PREFACE

The following report was produced in September 1999 at the request of the International Labour Organization. Its objective is to assess conditions in Kosovo relative to employment, wages, social protection and labour legislation and to formulate suggestions concerning possible policies and activities.

The mission report provides an overview of the major problems and maps out tentative directions for short-, mid- and long-term strategic objectives.

The report was prepared by Mr. Lajos Hethy, senior adviser, ILO Balkans Task Force, Geneva and ILO/CEET, Budapest, formerly Political Secretary of State, Ministry of Labour, Hungary (1994-98). 

In order to clarify certain issues, Mr. Hethy joined the mission to Kosovo of Mr. Heribert Scharrenbroich, Regional Director of the ILO (14-16th September 1999). In addition, Mr. Hethy also relied upon the assistance of the ILO's Support Unit, Kosovo (headed by Mr. Michael Buchholtz).

I. EMPLOYMENT AND EMPLOYMENT PROMOTION 

The employment situation in Kosovo is controversial. There is no doubt that unemployment is very high but it is extremely difficult to get a true idea of its dimension as reliable data is unavailable.
A. On the basis of existing data, the employment situation is as follows: 

- Kosovo has an estimated population of 2,3 million (1997)⁽¹⁾. Current estimates are from 1.8-1.9 million.

- Due to the high birth rate, the Kosovar population is predominantly young - in 1991, 57,8 % were under the age of 25. 

- Kosovo's working age population is around 1,33 million (1997 figures), among whom 469,000 (35,3 %) are economically active (1997) while 861,000 (64.7 %) are economically inactive (1997) or unemployed according to local experts. 

- Of the economically active population, 106,300 (22,7 %) are engaged in agricultural activities. 

- A large percentage of the economically active population are men.

In 1996, the production of Kosovo's GDP was split evenly between the public and private sectors. In 1998 the latter's share amounted to 80 %. Public ownership predominates in industry, water supply, transport and telecommunication, while private ownership is concentrated in agriculture, construction, trade, catering and crafts. With the exception of agriculture, an employment breakdown by sector is not available.
B. The employment problem, both past and present, can be traced back to several interacting factors: 

- The decline of Kosovo's economy coupled with a high birth rate in the 1990s. (GDP declined by about 50 %).

- The dismissal of an estimated 145,000 Kosovo Albanians from civil administration, public services (education and health) and economic enterprises, following the 1990 Labour Act for Extraordinary Circumstances and other discriminatory legislation of the Federal Republic of Yugoslavia (FRY). 

- The war damage which resulted in the provisional closure of a number of big enterprises which are the major employers in Kosovo's business sector. 

- The forcing of Albanians off their lands and the destruction and looting of their shops and other businesses.

- Today's unclear situation regarding property rights.
C. It should be noted, however, that at least three trends have counterbalanced, at least to some extent, the decline in jobs for the economically active population. 

First, the ethnic Albanian community has developed so called "parallel" activities - primarily in education and health services - as substitutes for the services from which they were excluded. These "parallel" activities provided paid employment for an estimated 24,500 people. Some jobs have also been created by the Kosovo Provisional Government and other local organisations. And a great number of Kosovo people (estimated to be 400,000) work abroad and it is not known to what extent they are included in the estimates for the economically active population.

Secondly, Albanian experts report that the "grey economy" is a considerable source of income and provisional employment. It is not known what ratio such unreported and unregistered activities make up in overall employment.

Third, the presence of the UN Administration as well as other international organizations and NGOs has already made a contribution to employment.

While not providing a full picture, the following examples illustrate the effect of international assistance on employment creation:

- The UN Administration, as well as the large number of other international organisations in Kosovo, employ local technical staff (assistants, interpreters, secretaries, drivers etc.). 

- Reconstruction and rehabilitation programs managed by UNDP, UNICEF, KFOR and a great number of NGOs also create jobs.

The tasks of reconstruction and rehabilitation are immense. The assessment by IMG (International Management Group), done for the European Union in July, estimates the damage to housing at 1.1 billion EUR (affecting about 120,000 houses) and to the basic local infrastructure (education and health facilities, energy and water supply) at 40 million EUR.

Reconstruction and rehabilitation has already begun, with, for example, rural rehabilitation programs being run by UNDP and the reconstruction and repair programs of schools by UNICEF. These programs presumably rely on the local labour force, mobilizing the unemployed. But their real impact on the alleviation of unemployment is not known.
D. At least four strategical targets are a priority: 

First, to restart and maintain production in public enterprises, initially at least in power plants⁽²⁾ and the related mines, which can make a direct contribution to reconstruction and in agriculture and food-processing.

Secondly, to reduce the extremely high unemployment rate as soon as possible by direct job-creation (e.g., labour intensive projects of reconstruction)

Third, to promote and assist from the labour side those economic processes which yield jobs (e.g., SMEs development, vocational training to improve employability, etc.). There is a vast demand for vocational (re) training. Qualified labour is abroad and those who were dismissed from their jobs in the early 1990s do not (and cannot) meet today's requirements. Demand is especially high in trades related to reconstruction (e..g., carpentry, electricity, plumbing).

