Labour Laws do not specifically provide for this possibility, most employers in practice regulated work from home by a separate decision. However, it will be advisable to execute new employment contracts with employees who continue working from home once the circumstances allow it.

Remuneration to employees during downtime

The second important question that arose was related to the payment of remuneration to employees during downtime (termination of work process) due to COVID-19. These employees are on paid leave since the downtime was caused by circumstances outside of the employee’s control. In FBiH, a single provision in the Labour Law regulates this situation by providing that an employee in such case has a right to salary remuneration in line with the collective agreement, employment rulebook and employment contract. In other words, the law did not regulate the amount of remuneration during the downtime, but made a reference to other employment-related regulation and documents.

In practice, the amount of such remuneration was seldom regulated by collective agreement or internal documents of employers. Therefore, employers in FBiH (especially in sectors severely affected by the pandemic, such as tourism, hotels, and the catering industry) were left with several questions to answer: firstly, how to regulate such remuneration – in which way and by which document; secondly, what is the amount of remuneration they were obliged to pay to employees; and, finally, how long this type of leave could last.

In RS, the situation was somewhat different, as the Labour Law of RS provided certain regulation on two types of remuneration that could be used in this situation: (i) remuneration in the amount of 50% of salary in case the employee is unable to do his or her work due to force majeure, or damage of machines or other means of work, and (ii) remuneration in the amount of at least 50% of salary in case of paid leave due to unplanned temporary decrease of work activity and to reasons of an economic, financial or technical nature. Although the wording of these provisions is not entirely adequate, it nevertheless provides certain guidance to employers in RS in relation to the amount of remuneration to be paid to employees during the downtime.

In practice, in both entities we can see similar developments when it comes to regulation of paid leave during the downtime resulting from the pandemic. Firstly, the majority of employers opted to regulate these situations by their unilateral decisions, especially during the first onset of the pandemic and mandatory lockdown. The amount of remuneration obviously depended on each employer, but they generally adhered to the minimum amounts (50% of salary in RS and minimum wage in FBiH). After the lockdown, with businesses somewhat restored to normal, many employers regulated these issues in their internal documents.

Annual leave

Use of annual leave during the lockdown, as well as the decrease in economic activity that followed, was also subject of discussion. The competent authorities have recommended that employers allow employees to use annual leave during the lockdown. In FBiH, since the employer is obliged to consult with employees regarding the schedule of annual leave, there were discussions as to whether an employer could unilaterally decide on the employees taking annual leave during the lockdown (ie, without consulting them).

In practice, many employers decided to do this regardless of the obligation of consultation. This was done on the basis of consideration of prevailing circumstances and also by taking into account the fact that annual leave was more favourable to employees than paid leave during the downtime, since during annual leave employees receive full remuneration of the salary. However, after the lockdown and during the decrease of economic activity, the employers generally went back to respecting their obligation to consult with employees when deciding on the use of annual leave.

This problem did not exist in RS, given that the Labour Law of RS provides consultations with employees regarding the schedule of annual leave only as an option, and not obligation.

Position of Competent Authorities

During the pandemic, the situations described above exposed the deficiencies in employment regulation in both entities of Bosnia and Herzegovina. In practice, in order to overcome these problems, employers have been in constant contact with competent labour inspections and labour ministries.

Generally, the competent authorities recognised the issues and, within their respective competencies, tried to work with employers in order to overcome the problems. However, they can operate only within the legal boundaries and provisions of the relevant regulation. Therefore, whenever certain situations required that employers act in contradiction to existing regulation (such as deciding on working from home by a unilateral decision rather than by agreeing on it in the employment contract, or deciding on annual leave without consulting with employees), employers risked penalties and legal consequences.

However, the competent authorities in the majority of cases recognised that such acts of employers did not come from their desire to avoid legal obligations, but from practical necessity caused by the pandemic, and work inspections so far have not been particularly keen to penalise such action.

