Croatia Railways' restructuring
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Railway Workers' Trade Union of Croatia (RWTUC)
Croatia Railways (Hrvatske Zeljeznice HŽ) has gone through several organisational changes since 1990, when it employed 40,910 workers. New frameworks for restructuring based on commercial criteria were established in 1995, following the World Bank’s involvement. The Canadian consultancy firm Canac International was selected to carry out the study for HŽ restructuring.
Another consultant – Railplan – was in charge of the project for modernisation and restructuring of railways, followed by McKinsey & Company. A new phase of re-organising HŽ is currently under way and McKinsey & Company has again been chosen as the consulting company.
Trade unions disagreed with some of the suggested changes, which proposed decreasing the number of employees without introducing new technologies, as well as significant deregulation. At the same time, the management requested certain parts of the study that were related to management and business re-organisation. Even though the consulting companies produced their studies, the transport ministry and the Croatian Railroad Board conducted the restructuring process based on their own strategies.
In 2000, the Croatian parliament adopted the strategy on restructuring and modernisation of Croatian Railways and trade unions succeeded in lobbying for a social program within that strategy. The issue over reducing the number of employees was resolved with voluntary redundancy through the 'Purchased Supplementary Pension Scheme' and 'stimulant retirement indemnities' (compensations for employees to take early retirement). The average retirement indemnity within HŽ ranged from €20,000 to €25,000, which is well above the average retirement indemnity for other Croatian companies. Funding for retirement indemnities was jointly funded from the World Bank loan and the national budget.
In 2003, non-core services were separated from HŽ. Sixteen subsidiaries with 6,030 employees were created, all entirely owned by HŽ. Croatia committed itself, through the Programmatic Adjustment Loan 1 (PAL1) with the World Bank, to privatise these companies.
Following the new PAL2 programme signed by the government with the World Bank in 2005, Croatian Railways (HŽ) was divided into five independent companies:
- HŽ Holding d.o.o. (Croatian Railways Holding Limited Liability Company for Business Services)
- HŽ Cargo d.o.o. (HŽ Cargo Limited Liability Company for Cargo Transport)
- HŽ Putnički Prijevoz d.o.o. (HŽ Passenger Transport Limited Liability Company)
- HŽ Vuča Vlakova d.o.o. (HŽ Train Traction Limited Liability Company for Train Traction)
- HŽ Infrastruktura d.o.o. (HŽ Infrastructure Limited Liability Company for Management, Maintenance and Building of Railway Infrastructure)
But the trade union lobbied for a stronger holding and one year later, four companies transferred a part of their ownership to the HŽ Holding. However, it is still a transition period, as HŽ Cargo and HŽ Passenger Transport are expected to be privatised. The number of railway employees working for the HŽ holding and the four rail service companies has dramatically decreased from 26,398 in 1998 to 13,411 in 2008.
Privatisation of the 16 dependent service companies owned by the companies in the holding should have been completed by 2007. However in October 2007 only two of them (ŽPD – railway design and RVR – police, fire brigade and greenery) were privatised. Four more companies were on the market, and one of them (PZZ Engineering – real estate management and railway facilities maintenance) was declared bankrupt in January 2008, after its 80 employees had been transferred to the parent company.
There were no interested buyers in ŽU (tourism services), as the discounted asking price was considered too high, or in PROREG (manufacturing and repair of railway track equipment) and Railway building (infrastructure constructions and maintenance), both put on the market at their nominal price. The bidding procedure has to be repeated after the matter of public property had been solved by the Croatian Parliament. Potential investment interest has been reported for three companies providing wagon servicing (Čakovec, Slavonski Brod and Bjelovar), all owned by HŽ Holding and ready for privatisation in June 2008.
The main problem during the process of restructuring and privatisation of some parts of HŽ was that neither the Croatian government nor the departmental ministry had a clear strategy on the railway’s future. Prior to dividing HŽ, there was no preliminary inventory of public domain, of real estate related to railways or railway assets, while the deadlines for carrying out all the projects were too short.
Furthermore, the World Bank demanded that the service companies be sold by public procurement, without any discount for the employees. Social clauses were rejected and the stimulant retirement indemnities were opposed as well as the portion of subsidiaries' capital held by workers prior to privatisation.
Fragmented trade unions were an aggravating circumstance. Employees from HŽ companies were represented in collective negotiations by six representative trade unions, although there are a few other small trade unions without representatives. The Railway Workers' Trade Union of Croatia (RWTUC) organises the largest number of railway workers in HŽ companies.
RWTUC and partner trade unions managed to achieve social clauses which should be implemented into the privatisation process:
- Workers in the newly privatised companies cannot be made unemployed for buisiness-related reasons for at least three years after the sale.
- Present collective agreements which regulate industrial relations for employees will be implemented in privatised companies until new collective agreements are agreed with the new owners.
- Travel railway facilities are to be granted by the new owner for its employees.
- The new owners have to appoint the employees’ representative into the supervisory board of the company.
- HŽ and its legal successors will conclude commercial contracts with their privatised subsidiaries for at least three years.
- During the process of privatisation, HŽ subsidiaries will implement the procedure of consulting with trade unions about important acts and documents regarding the privatisation process.
RWTUC has the right to veto the company’s sale if social clauses are not implemented in the procurement or bidding process.
On 2 October 2007, RWTUC initiated the foundation of the Railway Fund. The agreement on legal protection for railway employees was signed and new criteria were established to evaluate the number of employees that may become redundant due to new technologies. No HŽ worker can be declared redundant unless previously agreed criteria (such as seniority, social status) are in place. It is a new model to manage redundant employees and workers from a potential surplus list, who are offered the option to take the stimulant retirement indemnity or to transfer it to the Railway Fund.
Employees who choose the Railway Fund are covered for three years after they lose their jobs. In these three years, they are paid according to their work contract, up to a maximum of €835 per month, and are also entitled to receive compensation, Christmas bonus, and gifts for their children. They have also the option to retrain. Workers in the Railway Fund have to call the Fund once a month, and have to accept a new job if it is offered according to their professional qualification.
The director of human resources from HŽ Holding and the Organisation Fund Advisory Board, comprising the unions’ representatives, have the authority to manage the Railway Fund. The president of the Railway Fund Council is a representative of RWTUC. The Fund acts as the inner stock exchange for employees and workers, who have priority for employment according to the Holding companies' personnel needs. Without the Organisation Fund Advisory Board approval, none of the five railway companies has the right to employ people. The Railway Fund’s activities are financed from the national budget.
This is the edited version of the Croatian Railways’ Restructuring document submitted by Katarina Mindum, International Secretary – Railway Workers' Trade Union of Croatia.