Fourth, to revive the past unemployment insurance system or to lay down the foundations for a new one to contribute to the survival of the unemployed. FYR has a system - based on the Law on Employment and the Rights of Unemployed People. 

These strategic objectives can be achieved via the UN Administration⁽³⁾ (Pillar IV as for reconstruction and economic development) and also via the activities of the labour administration (Pillar II) both on the central and regional levels, assuming they are provided with the necessary technical assistance.

II. THE DEVELOPMENT OF A WAGE SYSTEM

Along with its employment system, Kosovo's wage system also collapsed. While business organisations continued to pay wages, during and after the NATO campaign, no salaries were paid in public services, abandoned by the Serbs and re-occupied by the Kosovo Albanians.
A. That is why, it is the UN Administration's top priority to pay salaries to the civil servants on whom it relies: civil administration (including police, judges, taxation and customs officers), education, health service and public utilities workers (e.g., in the electricity and water services 

As public service wages and wage structures have an orientating role for business organisations, the initiative by the UN Administration has more far reaching consequences than to meet the urgent needs for survival of those in public service. Wages paid out for workers in the reconstruction projects have a similar mission.

The UN administration's provisional budget (for 1999)⁽⁴⁾ contains two scenarios for public service salaries - envisaging lower and higher figures - for jobs requiring differing levels of education and qualification. For general civil administration (as well as for the central fiscal agency, tax administration and customs administration - except for a few high ranking officials) the budget envisages 200-320 DM/month, while for the police 200-280 DM/month. Judges' salaries are envisaged to be 400-750 DM/month. Teachers' salaries (depending on their engagement in elementary, secondary or higher level education) are in the range of 150-315 DM/month; those of school administrative support staff in the range of 150-225 DM/month and those of technical support staff at 150 DM/month. Doctors are to be paid monthly 270-400 DM; nurses 150-225 DM and unskilled health workers 100-150 DM. Salaries in utilities are envisaged to be 200-400 DM/month.⁽⁵⁾

The actual public service salaries - referred to as "stipends"⁽⁶⁾ - which the UN Civil Administration has started to pay seem to reflect a compromise between the two scenarios.

When setting Kosovo public service salaries - or, "stipends" - it was stated that a) they were not linked to any "cost of living" calculations, b) had no relationship to wages paid out by earlier (Yugoslav) administration c) or to current wage levels in the labour market or d) the wage rates paid out directly by the UN Civil Administration and KFOR to their local employees. (Wages paid out by UN Administration to its local staff are in the range of monthly 940-2200 DM.).⁽⁷⁾

It was argued, however, that the issues of sustainability of the salaries and inter-sector wage equity were taken into account.

(The current cost of a one-month payroll amounts to about 10 million DM. The annual costs of public service salaries, included in the two scenarios of the provisional budget are in the range of 85-135 million DM.). 
B. It is difficult to judge to what extent public service salaries (and wages paid out by UN agencies) can be considered as rational and equitable in the given conditions of Kosovo. In trying to evaluate the situation one can take into consideration the following: 

New salary structures in public services seem to follow well-known international (European) patterns: civil administration has the highest salaries followed by education and the health service (except for professors and doctors). Monthly salaries in parallel public services, primarily education, run by the informal Rugova government in the 1990s amounted to 150-160 DM (paid out from funds based on the 3 % obligatory donations by Kosovo Albanians and the Albanian "disapora" in Western Europe). New salary levels in public services seem to be more or less in line with earnings achieved in the private sector, (1997) at least on the basis of the scarce information we have.⁽⁸⁾

It is sad and, at the same time, understandable that public service salaries - as well as earnings in the private sector - are extremely depressed according to Western European standards. Their sustainability remains doubtful for the following reasons:

If Kosovo's present and future economic performance is taken into account, net salaries (earnings) in surrounding countries should be taken into account. 

It is an open question how much public revenue can be generated by the UN administration. Taking into account the enormous costs of reconstruction and the launching of economic development, the budget will be extremely tight. External resources, while declining, can be involved primarily for the above purposes and donors will presumably be unwilling to contribute to the running costs of Kosovo public services.

In Kosovo gross salaries (and earnings) are equal with net salaries, that is, no tax or other kind of duties (e.g., social insurance, unemployment insurance, etc.) are imposed on them. Employees make no direct contribution whatsoever to state revenues out of which public expenses (including salaries of public services) are to be financed.

As for possible corrections in the level of earnings in the business sector - especially in private companies - there is no need to be concerned. Wages will be (as they already are) based on the capacity to pay.⁽⁹⁾ Public service salaries, however, are politically a much more sensitive issue: ceilings on wages are likely to be met with disillusionment, dissatisfaction and resistance.