Expected Developments

Importantly, in FBiH the Federal Ministry of Labour and Social Policy (Federalno ministarstvo rada i socijalne politike) has recognised the need to solve these deficiencies and regulate certain employment-related issues that have arisen during these extraordinary circumstances. In the aftermath of the lockdown, the labour ministry has proposed amendments to the Labour Law of FBiH that would regulate a number of important issues that may arise during a declared state of natural or other disaster and a state of emergency in FBiH.

One such provision provides an option for the employer to decide on working from home on the basis of a unilateral decision (as opposed to regulating work from home in an employment contract). Also, the amendments provide that during the declared state of natural or other disaster and state of emergency, an employer may decide on use of annual leave with obligation to consult only with the relevant trade union or employees’ council, if any (as opposed to the obligation to consult with all employees, as is the case at the present time).

Furthermore, it is proposed that during the declared state of natural or other disaster and state of emergency, a company that is inoperative due to imposed public measures, or that had a decrease in income of at least 20% compared to the same period of the previous year, can adopt the decision that employees are not obliged to work and determine the amount of remuneration during this period. The amendments further provide that such a situation can last for a maximum of 90 days from the day of decision and that remuneration cannot be below the FBiH minimum wage.

Also, the amendments provide the possibility for an employer to lower the agreed salary of an employee if the employer has had a decrease of income of at least 20% compared to the same period of the previous year due to a declared state of natural or other disaster and state of emergency. In such case, the salary cannot be lower than the FBiH minimum wage, unless differently regulated in a collective agreement, internal acts of the employer or an employment contract. Other amendments were also provided, focusing on regulation of paid and unpaid leave, redistribution of working time and the possibility for employers to shorten the working time of employees and pay correspondingly lower salaries.

The aim of the proposed amendments was to provide more flexibility to employers during extraordinary circumstances, but to do so in such a way as to ensure that the rights of employees were also respected, especially in relation to the minimum wage and the duration of such circumstances. The business community in FBiH welcomed these amendments, considering that they generally represented an improvement compared to the previous situation. Conversely, the trade unions were against them, claiming that they reduced workers’ rights and gave too much power to employers in such circumstances.

The amendments are in parliamentary procedure and their adoption is pending. It is yet to be seen what the position of the legislator will be after the amendments are public debated. However, regardless of whether these particular amendments become part of the employment-related legal system, the COVID-19 pandemic clearly showed that employment regulation in Bosnia and Herzegovina has a lot of room for improvement: many important issues are completely unregulated, regulation of other issues leaves too much room for interpretation and implementation of employment regulation is fragmented and not harmonised across the whole territory of Bosnia and Herzegovina.

All of these issues leave the business community and employers with the difficult task of ensuring that the rights of their employees are respected, while providing optimum circumstances for development of their businesses. Serious reforms are needed in this sector in Bosnia and Herzegovina – we will see in the future whether the COVID-19 pandemic proves to be a driving force behind such reforms. 

dmb legal

Kralja Tvrtka 6
71000 Sarajevo
Bosnia & Herzegovina

+387 33 204 138

+387 33 204 138

info@dmb.ba www.dmb.ba
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Trends and Development

Authors



dmb legal has been established with the aim to provide the highest-quality legal services to foreign and local investors in Bosnia and Herzegovina in the areas of business law, corporate, regulatory, competition and employment law. The firm also provides services to international organisations and foreign embassies. The firm embraces the idea that its primary task is to offer tailor-made solutions to clients, appropriate for their commercial and business needs. The firm is located in Sarajevo and has seven outstanding lawyers who combine their extensive experience in practising law in Bosnia and Herzegovina with unique understanding of the market. The width of dmb legal's experience allows it to be a principal adviser to many clients both in everyday business matters and in complex legal and commercial projects. The firm's long-term clients include Sberbank, Inditex Group, Molson Coors Group, Asseco SEE group, Bingo, Cimos, Qatar Airways, Vakufska Banka.

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