Individual Case (CAS) - Discussion: 2010, Publication: 99th ILC session (2010)

A Government representative stated that he was aware that the current wage arrears situation was in contradiction with the Convention. The main reasons for this situation were the following: enterprises were in a difficult economic and financial situation due to the global economic crisis, the banking system was experiencing a cash flow problem, unemployment was increasing and enterprises were ineffectively managed in these unstable conditions. He subsequently outlined the main measures the Government was undertaking to remedy the wage arrears situation. The Government sought to work on a tripartite basis towards addressing the effects of the crisis in a coordinated way. Measures included the reduction of the size of the shadow economy, reform of the tax system, changing of the national law and of the social protection system. Last year, the President’s Office had adopted an anti-crisis plan together with workers’ and employers’ organizations. On 11 May 2009, a law was adopted increasing the responsibility and liability of enterprises which unjustifiably delayed wage payments and setting higher fines. Labour inspections conducted in 2009 in 8,199 enterprises had resulted in 10,108 persons having been found to be liable for wage arrears. When faced with cases of wage arrears, courts often mandated fines lower than the level set out in the national legislation. This issue had been drawn to the attention of the Supreme Court. Currently an analysis was being carried out to prevent future wage arrears and settle current ones. In consultation with social partners, a tightened timetable was being designed to pay off outstanding wage payments. Most wage arrears had occurred in enterprises which were declared insolvent or had gone bankrupt in 2008–09. Active economic enterprises accounted for 38 per cent of this total debt. Of these, 62.3 per cent of the wage arrears existed in the industrial sector, 10 per cent in the construction sector and 0.3 per cent in the mining sector. With regard to changes in legislation, he pointed out that the new Criminal Code now provided for both criminal and administrative liability for the delay in wage payments. Workers and unions had the right to go to court to have their wages paid in the event of enterprise insolvency. Also, discussions were ongoing with social partners to establish a fund to guarantee the payment of wages in case of insolvency of enterprises. The present Government has taken control over the situation regarding wage arrears. Wage arrears had been reduced by 12.7 per cent in the last three months, there were tendencies of stabilization and even reduction of the wage arrears (a 2.8 per cent reduction with regard to bankrupt enterprises and a 15 per cent reduction with regard to economically active enterprises). This included a 20.7 per cent reduction in the private sector and a 10.8 per cent reduction in the coal industry.

Efforts were being made to reduce red tape and it was planned to adopt a new tax code in the future. In addition, the minimum social standards provided by the legislation in force as well as the collective agreements on tariffs (also in the mining industry) would be implemented this year. As regards the specific cases of the Nikanor–Nova coal mine and the state enterprise “Luganskugol”, measures had already been taken by the Government. The companies in question had not used the 1.3 per cent adjustment rate set by law in September 2009 and currently 16 court cases were pending. The mining industry was subsidized by the State and was undergoing restructuring. He stated that it was outstanding that this sincere discussion took place exactly today, when the Minister of Labour and Social Policy was reporting on the issue of wage arrears at a meeting of the Cabinet of Ministers of the Ukraine with the participation of the representatives of workers’ and employers’ organizations. The Government of Ukraine had all the legal and economic power, and most importantly the political will and the support of the social partners, in order to realize large-scale economic reforms which would guarantee social progress, growth in employment rates and decent working conditions as well as remuneration standards. The Government would report to the Committee of Experts on the effectiveness of the measures taken and reply to the conclusions taken by the Committee appropriately. The issue was also taken up within the framework of the ILO Decent Work Country Programme.

The Employer members regretted that the information provided by the Government was not submitted beforehand in writing. This was already the fifth time that the Committee discussed the application of the Convention by the Ukraine. At the last occasion in 2003, specific measures had been announced by the Government to deal with the problem of wage arrears. At that time the situation in the coal mining sector was already the worst and this was still today the sector facing the biggest problems. The Government had acknowledged the problem and informed that there were one month wage arrears in the Nikanor–Nova coal mine, that the state enterprise “Luganskugol” was not in a position to pay workers their entitled salaries and that criminal measures had been initiated against the directors of these enterprises. It was also reported that investments in occupational safety and health were being made in the Nikanor–Nova coal mine, however the link with the wage arrears was unclear and he maintained that a violation of the Convention could not be offset by investments in other areas. The Convention in question dealt with the core of the employment relationship. The continuous lack of salary payments had a serious impact on the living conditions of workers. Wage arrears could have a serious impact on the functioning of the economy, lead to social instability, increase the informal economy, worsen living conditions and lead to unfair competition. The Employer members were convinced that the problem of wage arrears in the Ukraine was not a problem of a lack of legislation, but of a lack of application in practice. There was a structural problem in the coal mining industry in the Ukraine and the causes had to be found. The Employer members were surprised that the Government did not provide more information concerning developments in other industries and it was therefore difficult to judge whether there had been improvements or were still economy-wide problems. They urged the Government to provide the Office with the corresponding data.