C. It is another open question how to deal with wages in publicly owned enterprises as the former system of state regulation has collapsed and no market mechanism exists as yet to substitute them. (Publicly-owned enterprises, unlike private companies, are not too sensitive to wage costs and to the macroeconomic consequences of wage growth without proper justification by economic performance.)

Two alternative approaches are available to the UN Administration concerning public service salaries.

First, it could choose to adopt the existing situation, where no taxes or contributions are imposed on salaries, due to the lack of a fiscal (and social security) system,

Second, it could choose as a sign of a new era that public expenses will be paid for by - among others - the wage-earners, imposing at least an initial symbolic tax on such salaries, and putting the money into a kind of reserve fund.

The first approach gives tacit international approval to the present state of affairs and makes an inevitable similar initiative more difficult in the future when such measures will foreseeably be met with more resistance.⁽¹⁰⁾

The UN Administration is now in a position to take the second approach as it currently controls the money and can, in the present atmosphere of euphoria, expect the Kosovo people to accept this measure, even if it is not necessarily popular.

Pillar IV envisages a withholding tax on salaries to be introduced from 1st January 2000.⁽¹¹⁾

Keeping in mind the probable difficulties in future financing - as well as local dissatisfaction with salary levels - the possibility of an, at least symbolic, cost-sharing with the Kosovo Provisional Government could also be explored (with reference to the financing of "parallel" institutions and salaries by the informal Kosovo government in the 1990s).

The introduction of a statutory minimum wage could be considered - to provide protection for the most vulnerable groups of labour and to contribute to the "whitening" of earnings in "grey employment".

III. SOCIAL PROTECTION

The FYR system of social protection of the Federal Republic of Yugoslavia (FYR)- involving old age, disability pensions, health and unemployment insurance as well as other social assistance⁽¹²⁾ - collapsed in Kosovo. (It should be noted that it is faced with serious difficulties in Serbia, too.)
A. Kosovo's social protection at present seems to be based on the following pillars: 

- FYR pensions which presently are not paid.

- Pensions paid by foreign (Western) countries, where Kosovars worked as guest-workers in the past.

- Financial support by the Albanian "diaspora", primarily in Western Europe.

- Traditional family structures supporting members in need. 

- The large inflow of humanitarian aid (primarily food, but also other consumer goods)

There is a justified demand for the adequate and regular payment of pensions due under FYR law, but there is little hope that financing will be provided by the relevant FYR funds.

In September 1999, the representatives of 13,000 pensioners of the Prizren region contacted the UN regional administrator complaining about the non-payment of their pensions (200-300 DM/month) and asking for his assistance.

These funds - the Employees' Fund, the Self-Employed Workers' Fund and the Farmers' Fund - seem to be unavailable, partly because they are said to have been exhausted by the expenses of war, partly because of the political context in which Serbia's willingness to transfer financial resources to Kosovo is unlikely.⁽¹³⁾

As many Kosovo Albanians were dismissed from their jobs in the early 1990s, their entitlement to unemployment benefits under FYR law expired long ago. Jobless, they were also deprived of those social benefits dependent on employment (e.g., family allowances.)
B. Kosovo's present very high rate of unemployment underlines the seriousness of the situation in which large segments of society (i.e., the unemployed, pensioners, widows, orphans, the disabled, etc.) are left on their own with practically no financial assistance by the state to cope. 

At the same time there is no official registration of pensioners, the unemployed and other groups entitled to social benefits as there are no reliable statistical data on the actual dimensions of poverty and the most vulnerable groups.

The UN Administration is faced with the enormous task of providing some kind of- at least minimal - financial assistance for the most vulnerable groups of the Kosovo population. Priorities are:

- An assessment of poverty, an identification of the most vulnerable groups and registration of the most needy .⁽¹⁴⁾

- A flat rate for financial assistance could be fixed for all those in need. In the given situation, differentiation on the basis of possible entitlements is neither desirable nor possible. (In case of "emergency assistance", it matters little whether it provisionally substitutes for pensions, unemployment benefits or other social assistance.)

- The mobilisation of the large number of international and local NGOs who are present and engaged in valuable activities in this field.⁽¹⁵⁾

- The provision of financial resources by the budget (relying on external resources, too)

Kosovo's provisional budget (July 1999) envisaged financial assistance for 72,000 people (of whom 60,000 are pensioners and 12,000 orphans, widows and disabled) at a flat rate of 100 DM/capita/month. In the meantime, the number of those targeted has increased to 100,000 and financial assistance/capita/month has decreased to 70 DM.⁽¹⁶⁾
C. It is necessary to lay down the legal and financial foundations for a sustainable - and partly new - social protection system. 

The FYR pension system - based on the Serbian Law on Old Age and Disability Pension (1977) - should be maintained most probably for those already retired or close to retirement, although the pensions paid out may be subject to certain changes due to the critical condition of the budget and the economy of Kosovo.

A new system based fully or partly on private arrangements may be considered, but can be introduced only for the younger generation after proper preparation. (It should be noted that Central and Eastern European countries have had serious difficulties in launching pension reforms.)

