Lithuania: Business group proposes union-employer pacts for minimum wage

Lithuania's business confederation (LVK) is advocating for a significant shift in how the national minimum wage is determined. The LVK proposes amending the Labor Code to empower social partners, unions and employers, to negotiate and agree on the minimum wage (MMA) through collective agreements. Currently, the Labor Code designates MMA setting as a governmental political decision, limiting social partners to offering recommendations.

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Now, according to the Labor Code, the process of setting the MMA is not an object of agreement between social partners, but a political decision of the Government. Social partners can only provide recommendations on the size of the MMA. Therefore, we propose to give social partners the right to agree on the size of the MMA in collective agreements.

LVK President Andrius Romanovskis stated that granting social partners the right to decide on the MMA via bilateral agreements would bring Lithuania closer to the model used in developed Nordic countries. The confederation suggests adopting a mechanism similar to Estonia's, where a bilateral agreement on the MMA reached by national-level employer and employee organizations would be enshrined in a national collective agreement, serving as the basis for government approval.

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If the LVK's proposal to amend Article 141, Part 3 of the Labor Code is implemented, granting social partners the right to make a decision on the size of the MMA by bilateral agreement, it would bring us closer to the model applied in developed Nordic countries, in the words of Minister I. Ruginienė.

Romanovskis believes this change would make unions and employers full decision-makers in the MMA process. He argues it would lead to MMA determinations being more grounded in economic realities, considering the country's economic situation, labor productivity changes, and business capacities. Furthermore, it would foster more active negotiations on other terms and conditions of employment stipulated in collective agreements.

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Upon adoption of the proposed amendments, trade unions and employers would become full decision-makers, and the process of setting the MMA would be more based on economic arguments, taking into account the country's economic situation, changes in labor productivity, and business opportunities. Furthermore, it would become a basis for more active negotiations on other terms of employment established in collective agreements.