The Worker members noted the seriousness of this case, which was marked by a steadily deteriorating situation and wage arrears that had been accumulating for years. Moreover, the Government’s latest report contained no up to date information on wage arrears, no statistics on the accumulated wage debt and no announcement of new measures. Despite the lack of official data, the Committee of Experts had obtained extensive information on the situation from exchanges between the miners’ unions and the public authorities. These communications contained figures on the minimum guaranteed remuneration, delays in payment, the amount of certain entitlements and the deterioration in occupational safety and health conditions in the Nikanor–Nova coal mine and the “Luganskugol” state enterprise. In both these enterprises, a 2009 labour inspection had noted that the remuneration paid did not conform to the relevant minimum wage, that compensation for late payment was not always paid along with the arrears and that there were sums owing to the pension fund. These were not isolated incidents but typical examples of the situation in Ukraine’s coal industry, which was characterized by poor returns on investment, a high level of unemployment and too little safety at work. The principle victims continued to be the miners themselves.

The Employer member of Ukraine observed that the question of the payment of wage arrears in his country remained of topical importance despite the steps taken by the Government along with the social partners to improve the situation. The wage arrears had continued to accumulate in the last months and the total amounted to 1.5 billion hryvnias (UAH). The situation of wage arrears had worsened because of the economic crisis which had led to a drop in GDP, shrinkage in consumer spending and the growth of the shadow economy. The lack of VAT rebates by the Government aggravated the lack of resources on the side of the employers and restricted even further their ability to pay wages. The same applied with the absence of payment in case of government procurement. As a result, many employers had gone bankrupt. These difficulties, however, did not relieve employers from the obligation to make wage payments in full. It was important for employers to emphasize their interdependence and their common interest in achieving full payment of wages. For this reason, all the employers’ organizations at the national level had set up a common representative body which would help tackle the problem, in collaboration with the Government and the trade unions.

In essence, solving the problem of wage arrears in a sustainable manner, which would be to the benefit of both workers and enterprises in Ukraine, depended to a large extent on the adoption of economic and tax reforms. The enforcement of administrative and criminal sanctions would not solve the root causes of the problem and tackle it in the long run. The role of the State was to strike a balance and make sure that everybody was treated fairly. To sum up, the speaker suggested taking the following concrete measures to resolve the problem of wage arrears: (i) the Government should undertake its responsibilities relative to the repayment of previous debts and sums due to enterprises, including through state procurement and the VAT rebate. This money would no doubt help the employers to pay the wage arrears; (ii) a State Wage Guarantee Fund needed to be established for enterprises in difficulty; and (iii) the social partners should be invited to take part in the elaboration of the draft State budget for 2011 to ensure more balanced decisions.

A Worker member of Ukraine said that his country’s non-compliance with international labour Conventions was an ongoing problem. Even when the economy was booming (7 per cent growth rate) not all salary arrears had been paid. They were now two-and-a-half times higher, and between January and April 2010 they had risen by 15 per cent to over US$100 million. For the enterprises themselves that was unacceptable, but it was up to the Government to ensure compliance with Convention No. 95. The trade unions had appealed to the labour inspectorate, to the police, to the courts, to every possible domestic institution before resorting to international channels. The problem was not that the authorities had failed to act but that, although they had taken some steps to resolve the issue, they had done so too late and the Government had not adopted systematic measures to make sure that there was a real change in the situation. A lot of people were living below the poverty line. There were 59 enterprises that were particularly in arrears, and some of them had not been paying for years. It was important that salaries be paid on time.

Another Worker member of Ukraine said that unpaid salaries had reached US$200,000 million and that this had to be measured in terms of an average salary of US$150 a month. Some enterprises went into fictitious bankruptcy in order not to have to pay the arrears. In some cases people employed in the mining industry, which was dangerous work, were even paid in kind instead of cash. He emphasized that it was the oligarchs, who controlled every sector including the political sector, and benefited from the situation. He could not think of a single instance where sanctions had been applied.

The Worker member of Croatia expressed concern about the situation of workers in the Ukraine which constituted a typical example of non-observance of the Convention. The regular payment of wages for services rendered was a basic right of workers. The violations could not be blamed on the global economic crisis since the problem of wage arrears had persisted for more than a decade. Moreover, this problem was not isolated to one company in the Ukraine since the practice had spread to the majority of regions and to most branches of industry, directly affecting the standard of living and social security, especially health protection, and contributing to the growth of the informal economy and poverty which were alarmingly high at the moment. It also forced the Ukrainian workers to leave and seek jobs abroad. The Ukrainian trade unions had consistently asked the Government over the last decade to find a solution and had proposed ways in which the situation could be resolved. It was for the Government to solve the issue using all resources necessary. Despite certain efforts made by the Government, more should be done especially with regard to the labour inspectorate and the sanctions imposed in cases where the wages were not paid in line with the applicable collective agreements. Furthermore, in order to protect the workers in cases of employers’ insolvency, immediate steps should be taken to adopt the necessary legislative amendments.

The Government representative expressed his Government’s appreciation for the unbiased discussion at the Committee as well as gratitude for the proposals made. This discussion was held on the very same day when the Minister of Labour was reporting to the Cabinet on the issue of wage arrears and suggesting to disseminate detailed information through the media about the problem and the measures to address it. The Government had taken all necessary legal measures in order to find a solution to the issue and promote decent work in the country. The Government was grateful for the efforts of the ILO to strengthen countries at this difficult time in the context of the global crisis and would continue to collaborate with the ILO so as to take the necessary steps to tackle the problem of wage arrears.