As FYR pension funds are inaccessible, the Kosovo pension system has to be financed from internal revenues.

The pay-as-you-go system, in which current expenditures are financed from current revenues - as it is in the Yugoslav system - may also work in Kosovo in the future, due to the favourable demographic structure of society (the small ratio of pensioners). Its success, however, depends on two conditions:

- First, a high employment rate (which in Kosovo at present is catastrophically low).

- Second, the collection of contributions to the pension fund(s) from those employed. (In 1998, Serbian employees contributed 24,6 % of their gross earnings to their Employees' Fund.)

External financing, except for ad hoc humanitarian aid, is likely to decline and to be insufficient for the financing of the pension system or the social protection system of Kosovo.

Other elements of Kosovo's social protection system - such as unemployment insurance and other forms of social protection - can be revived on the basis of the two Yugoslav legislation or built up on entirely new foundations, but they are also likely to face the same difficulties as the pension system in financing.

The dilemma is whether or not people in Kosovo accept this system (and the legislation it is based upon). As Kosovars dismissed from their jobs in the early 1990s were practically excluded from unemployment insurance, it is unlikely that they are willing to accept this system, regardless of its nature. The revival of the Yugoslav (Serbian) model or the creation of a new Kosovo unemployment insurance system face, however, essential difficulties. No such institution can function in the absence of labour law enforcement, i.e. of the legal institution of employment relationship, in the absence of registration and documentation of employment and unemployment and without proper financial backing.

Employment policy measures whether active (e.g., mediation of jobs, retraining, etc.) or passive (e.g., unemployment benefits) can be financed from the state budget and/or from funds made up of contributions by the employers and employees levied on earnings.

At the same time the functioning of such systems is supported by labour market services. (In the Federal Republic of Yugoslavia labour market offices are those competent agencies which are supposed to take care of labour market programs and unemployment benefits.)

The UN Administration could try to:

- Resume contacts with the Yugoslav (Serbian) governments on behalf of Kosovo pensioners under Yugoslav (Serbian) law

- Carry out wide consultations for possible solutions with international experts and agencies (such as the ILO and the World Bank)

- Start a dialogue with the Kosovo people.

IV. ENFORCEMENT OF LABOUR LAW

Kosovo today is a vast "grey economy". Not only are car numberplates and registration missing, but also records of employment and unemployment, of entitlements to social benefits, etc. Such records were destroyed, taken over to Serbia or simply disappeared. Given the underground activities of Kosovo Albanians throughout the 1990s, records were probably incomplete and incorrect even in the period when it existed.
A. The lack of registration - the predominance of unregistered and unreported activities - is coupled to what can be called a "legal vacuum". That is, a legal system exists - a Yugoslav (Serbian) system of labour and social security legislation - but regulations are not enforced. Kosovars neglect or openly reject FYR law and desire new Kosovo legislation.⁽¹⁷⁾

In the absence of labour law enforcement, reliable data which could serve as a basis for the activities of civil administration - on the dimensions of employment, unemployment, income and earnings, those in need and those entitled to social benefits etc. - cannot be established .

For example, when the UN Administration started to pay out salaries in public services (health, education, civil administration), the local health service in Prizren provided obviously incorrect lists of employees - including non-existing workers - the identity of whom could not be controlled. The risk of manipulation and further redistribution is obviously present.

The predominance of unregistered and unreported employment (and other economic activities) prevents the revival of sustainable social and unemployment insurance systems as well as of taxation imposed on earnings which could serve as the financial foundation of such systems.

One should keep in mind that the existence of a legal employment relationship serves as a basis not only for workers' legal protection but also for the registration of the employed (and unemployed); for the provision of all employment-related social benefits and for the imposition of all employment-related taxes and duties, such as personal income taxation or social security contributions. The existence of such a relationship is closely related to the formulation of employment and social policies, with expenses and revenues of the state budget, etc.

In the absence of legal protection and at a time of high unemployment, workers are in an extremely vulnerable position. According to several reports, they are employed, hired and fired with no observance of any legal regulations. In such a context, the observance of basic rights at work is dependant on the employers' considerations.

Employers (in Prizren) confirmed they rely upon no labour legislation when establishing terms of employment, as they themselves say there is a "legal vacuum". "Even bad laws would be better than none", an employer commented. In small private concerns, belonging to the family seems to be the main criteria for employment.

In the UN Administration's present situation, it seems a major task to take definite measures for the establishment and enforcement of basic regulations of labour law to achieve the transparency of the situation in employment and the gradual "whitening" of "grey employment".⁽¹⁸⁾

It is well known from the experience of other countries (e.g., Southern Europe or Hungary) that employment outside of the legal framework - when existing on the periphery of a legal "white" economy is based on the strong common interests of employees and employers (i.e., to evade taxes and other contributions to the budget.) The establishment and enforcement of laws - i.e., efforts to transform "black" and "grey", i.e. illegal activities into "white", i.e. legal ones - will not be an easy task.

