Many labor market regulations were created with large mid-20th century manufacturing plants in mind – which is the spirit of the Polish Labor Code of 1974. However, along with the process of industrial automation as well as the growth of employment in services, the economic reality has changed.
There has been an increase in popularity of flexible working hours which favors finding a balance between private life and work in a way which takes into consideration individual lifestyle and preferences, that can also be beneficial for productivity.
The ability of an employee to manage own working time, opportunities to schedule ad hoc doctor’s appointments and other meetings, keeping family commitments, shifting working time, in order to avoid commuting during rush hours, as well as the possibility of working from home, are nowadays attractive for many employees, as well as beneficial for the employers.
Unfortunately, rigid legal regulations of working hours may hinder the emergence of novel working time arrangements beneficial both employees and employers – as pointed out in the report Tailoring the Work and Leisure Trade-Off, published by the Lithuanian Free Market Institute.
Rigidity of Working Time Regulation
The report compares the rigidity of working time regulations based on indicators collected by the World Bank, supplemented by the labor law surveys from Bulgaria, the Czech Republic, Estonia, Lithuania, Poland, and Slovakia as well as Denmark and Switzerland.
Working time regulations, including the length of the working day, additional remuneration for non-standard working hours, and annual leave durations are more rigid in Poland than the average for 40 members of the European Union and OECD.
The rigidities in Poland include the level of minimum bonuses for working during public holidays (the highest are in Poland, together with 9 other countries) and the minimum length of annual leave of experienced employees (the 4th highest level, together with Italy).
Rigid regulations of working time contribute to pushing employees into civil law contracts and self-employment, for which the Labor Code does not apply, so parties negotiate annual leave or compensation for non-standard working hours themselves.
If the minimum additional compensation for atypical working hours were reduced to the average of other EU Member States, the minimum additional compensation for work on days off during the week would fall from 100% of salary to 37%, for overtime from 50% to 33%, and for night working hours from 20% to 16%.
However, these are only the easiest measures to compare in an international context, and not necessarily the most important issues from the labor market perspective.
Polish Labor Code
The Polish Labor Code contains a lot of rigidities that are not visible in the quantitative measures used for international comparisons. These include so called hourly rigidity, i.e. restrictions on how to plan, record, calculate and account for working hours.
For example, the Labor Code makes it difficult or even impossible to plan working time shortly in advance. An employee can have an agreement with an employer about specific working hours, but changing them from day to day is often, in accordance with the law, impossible.
This hinders the effective management of working time, leisure and other commitments, and turns out to be harmful for the most sensitive categories of employees, i.e. retirees who visit doctors more often, parents of young children or full-time students.
Such people may prefer to work part-time, but the lack of flexible working hours restricts their employment opportunities.
This is one of the reasons why part-time work in Poland is much less popular than in the rest of the EU, which is unfavorable for the most vulnerable employees and makes it more difficult to draw them into the labor market.
To enable efficiency in shaping working hours, employees and employers often get along on the basis of “gentlemen’s agreements” or use civil law contracts and self-employment. One has to wonder what purpose is served by such employee projection from the Labor Code?
If it leads to working relationships based on informal arrangements that are difficult to enforce on the occasion of a real dispute, it may weaken instead of strengthening the certainty of a relationship between the two parties.
While the law should minimize transaction costs between the parties, such rigidities often generate new costs instead.