The Employer members concluded that the major difficulties in implementing Convention No. 95 still persisted in practice. While welcoming the Government’s readiness to continue its efforts in this regard, they regretted that the relevant information was only received on the very day of the discussion and thus did not allow the Conference Committee to assess the situation in an appropriate manner. The impression prevailed, however, that there had been no substantial improvement since the last Conference discussion. The Employer members therefore urged the Government to further intensify its efforts to ensure that wages were paid punctually, and to supply the written information necessary for the Committee to gain an overview, in particular as to whether wage arrears accumulated over the years had indeed been settled.

The Worker members drew attention to the reasons behind the discussion of this case, which were the deterioration in the regular payments of wages in the coal industry, the lack of action taken by the Government and its failure to provide information on the extent of the payment arrears. Two detailed reports were scheduled for 2010. The first concerned the irregular payment of wages in all the sectors and enterprises concerned and should explain what steps were going to be taken for payment to be made on a regular basis. Sanctions and compensation for payment in arrears should be increased and stronger action should be taken against the payment of wages “under the counter”. In addition, labour inspection should be stepped up and a mechanism introduced to guarantee the payment of wages in enterprises that went bankrupt. The second report concerned conditions of employment and work in the mining sector, both in major enterprises and in the hundred or so illegal mines.

Conclusions

The Committee took note of the statement made by the Government representative and of the ensuing discussion. The Committee observed that this case related to the application of Article 12(1) of the Convention concerning payment of wages at regular intervals and that it had already been examined by the Conference Committee on five separate occasions.

The Committee took note of the explanations presented orally by the Government representative concerning the reasons for the re-emergence of wage arrears problems, including the dire economic situation, cash flow problems in the banking system, high unemployment and inefficient management in some businesses. It also noted the Government’s indication that active measures were being taken, in consultation with the social partners, such as the Joint Anti-Crisis Plan, the legislation of May 2009 on the liability of those responsible for delayed payment of wages, the amendment to the Criminal Code and the Draft Law on the protection of workers’ wage claims in the event of the employer’s insolvency. As reported by the Government, inspection visits and administrative fines had been tightened resulting in a steady reduction of wage arrears in all regions. With reference to the situation in the mining industry, and in particular the problems experienced in the Nikanor-Nova mine in the Lugansk region, the Government acknowledged the continued failure of the enterprises in question to comply with applicable minimum wage rates despite the imposition of penalties to the managers concerned on several occasions.

The Committee expressed deep concern in light of the information contained in the report of the Committee of Experts, but also echoed by several speakers participating in the discussion of the Conference Committee, according to which the overall amount of wage arrears currently stood at 1.7 billion hryvnias (or approximately US$220 million) having increased by 15 per cent since the beginning of the year and affecting active, sound businesses and not only bankrupt or inactive businesses. The Committee also noted that several trade union organizations had commented on problems of persistent failure to pay wages on time and in full in several mining companies, and that the Committee of Experts had concluded that these problems were symptomatic of deep systemic difficulties of the country’s mining industry as a whole.

While fully conscious of the challenges that the global economic crisis posed to the prospects of settlement of wage arrears in Ukraine, the Committee recalled that the Global Jobs Pact stressed the relevance of ILO wages-related standards, particularly Convention No. 95, for devising appropriate crisis response measures. The Committee fully shared the point of view expressed by the Committee of Experts that the best form of wages protection was the assurance of regular payment, which allowed workers to organize their lives with a reasonable degree of certainty and security, and that any delay in the payment of wages – even more so the accumulation of large wage arrears – clearly went against the letter and spirit of that Convention and rendered the application of most of its remaining provisions meaningless.

The Committee recalled that giving effect to the requirements of Article 12(1) of the Convention called for a set of measures: effective monitoring by labour inspection services and sufficiently effective and dissuasive sanctions to prevent and punish infringements. The Committee accordingly urged the Government to intensify its efforts in pursuing the above-indicated set of measures through social dialogue in order to resolve the serious wage debt crisis that had persisted in Ukraine for more than 20 years.

The Committee requested the Government to provide updated information for the next session of the Committee of Experts concerning: (i) concrete measures that it had taken to improve the application of the Convention in practice and the results achieved, including detailed statistical information on the wage arrears situation; (ii) the activities of the labour inspection services or other monitoring bodies with regard to wage protection; (iii) any developments concerning the adoption of the law on the protection of workers’ wage claims in the event of the employer’s insolvency; and (iv) the working conditions, including pay conditions, prevailing in the mining sector.

In conclusion, the Committee welcomed the Government’s request for a technical assistance mission with a view to better understand the current wage debt situation and requested the Office to ensure that following such a mission all relevant information was transmitted to the Committee of Experts for its next session in November–December 2010.

The Committee hoped that real progress could be recorded by the Committee of Experts in the very near future on a matter that had been long-standing, had affected and continued to affect large numbers of the working people of Ukraine.

Individual Case (CAS) - Discussion: 2003, Publication: 91st ILC session (2003)

A Government representative (Minister of Labour and Social Policy) considered the discussion of the case as an opportunity to jointly decide on further steps towards solving the problem of wage arrears in Ukraine. The Government considered it to be an important issue and was well aware of its responsibility in settling wage arrears. Discussion of the case at the 2001 Conference had been followed by significant improvements in the situation regarding payment of wages and settlement of wage arrears. Particulars on the measures taken by the Government for the implementation of Convention No. 95 had been submitted by the end of 2002, as required under article 22 of the ILO Constitution. In April 2003, the Ministry of Labour and Social Policy, together with the social partners, had carefully studied the latest comments of the Committee of Experts.