Nonetheless, the UN Administration, as a direct or indirect employer and maintainer of Kosovo public services of some 47,000 employees, is in the position to enforce labour law (as for employment relationship), to set up proper registration - as a first step - in its own field of authority and to formulate - as a second step - similar requirements for the rest of the Kosovo economy. Such efforts could be backed by job inspection, following up the implementation of essential labour regulations.

The UN Administration, in its efforts to enforce labour law, could rely on its local partners, ensuring their cooperation or, at least, their understanding. The term "partners" refers to trade unions, employers and the Provisional Government of Kosovo for whom the present state of affairs also presents serious problems.
B. To proceed with labour law enforcement the following conditions may need to be considered: 

The general rejection among Kosovo politicians, trade unions and legal experts of Yugoslav (Serbian) labour legislation. This rejection can be explained by the extraordinary Serbian regulations of the 1990s - primarily by the Labour Act for Extraordinary Circumstances adopted in 1990 - which led to the dismissal of 145,000 Kosovo Albanians from civil administration, the police, education, etc.⁽¹⁹⁾ This rejection is a political and social fact which has to be taken seriously into account.

It is urgent to carry out an analysis of FYR labour and social security legislation in cooperation with Kosovo partners, to define those regulations which can be considered as discriminatory and be rejected and those which are in harmony with international labour standards and Kosovo's needs and can be relied upon.⁽²⁰⁾

In this task the Kosovo Rule of Law Centre (being established by OSCE), Prishtina University Law Faculty and other local expertise can be made use of.

The preparation and enaction of new legislation, even if justified, is an extremely time consuming process. (In Hungary and in other Central-Eastern European countries it lasted for several years) and the UN Administration has limited capacities for it.

What can be targeted - and achieved in a relatively short period of time - is the preparation and enaction of a package of essential labour regulations, on the employment relationship, the essential rights of workers and unions, based as much as possible on FYR labour law.

The Provisional Government is aware of the "legal vacuum" in Kosovo. As for labour and social security legislation it seems to have a rather differentiated approach. It is not opposed to the reintroduction of Yugoslav (Serbian) legislation preceeding 1989/90, i.e. the date of the withdrawal of Kosovo's autonomy. Regulations on labour safety have also been frequently referred to as acceptable.

The Union of Kosovo Jurists⁽²¹⁾ confirmed that pre-1989/90 labour legislation was acceptable to Kosovo's jurist community, although it would need adaptation to the changed conditions (e..g., the emerging private sector.) Members of the Law Faculty, Prishtina University, had similar views.⁽²²⁾

V. LABOUR RELATIONS ACTORS AND INSTITUTIONS

Collective labour relations, based on the Labour Relations Act of Serbia, have collapsed in Kosovo. While in the longer term there is a need to build up such institutions, in the short term it is premature, as reliable, properly organised, social partners - unions and employers - are partly missing.
A. The Unions 

The BSPK (Independent Trade Unions of Kosovo)was registered in 1991, and has been subject to repeated persecution by the Serbian authorities in the 1990s - as reported by ICFTU. It claims to have about 250.000 members (membership data were registered and reported in the early 1990s) and 24 sectoral (branch) organisations covering both public services and the business sector (larger enterprises). BSPK was a stronghold of Albanian resistance to Serbian authorities. It qualifies itself now as a non-political organisation representing workers' interests, but obviously it has had no time to adopt to the new conditions. No trade union strategies have been formulated as yet on such pressing problems as the legal protection of workers, the provision of social benefits and the alleviation of unemployment.

At a meeting with BSPK top leadership (including the heads of sectoral unions), mid September 1999, President Gorani stated that trade unions were an important factor for stability in Kosovo and thus an important partner for UN Administration, with whom no cooperation exists as yet. The heads of sectoral unions underlined the urgency of restarting production and investments, primarily in those plants which could make a direct contribution to reconstruction (such as, cement, building blocks, wooden and metal structures for buildings.) According to the Wood and Paper Industry Union, workers in this industry were so desperate over delays in starting production due to KFOR's occupation of some factories that a hunger strike was being considered. Repeated complaints were made of the absence of jobs and wages. The Secondary Education Union reported that teachers had not received salaries for 15-24 months. BSPK's vice-president criticized the UN Administration for its alleged preference of individual work contracts to collective contracts and for its lack of efforts to protect workers. More coordination was urged in the UN Administration's activities in reconstruction.

BSPK has links to ETUC, ICFTU and several European and American national trade union confederations.

It is a definite advantage for further labour relations developments that Kosovo's workers' organisations - unlike those of most transition countries - are dominated by one trade union confederation.
B. Employers Associations 

On the employers' side there are signs of self-organisation of business undertakings which may develop into employers' associations.

The remnants of the Kosovo Chamber of Economy seem to have survived. Traditionally, it united big publicly-owned enterprises to promote their internal and international activities. There is a new initiative to set up regional Chambers of Commerce (for example in Prizren) There also exists a Business Association of Kosovo - established in 1996 - uniting small private companies.

There are no signs as yet, however, that any of these organisations would define themselves as employers' associations, i.e. representing employers' interests. They do not seem to have regular contacts with the trade unions (BSPK). When asked, the BSPK itself made vague hints about contacts with the Kosovo Chamber of Economy.

In the present situation UN Administration could:

Establish regular contacts with the trade unions and business associations to learn their reactions to current labour and social protection issues, to promote dialogue and to assist their self-organisation. For such purposes a consultative body - a Tripartite Advisory Council⁽²³⁾- could be established with the participation of unions, business associations, the Provisional Government (and other political forces) involving also academicians (primarily legal and economic experts).

Start a dialogue (with the involvement of Pillar III) about the outlines of a future possible system of collective labour relations, possibly including:

- Collective bargaining and agreements (at the company, sectoral and perhaps national level);

- Strikes

- Workers' participation at the company level 

- Statutory procedures for the settlement of labour disputes (of both individual and collective, of rights and interests) 

- National level tripartite arrangements.

The settlement of labour disputes, in the absence of specialised labour courts, could be provisionally based on tripartite bodies established in the regions for mediation and conciliation.

The Labour Relations Act and Strike Act of Serbia could be taken into account as points of orientation in the building of labour relations institutions. The first piece of legislation starts out from the principle of freedom of association, i.e. trade union pluralism when regulating 

collective bargaining and national level tripartism. It should be noted, however, that the law has been a target of criticism by the independent Yugoslav confederation of UGS Nezavisnost, for putting the Trade Union Confederation of Serbia into a privileged position and disfavouring the independent trade unions.⁽²⁴⁾ That is why we think that the Labour Relations Act and the Strike Act of Serbia should be given close scrutiny, with the involvement of local social partners and experts.

As institution-building in collective labour relations seems to be a mid- or even long-term task for which the conditions are presently and partly missing, there is time and space to work out such arrangements which best suit Kosovo's needs and are in harmony with the international labour standards.

VI. LABOUR AND SOCIAL PROTECTION ADMINISTRATION

The UN Administration (UNMIK) of Kosovo is faced with urgent tasks in the short- as well as medium- and long-term in the field of labour and social security administration. Nonetheless, they have not yet been addressed as a decision on the Labour, Social Service and Welfare Section was still pending.

At the same time the Kosovo Provisional Government⁽²⁵⁾

is setting up its own structures for labour and social security administration and has its own ideas on the settlement of some of the problems enlisted in the present report. It claims to have ministries for labour and social protection, law and justice etc. The ministry of labour and social protection is said to have five departments: a) for social protection, b) for the protection of families (and children) c) for pensioners and invalids, d) for labour inspection and d) for the protection of those who participated in the fighting and their families, plus a national labour office.

In general, the Provisional Government looks upon the UN Administration as an "unnecessary duplication" of public administration. It seeks contacts with it but their present relationship, according to political analysts, is unstable, unfriendly and insecure. The involvement of local people - political forces, unions, employers, NGO's - in the UN Administration is of utmost importance.

On the one hand, the UN Administration could rely on Kosovars who are educated and qualified, who have demonstrated their capacity for disciplined self-organisation in difficult conditions and who have legislative and institutional traditions.

On the other hand, the UN Administration could share its responsibility with the local people for such measures which are unavoidable, but unpopular, and for the failure to meet impossible expectations.

"UNMIK will not succeed if it simply replaces one outside force with another in Kosovo."⁽²⁶⁾

VII. LABOUR STATISTICS

In Kosovo most recent statistics (on economic activities, employment, etc.) were produced in the first half of the 1990s, while in the meantime - it is needless to underline - dramatic changes have taken place in the country. In addition, most official records have been destroyed or moved to Serbia.

For the UN Administration, it is essential to carry out an assessment of the labour and social field (e.g., employment, wages, and poverty) and start registration (of the employed, unemployed, and those entitled to pensions or other social benefits.)

It would be fortunate if these exercises serving the purposes of the UN Administration could be realized in such a way that they contribute at the same time to laying the foundation of a new statistical system meeting the standards of the ILO and the European Union.

Drawing on ILO and EU expertise is essential in the preparation and implementation of such exercises.

VIII. SUGGESTED ACTION PLAN

EMPLOYMENT AND WORKERS' PROTECTION IN KOSOVO

The following strategic objectives could help orientate the UN Administration (UNMIK) in the coming period. The list is divided between short-term objectives (i.e., for the rest of 1999 and for the first half of 2000) and mid- and long-term objectives (i.e., for the coming years). 
1. EMPLOYMENT AND EMPLOYMENT PROMOTION 
1.1. Short-term:

- Restart production in publicly owned enterprises which can make a contribution to reconstruction. 

- Promote and coordinate technical assistance programs aimed at labour intensive reconstruction, vocational training to meet the requirements of reconstruction, SMEs development etc. 

- Start the registration of employed people (in fields under the control by UN Administration and in the exercises carried out by international agencies and NGO's).