Following the debate on the case of Ukraine at the 2001 Conference, total wage arrears had been reduced by 48.1 per cent, from 4.6 billion grivnas in 2001 to 2364 billion grivnas in 2002. Furthermore, the number of workers affected by wage arrears had decreased from 5.4 million in 2001 (41.8 per cent) to 2.1 million in 2003 (17.9 per cent), a decrease of 3.3 million persons. Half of these workers (48.5 per cent) suffered delays in payment of wages of three months or less, which was also unacceptable.

The most significant changes had taken place in the public sector, where wage arrears had been reduced by two-thirds to 1.5 per cent (35.8 million grivnas). Wage arrears had also been reduced in agriculture (by 71.3 per cent) and coal mining (by 6.6 per cent). Reduction of wage arrears had been reported in most economic and industrial sectors, as well as in all administrative-territorial units. All this was the result of improvements in the economy and effective actions by the executive branch in solving social problems.

Wage arrears were being monitored on a monthly basis by the Minister of Labour and Social Policy of Ukraine, and the relevant information brought to the attention of the Cabinet of Ministers and the Administration of the President of Ukraine. They were being settled in an economic context of increasing minimum monthly wages and average salaries.

The legislation aimed at protecting workers' wages had been strengthened. In 2001 the draft amendment on the criminal code and the code of Ukraine on administrative offences had been adopted in consultation with trade unions, establishing the criminal and administrative liability of officials for untimely and partial payment of wages. In January 2001 the "Act respecting compensation to citizens for loss of part of their profits due to the non-observance of time of their payment" had entered into effect. In October 2002 the Labour Code, concerning the strengthening of penalties and fines for company executives guilty of delay in the payment of wages, was amended. In May 2001 the President of Ukraine issued the "Urgent measures for acceleration of settlement of wage arrears" Decree. The strengthening of state monitoring, primarily through labour inspections, had also contributed to the reduction of wage arrears. Transformation of the labour inspection system had allowed the introduction, to the Supreme Council of Ukraine, of draft laws on the ratification of the Labour Inspection Convention, 1947 (No. 81), and the Labour Inspection (Agriculture) Convention, 1969 (No. 129).

In 2002 on the initiative of state labour inspectors, 1,044 company executives, guilty of wage arrears, were taken to court, which led to the termination of their contracts in 278 cases. Central and local authorities took 940 company executives to court resulting in the termination of 208 contracts. Since the beginning of 2003, 457 company executives were prosecuted and 69 of their contracts terminated. In the first four months of 2003, state labour inspectors took 6,799 company executives to court for violating wage payment legislation; (88.4 per cent of defaulting enterprises inspected) this was up from 19,629 prosecuted in 2002 (77.8 per cent of defaulting enterprises inspected), and 48.9 per cent in 2001. More than twice the number of criminal proceedings were initiated against company executives in the first quarter of 2003 compared to 2002 (i.e. 485 in 2003 compared to 206 in 2002).

The Government prepared a number of draft laws aimed at facilitating settlement of wage arrears by giving them top priority over other payments, and considering them as privileged payments in the event of liquidation of an enterprise. The creation of guarantee institutions in accordance with the Protection of Workers' Claims (Employer's Insolvency) Convention, 1992 (No. 173), was also being considered.

Taking into account that the adopted measures were not sufficient, in April 2003, the Supreme Council of Ukraine approved the action plan of the Cabinet of Ministers of Ukraine, which has made the settlement of wage arrears a major priority. Referring to the observation by the Committee of Experts on wage arrears in the Voltex company, he indicated that, by decision of the Commercial Court of Volynsk Oblast 4 January 2003, bankruptcy proceedings had been initiated against the enterprise. Wage arrears of 2.2 million grivnas were included in the list of claims against the enterprise. The Voltex Committee of creditors carried out financial restructuring according to the recovery plan, which was approved by the court on 24 April 2003 aimed at settling wage arrears, in accordance with the Act respecting the renewed solvency of the debtor or confirmation of bankruptcy.

Ukraine requested ILO technical assistance for drafting legislation to give priority to the payment of wages over other mandatory payments and for studying other countries' success in creating a guarantee fund for payment of wages in the event of bankruptcy. He indicated that two draft laws would be submitted to the Committee in the near future. Finally, he emphasized that the new Government of Ukraine, together with trade unions and employers, had decided that all draft laws and standards concerning wages and observance of social standards would be adopted only after they had been debated by the National Council of Social Partnership, where all decisions would be taken on the basis of consensus. He was convinced that continued dialogue with the social partners would help solve the problems of implementation of the ILO Conventions ratified by Ukraine.

The Employer members noted that it was hardly surprising that in the present case workers' as well as employers' organizations had supplied comments to the Committee of Experts. Wage arrears were only partially a problem in law or practice, as the basic principle of receiving remuneration for work done existed in every legal system. The Employer members noted that by formally fixing time limits for the payment of wage arrears, the Government had in fact officially endorsed and authorized the delays in the payment of wages. They noted that some progress had been made in an individual enterprise mentioned by the Committee of Experts, but that nevertheless the 2002 observation gave a mixed picture of the situation. The situation remained particularly difficult in the public sector, which was highly dependent on the state budget. It was hoped that the Government would strengthen labour inspection and other relevant institutions, but the Employer members believed that further administrative and legislative action would have a limited effect since the root causes of the problem were related to the economic system. The existing situation might be due to the tax and business laws in force, but also to the current state structure, which lacked a culture based on the market economy and private property. As long as the country would not tackle this fundamental issue the current situation would be prolonged.

The Worker members recalled at the outset that the case raised before the Committee for the last nine years concerned the failure of the Government to comply with its obligation of ensuring the regular payment of wages. Taking into account the General Survey on the protection of wages, which was undertaken this year, they believed it was appropriate to focus on the issue by way of example. With regard to Article 4 of the Convention on the restriction of payment of wages in kind, they noted the adoption of a new law which restricted such a form of payment to 50 per cent of the remuneration due to a worker. That percentage was, in their view, a large proportion of the remuneration due to a salaried worker. They noted, however, that the partial payment of wages in kind should be calculated on the basis of prices, which were not less than the cost price. With respect to Article 11 of the Convention which constituted one of the pillars of social protection because it established the priority of wage claims in the case of an employer's insolvency, the Worker members regretted to note that the principle continued to be ignored in Ukraine. He referred to Article 12 of the Convention, which provided for the payment of wages at regular intervals, which was another fundamental pillar of social protection, because it gave the worker the security necessary for his or her daily life. The Worker members further underlined that the continued situation of wage arrears, as witnessed in Ukraine, violated grossly the spirit and letter of Convention No. 95. The Worker members indicated that, during the previous years, the observations made by the Committee of Experts on Convention No. 95 had mentioned the problem of arrears. The Governing Body of the ILO had received nine representations based on article 24 of the ILO Constitution, claiming the non-compliance of Convention No. 95. He added that, in the countries under discussion, the phenomenon was mixed with massive violations of the right to work, aggravated by the cynical attitude and lack of responsibility on the part of some employers.

The Worker members took note of the information presented by the Government in which wage arrears would have diminished by 46 per cent in the last two years and that the number of workers affected reached 58 per cent. He noted that, despite of the above, the Committee of Experts had further signalled an aggravation of the phenomenon since April 2002 in certain industries and in two important regions. He highlighted that the Federation of Ukrainian Trade Unions had pointed out that a draft law establishing the priority of wage claims over other mandatory payments, and the draft law establishing the priority of wage claims in the case of insolvency, were blocked by a veto of the Head of State. He further highlighted that those elements did not reflect a constructive attitude. The Worker members requested that the Government be called upon to put to effect without delay the recommendations made by the Committee of Experts, to adopt the appropriate legislative measures; to reinforce controls; to apply subsequent sanctions; and to formulate efficient measures in order to redress the prejudices experienced by workers.

The Worker member of Ukraine recalled that this was the fourth time the case of Ukraine was being taken up by the Committee. Previous discussions by the Committee had had a positive impact on the Government. In 2001, at the request of the trade unions to the President of Ukraine, the Presidential Decree concerning the settlement of wage arrears had been adopted. The same year wage arrears had been reduced by approximately 2.2 billion grivnas, or 44 per cent of the total wage arrears. In 2002, wage arrears in the public sector had been almost liquidated. He emphasized the positive role played by the general agreement between trade unions and the Government in resolving the problem of wage arrears. The social partners had undertaken various measures aimed at payment of wage arrears and improving the supervision of compliance with the wage payment legislation in enterprises. Nevertheless, the problem of wage arrears had not yet been fully resolved. In response to the declining growth rate of industrial and agricultural output in 2002, the settlement of wage arrears had been reduced accordingly. In 2002, wage arrears in the productive sector had been decreased by only 6.5 per cent. Since the beginning of 2002 overall wage arrears had even increased by 51 million grivnas, or 2.2 per cent of total wage arrears. Particularly troubling was the fact that the wage arrears accumulated in 2003 made up approximately 26 per cent of total wage arrears. Nearly 2.1 million workers, or 18 per cent of the total workforce, were affected by the wage arrears and more than one-third of workers suffered wage payment delays of over six months.

To protect the right of workers to timely payment of wages, the Federation of Trade Unions of Ukraine and its member organizations initiated a complaint, on behalf of workers, demanding the mandatory recovery of wage arrears from employers. In 2001, the courts had taken up approximately 225,000 individual complaints by workers and more than 155,000 in 2002. As a result, in 2001-02 the courts judged in favour of the payment of approximately 650 million grivnas, or US$123 million. Within the same period, 84 contracts with enterprises, which had violated labour laws, were terminated at the request of the trade unions. Trade unions were also using collective means for protecting the economic interests of workers. In 2002, 409 collective labour disputes had been registered, involving more than 2 million workers. In the process of conciliatory procedures employers had repaid approximately half of the arrears.

He indicated that the national legislation of Ukraine was not in compliance with Article 11 of the Convention, according to which, in the event of the bankruptcy or judicial liquidation of an undertaking, the workers employed therein should be treated as privileged creditors, and wages constituting a privileged debt should be paid in full before ordinary creditors could claim a share of the assets. For this reason, the chairperson of the Federation of Trade Unions of Ukraine had introduced to Parliament a draft amendment to the Act respecting the renewed solvency of the debtor or confirmation of bankruptcy. The speaker also referred to section 15 of the Act on labour wages, according to which payment of wages could be made only after payment of taxes and other mandatory payments. He indicated that in 2001-02 a law, which considered wages to be priority payments, had been discussed several times by the Parliament, but had been repeatedly vetoed under the pretext that it would reduce state income. However, no estimations of the alleged budgetary losses had been made.