- Carry out an assessment of unemployment and start registration of the unemployed

1.2 Mid- and long-term:

- Prepare and adopt legal rules on employment promotion and the protection of the unemployed. 

- Work out the outlines of a new employment insurance system

- Start to build the institutional framework of a national labour market service (labour offices engaged in registration, paying out unemployment benefits, taking care of active employment policy programs etc.)
2. THE DEVELOPMENT OF A WAGE SYSTEM 

2.1 Short-term:

- Work out and adopt a job categorisation system plus wage scales for the public sector (civil service, health, education, utilities) on which the payment of salaries can be based (to substitute the present "stipends").

2.2 Mid- and long-term:

- Provide sustainability of financing for public service salaries. 

- Work out a wage determination system for the business sector to take the place of the former regulations of the centrally planned system. 

- Prepare the introduction of a statutory minimum wage and the mechanism by which if could be fixed. 

- Consider the setting up of a wage tariff system in the business sector to orient wage structures. 

- Prepare the establishment of an institutional framework for the participation of the social partners in wage determination in both the public and business sector.
3. SOCIAL PROTECTION 

3.1 Short-term:

- Assess the needs of the poor (pensioners, unemployed, orphans, widows, disabled, demobilised fighters, etc.). 

- Provide a flat rate of social assistance for all in need regardless of the origins of their present situation and their possible entitlement (or its lack) to social assistance.

3.2 Mid- and long-term:

- Establish a classified registration of those in need based on the origins of their present situation and of their possible entitlement for social assistance. 

- Prepare and introduce new systems (or reconstruct and modernize the past Yugoslav/Serbian systems) and pension insurance, unemployment insurance and social protection. 

- Clarify and establish conditions for the sustainable financing of these systems. 

- Initiate and engage in a wide social dialogue on the possible new arrangements with the Kosovo people. 

- Prepare and pass relevant legislation.
4. THE ENFORCEMENT OF LABOUR LAW 

4.1 Short-term

- Prepare and enact (by UNMIK regulation) essential labour legislation on terms of employment, employees' rights and duties arising from it, and trade union rights (with the involvement of local social partners)

4.2 Mid- and long-term:

- Establish a job inspection authority (to control the implementation of labour law on employment relationship and labour safety regulations). 

- Adopt (reinforce) (Yugoslav Serbian) labour safety regulations. 

- Set up central and regional bodies for the mediation and conciliation of labour disputes (partly as a substitute for the provisional absence of specialized labour courts).
5. LABOUR RELATIONS ACTORS AND INSTITUTIONS 

5.1 Short-term:

- Set up a Tripartite Advisory Council related to labour and social security policy formulation with the involvement of local political forces, unions and employers to assist the UN Civil Administration.

5.2 Medium-term:

- Organize technical assistance programs to promote the self-organisation and preparation for their new functions of both workers' and employers' organisations.

- Prepare and enact collective labour law dealing with collective bargaining and agreements, etc. (by UNMIK regulation). 

- Consider the possible establishment of a tripartite body (based on the Tripartite Advisory Council) to function as an institution of workers' and employers' involvement in labour and social security policy formulation and implementation.

6. LABOUR STATISTICS

Mid- and long-term:

- Lay down the foundations for an up-to-date system of labour statistics following international (ILO and European) standards.

1. Economic Activities and Democratic Development of Kosovo, Research Report. RIINVEST, Prishtina, 1998. Data as for the Albanian diaspora, the parallel institutions etc. come from this report too.

2. It is a top priority of the UN Administration.

3. UN Administration in Kosovo (UNMIK) is based on four pillars: 1) Pillar I: Humanitarian Aid (led by UNHCR); 2) Pillar II: Civil Administration 3) Pillar III: Institution building (led by OSCE) and 4) Pillar IV: Reconstruction and Development (led by the European Union). A Labour, Social Service and Welfare Section is to be part of Pillar II. Kosovo is divided into five regions where UN regional administrations have been set up. KFOR is under separate command.

4. Indicative Budget Estimates for Kosovo for the Five Month August-December, 1999. ANNEX to Strategic Directions for the Economic Recovery of Kosovo. World Bank. 26 July 1999. This version of the provisional budget was prepared for the First Donors' Conference, while a second version is under preparation for the Second Donors' Conference (to be held at the end of October 1999). The total expenditure is estimated to amount to 167 million DM, revenues to be 90-100 million DM, the deficit being about 70 million DM. The budget is to finance public services (health, education, civil service, utilities), including salaries. Budget revenues are based on customs duties, excise and consumption taxes, collected at the borders (since early September). Taxes are envisaged on services (10 % on hotels and restaurants). Pillar IV. has corporate tax and withholding schemes (on public service salaries and wages) under consideration too. Such taxation, however, has ± as precondition ± the establishment of a taxation authority.

5. Among the groups referred to above education employs 25.782, health service 9.785 while civil administration and utilities 11.389 people. The number in general civil administration is 600, in police 4600, while in utilities 6545.