He supported the position of the Ministry of Labour and Social Policy to consider enterprises, which did not pay wages to their workers, to be insolvent and suggested that the State Labour Inspectorate be authorized to initiate bankruptcy proceedings. He stated that resolution of the problem of wage arrears in Ukraine, in the opinion of the Federation of the Trade Unions, would also require the adoption, by the Supreme Rada of Ukraine, of a law on payments of wages prior to other payments; amendments in the Act respecting the renewed solvency of the debtor or compilational bankruptcy, in order to ensure that, in the event of bankruptcy or liquidation of an enterprise, wages would be paid prior to other payments; and ratification of Convention, No. 173. He hoped that the conclusions of the Committee would contribute to fully addressing the problem of wage arrears in Ukraine.

The Employer member of Ukraine expressed his gratitude to the ILO for its contributions to strengthening social dialogue in Ukraine. He supported the proposals made by the Government representative and the Worker member of Ukraine. He indicated that the settlement of wage arrears in the industrial sector had been slower than in the public sector. A number of enterprises had gone bankrupt, and it was necessary to find ways of solving the problem of wage arrears. He was concerned that the minimum monthly wage in Ukraine had not been negotiated with employers, and did not take local differences into account. He emphasized the importance of ILO technical assistance in drafting laws dealing with the protection of wages, fixing a minimum monthly wage, and creating a guarantee institution as provided in Convention No. 173. He emphasized that, in view of the unprecedented character of the economic transformations taking place in Ukraine, it was impossible to avoid wage arrears. He expressed his firm belief that within a year this problem would be successfully resolved. The economic growth of 6 to 7 per cent per year was a significant achievement by the Government and employers, and it would contribute to the resolution of the problem of wage arrears.

The Worker member of Romania stated that the phenomenon of wage arrears affected several countries in the region but it was most widely felt in Ukraine, because 20 per cent of its workers were affected. In certain branches of industry (extraction industries) and the services sector (health, social services and education), the phenomenon was on the increase since April 2002. It was particularly felt in the regions of Donetsk and Lougansk. The speaker pointed out that the liquidation of wage arrears by the close of 2001 had not been made, yet no sanctions had been imposed by the authorities in power. He further indicated that the payment of wages in the form of allowances in kind continued to be a current practice in Ukraine, contrary to Article 4(2) of Convention No. 95. According to Article 1 of Convention No. 95, wages were fixed by mutual agreement between the parties or by national laws or regulations, in such a manner that it was incumbent on the public authorities to ensure that workers received the wages to which they were entitled, on time. The speaker added that Ukrainian trade unions had requested the adoption of a law establishing the priority of payment of wages, and the formulation of a legislative instrument on the priority nature of wage claims in the case of insolvency of an enterprise. He concluded that they had further requested that the Government take without delay all the appropriate measures in this regard.

The Government member of Cuba referred to the progress mentioned by the Committee of Experts in their observation. Some speakers, however, had questioned the figures presented by the Government during the discussion, figures which, in the speaker's view, should be accepted. Moreover, it was not appropriate to make value judgements on the form of property or economic system chosen by Ukraine, which were issues outside the competence of the ILO. When, in a situation of economic slowdown in a market economy, such solutions as privatizations continued to be promoted as a solution to a country's problems, workers rights were neglected and issues were addressed that interfered with an objective assessment of the situation.

The Worker member of India noted that this was a clear case of a violation of the Convention, which had already been discussed in the Conference Committee three times since 1997. It was undisputed that wage arrears had increased in a number of sectors during the last year. Payment in kind was unacceptable and the fact that 30 per cent of the total workforce remained unpaid was a social problem of a critical dimension. Receiving payment for services rendered was a basic right of the worker. It was thus an obligation of the Government to pay the arrears and to deal with defaulting enterprises. Many social benefits were linked to the payment of wages and unpaid workers risked losing retirement benefits. The speaker urged to take a strong position in this case.

The Worker member of Tunisia declared that this case constituted a typical example of the non-observance of Convention No. 95, which was a Convention that touched upon a vital aspect of a worker's life because wages were, in general, his only means of subsistence. The case raised here posed a real problem which affected numerous sectors of the economy and several regions. He added that even the public sector, which was, by definition, directly attached to the State, was also affected. He indicated that this inertia by the public authorities encouraged the same practices to occur in the private sector, by giving a bad example. He indicated that the Government had taken a number of measures at the administrative and legislative level, which gave some results. Thus, in 2002, wage arrears would have diminished by 44 per cent in comparison to the previous year, and the number of workers affected reached 45 per cent. He added that the positive development was interrupted and that the phenomenon of wage arrears was on the rise whilst other indicators pointed to a revival in the economy. He added that such a contradiction could be explained by the fact that some enterprises, in their cynical attitude, preferred to invest their profits, instead of fulfilling their obligations vis-à-vis the workers and due to the preference of the State for the reduction of its debt. He added that, in reality, the practices of payment in kind, and the continued situation convinced workers even further that, behind its declarations of goodwill, the Government did not have a firm commitment at that level.

The Government representative expressed his gratitude to the participants in the discussion. He indicated that he would inform the members of the Cabinet of Ministers and the President of the results of the debate on the case at the Conference. He emphasized that, in light of the results of the discussion, the Government would adopt measures aimed at solving the problem of wage arrears in Ukraine.

The Employer members stated that since the Government found technical cooperation useful, the Committee should recommend it. For instance, the Government could be assisted in drawing up new legislation in such areas as bankruptcy. However, the Government should also examine the current economic system as a whole with a view to identifying areas where improvements could be made.

The Worker members considered that, while there had been some progress, wage arrears were still a problem which continued to affect workers in many sectors. Their widespread and long-lasting nature made them serious violations of Convention No. 95. While noting the ongoing efforts of the Government, the Worker members requested that the Government show more determination in enforcing the Convention, by adopting the Act aimed at accelerating the payment of arrears and establishing priority payment of wages, and the Act guaranteeing the privileged payment of wages in the event of the bankruptcy, and by reinforcing labour inspection and the system for sanctioning infractions to labour legislation. They expected the Government to demonstrate its will through the establishment of precise deadlines, the exact planning of arrear settlements, and the recognition of the principle of privileged payment of wages. While praising the Government for requesting ILO technical assistance, they recommended that such assistance not be limited to wage arrears but that it cover wage legislation as a whole.

The Committee noted the oral explanations given from the Government representative and the discussion that followed. It noted in particular, the information provided by the Government concerning the legislative measures aimed at reducing the wage arrears as well as the latest statistical data showing a clear improvement of the situation both in respect of outstanding wage debts and the amount of wages paid in kind. The Committee reiterated that the payment of wages in full and at regular intervals was a fundamental right of workers and an absolute prerequisite for healthy employment relations, economic progress and social welfare. It emphasized that the social partners should be fully involved in the national effort to comply with the Convention. The Committee encouraged the Government to deal with the persisting wage crisis. It also invited the Government to continue closely monitoring the evolution of the situation and to keep the Committee of Experts informed of any significant developments in this respect, including the adoption of the draft Act on the privileged payment of wages. Finally, the Committee welcomed the Government's and its social partners' request for technical assistance from the Office, especially in respect of the effective establishment of a wage guarantee fund in accordance with the international labour standards.

Individual Case (CAS) - Discussion: 2001, Publication: 89th ILC session (2001)

A Government representative, the Minister of Labour and Social Policy, indicated that the Government of Ukraine had informed the Committee of Experts in due time on the efforts and results of the measures taken to resolve the problem of wage arrears in the country. In its recent report, the Government had provided detailed information on the positive changes achieved during the last year and he now wished to supplement this information. The Government recognized the exceptional social importance of this programme of measures. In 2000 and 2001, the Government had taken a number of economic and organizational measures aimed at reducing wage arrears. As of 10 May 2001, wage arrears in Ukraine had been reduced to 2 billion grivnas, or by more than 29.3 per cent. Compared to the maximum level of wage arrears in August 1999 (7,192.3 million grivnas), the wage arrears had been reduced by 40 per cent. In the first four months of 2001, the amount of wage arrears has been further reduced by 7.6 per cent, compared with the same period in 1999 and 2000, when it had increased by 6.7 per cent and 0.6 per cent respectively. The total amount of wage arrears as of 10 May 2001 was 1.3 times the monthly wage mass of all workers, compared with a figure of 2.3 in 2000.

As of 10 May 2001, the wage arrears owed to workers of the sector financed out of the state budget had been reduced by 365.2 million grivnas, or 73.4 per cent compared to the previous year. Between January and April 2001, the amount of wages paid in kind had also been reduced. The volume of wages paid in kind constituted 6 per cent of the total amount of wages. Positive changes had occurred in all branches of the economy, in both the public and private sectors, and in all territorial subdivisions of the country.

The legislation providing for the protection of wages had also been improved. In 2000, the Law of Ukraine on the compensation to citizens of lost income because of its non-payment, and a Presidential Decree on urgent measures to accelerate the repayment of wage arrears, had been adopted. The Decree provided for the creation of territorial bodies of a state department to supervise the observance of labour legislation before 1 September 2001. This will signify the completion of the transformation of the state labour inspectorate in accordance with the requirements of Convention No. 81 and the recommendations of the Committee of Experts. The efficiency of state control over the observance of the legislation respecting wages had been improved. While in 1999 administrative sanctions had been applied by state labour inspectors to one out of five directors of inspected enterprises which were in arrears in the payment of wages, in 2000 this figure was one in three directors, and in the first quarter of 2001 it had reached practically one in two directors.

The problem of the repayment of wage arrears was reflected in the text of the general collective agreement for 2001. The situation with regard to the measures taken for the repayment of wage arrears had been discussed at the last meeting of the National Council for Social Partnership, where it had been decided to consolidate the efforts of the parties for the solution of the problem. Moreover, the new Prime Minister of Ukraine had met with the representatives of the trade unions on 28 May 2001 and had emphasized that the issue of the repayment of wage arrears was a priority for the Government.

The Worker members thanked the Government representative for the information provided. They said that the protection of wages, as set out in Convention No. 95, constituted an essential right. For several years, they had been expressing their concern at the spread of the scourge of the non-payment of wages throughout the world. The case of Ukraine was a sad illustration and had been addressed every year since 1995 by the Committee of Experts, and in 1997 and 2000 by the Conference Committee. In its conclusions the previous year, the Conference Committee had expressed its deep concern at the continued violation of the Convention and had emphasized the serious nature of the problem which affected millions of Ukrainian workers and requested the Government to take the effective measures that were needed to ensure compliance with the Convention. Unfortunately, the report of the Committee of Experts had not found any real progress in the case. The Committee of Experts had noted, among other problems, the persistence of wage arrears, the non-payment of wages and the absence of effective penalties against those who violated the Convention.