6. BSPK (Independent Trade Unions of Kosovo) vice-president criticized the differentiation in payments in hospitals on the grounds that, if the wages are not meant to be salaries but social assistance, all persons should receive the same unit. 

According to the UN regional administrator in Prizren the following salaries were paid out in the health service: 350 DM for doctors, 200 DM for nurses and 100 DM for technical staff (janitors and other assistance.)

Judges were paid 500 DM for one month.

In higher education, professors at the Faculty of Economics, Prishtina University, were paid 300 DM for one month.

In UNDP rehabilitation/reconstruction programs, local workers are paid weekly 100 DM, i.e. a monthly earning of 400 DM.

7. Indicative Budget Estimates for Kosovo. Op.cit.

8. According to the 1997 RIINVEST survey, covering 300 enterprises, monthly earnings of workers in differing categories of education and qualification levels were as follows: 211,2 DM (elementary school), 237,8 DM (secondary school), 365,8 DM (highly qualified) and 427,6 DM (university degree).

9. After the NATO campaign in 1999 successful business organizations (e.g., in construction and pharmaceuticals) paid out more than monthly 200 DM on the average while business organizations faced with difficulties (due to competition and imports) had to keep the level of monthly earnings at 50-60 DM (e.g., in the textile industry), as reported by businessmen in Prizren.

10. In fact, the Kosovo Albanian community got used to paying a certain tax (3 %) to the informal Kosovo government ± a practice which ended when the NATO campaign began in Spring 1999. The Provisional Government of Kosovo, has begun the collection of a 1 % tax on income, too.

11. Kosovo. Report on Pillar IV's Activities. UNMIK-EU-UN, Washington 28 Sept. 1999. P. 6.

12. For a description, see: Lukovic, S.: Social Protection in the Federal Republic of Yugoslavia. South East Europe Review. Hans Bêckler Foundation. NOMOS. Baden-Baden, Vol. 1. No 4. Sept. 1998.

13. According to Summer reports from Yugoslavia many Serbian employees could not pay their contributions and pensioners received only one-month payment of their pensions in the year and the trade unions urged free of charge energy, water supply for them as a compensation.

14. Also suggested by the World Bank.

15. For example, for the distribution of food aid UNWFP (World Food Program) relied on a registration of the most needy prepared by the Mother Teresa Society which has several thousand activists all over Kosovo.

16. Kosovo. Report on Pillar IV's Activities. op.cit.

17. The UN Administration (in its Regulation No 1999/1) ruled that the laws applicable in the territory of Kosovo prior to 24 March 1999 shall continue to apply in Kosovo, if they are in line with the internationally recognized human rights standards and are not discriminatory. This regulation, however, does not seem to be followed up as to labour legislation.

18. UN Administration Pillar III. and Pillar IV. demonstrated strong interest in essential labour legislation for Kosovo (with the assistance of the ILO).

19. The 1990 legislation for extraordinary circumstances and its consequences were amply discussed by the ILO's tripartite committee of inquiry, in its report for the Governing Body, related to the complaint by ICFTU on Yugoslavia's violation of Convention No 111. (GB. 253/15/27). 

20. It is a difficulty that Yugoslavia's absence from the ILO in the 1990s prevented the organisation from the systematic collection, documentation and analysis of Yugoslav/Serbian labour and social security legislation.

21. A. Fetahu is secretary of the above organisation which is not part of BSPK. He is the author of the booklet "Temporary measures. An Act of destruction of economic enterprises and social institutions in Kosovo. BSPK. Prishtina 1992. (In Albanian)

22. The most recent piece of pre-1989/90 Yugoslav (Serbian) labour legislation is Act No 921 (Dated 28 Sept. 1989) on the fundamental rights of the employment relationship. It took the place of legal regulations dated 1976, 1983 and 1987. This piece of legislation, at first reading, appears to be a positive one as for workers' protection and be in line with the international labour standards. It was followed up, already in the period of the Kosovo conflict, by the Labour Relations Act No 358 (dated 19 June 1996).

23. UN Administration Pillar IV. (Reconstruction) has set up an Economic Policy Board with the involvement of a number of local experts. It has been active in the preparation of currency, customs as well as (recently) of banking regulations. See: Kosovo. Report on Pillar IV's Activities op.cit.

24. It should also be noted: UGS Nezavisnost also urged "new labour legislation which will be consistent with the concept of market economy and international standards. (Framework plan prepared for the ILO in May 1999, Belgrade.)

25. The Kosovo Provisional Government was set up on the basis of the Rambouillet agreement, by basically two of the three political groupings recognized in the peace talks: UCK (Kosovo Liberation Army) and the LBD (United Democratic Movement Coalition). The third grouping, Rugova's LDK (Democratic League of Kosovo) remained absent.

26. Kosovo. Report on Pillar IV's Activities. op.cit. p. 8. 
 

For further information, please contact the Regional Office for Europe and Central Asia (SDG/EUROPE) at Tel: +41-22-799 6666, Fax: +41-22-799 6061 or e-mail: europe@ilo.org