At the sectoral level, although the Committee of Experts had noted that the situation had improved somewhat in certain sectors, it had grown worse in others, to the extent that it was imperilling the proper functioning of the labour market. They also noted that, in sectors such as agriculture, restructuring had resulted in a deterioration in the situation. While the public sector was greatly affected by violations of the Convention, workers in the private sector also suffered from violations of their rights. As indicated by the Government representative, some 65 per cent of cases of wage arrears occurred in the private sector. In relation to controls covering the payment of wage arrears, the Worker members noted the increased activity of the labour inspection services. These appeared to be accompanied by new legislative initiatives. The Worker members shared the concern expressed by the Committee of Experts concerning the real and enduring effect of these initiatives in bringing the country into lasting conformity with the Convention.

The previous year, they had drawn the Government's attention to the importance of the three criteria set out by the Committee of Experts for the application of the Convention, namely effective control, appropriate sanctions and measures to remedy the damage suffered. While welcoming a certain strengthening in the activity of the labour inspectorate, they were of the view that this would not be sufficient unless it was backed up by significant sanctions and compensatory measures. They therefore called on the Government representative to provide the Committee with more complete information on the penalties set out by the legislation, their effective imposition and the rigour with which court rulings were applied.

Economic transition could give rise to short-term imbalances. Since the Committee of Experts had started addressing this case, the Government had systematically tended to justify the ineffectiveness of its policies by resorting to the argument of the transition to a market economy. They believed that this reason could not be used for ever, particularly since other transition countries had been able to comply with the provisions of the Convention. They emphasized that the Government needed to bring itself into conformity with the Convention by taking the necessary measures, and particularly by following the advice of the Committee of Experts on the need to strengthen controls, the application of meaningful penalties against those who violated the Convention and the implementation of measures to compensate the prejudice suffered by workers. The Worker members expressed agreement with the comment made by the Committee of Experts that the problem of non-compliance with the Convention by the Ukrainian Government persisted and continued to affect millions of workers in all sectors. These violations were rendered particularly serious by their scope and duration. The Worker members therefore firmly reaffirmed the urgent need for real progress to be made in this case through the application of effective measures to guarantee the payment of wages and for the total liquidation of wage arrears.

The Employer members thanked the Government representative for the information provided. In many respects, despite the progress made, the case continued to raise the same issues that had been examined by the Committee the previous year. Indeed, the Committee of Experts had made observations on the case every year since 1995 and this was the third occasion on which it had come before the Conference Committee. In the view of the Employer members, the case was related to the problems arising out of the transition from a centrally planned economy to a market economy. Indeed, the transition process had not yet been completed. Nevertheless, the problems caused by the transition process could not perpetually be used as an excuse for the failure to pay wages, which was highly reprehensible. The Government openly acknowledged that it was in violation of the Convention. Indeed, the problem of wage arrears was so pervasive that it affected a large number of sectors, including, for example, mining, information technology and housing.

In the view of the Employer members, it was still the case that the economic and legal structures were not in place for the establishment of a viable market economy in the Ukraine. Indeed, they were concerned that the decline in wage arrears was mainly related to the good performance of the world economy last year. In view of the current slowdown in the international economy, it was to be doubted that the volume of wage arrears would continue to fall. The Government had said that the main reasons for the wage arrears problems were the radical structural reforms and the privatization of state property. But the Employer members questioned whether in practice the radical structural reforms necessary for a market economy had actually been implemented. They also expressed doubts as to whether wage arrears were primarily a private sector problem. Indeed, they considered that further privatization constituted the means of resolving the problem. More information was needed, particularly on the delineation within each sector between what was state-owned or public and what was private.

Despite all the action taken by the Government, the problem of wage arrears persisted. It could not be resolved without major market reforms. They emphasized that in a market economy unpaid workers could file a claim with an administrative agency or a civil court. Moreover, workers would be free to give up their job and look for another. In a market economy, enterprises which were facing financial difficulties would normally restructure, or in the worst case file for bankruptcy. None of these options appeared to be available in Ukraine. In that respect, the Employer members questioned the comment made by the Committee of Experts that the State lacked a controlling influence over companies that had been inspected. Such an approach appeared likely to perpetuate the centrally planned system. They therefore believed that the emphasis placed by the Committee of Experts on inspection and sanctions might not be a totally adequate solution. What was needed instead was to give priority to the economic and structural reforms required for a successful transformation to a market economy. Without such reforms, the Committee might well be examining the case for many years to come.

The Worker member of Ukraine expressed his gratitude to the Committee for considering the problem of wage arrears in Ukraine once again. He indicated that, as a result of the rise in GDP and the commitments undertaken by all the social partners under the general collective agreement, the amount of wage arrears had been significantly decreased in 2000. In that year, the amount of the wages owed had fallen by 1.5 billion grivnas, or 23 per cent. As a result, the number of workers to whom wages had not been paid had decreased by more than 2.9 million persons. Unfortunately, despite all the efforts of the Government, wage arrears had not been fully liquidated in 2000. As of May 2001, the total amount of wage arrears in the industrial sector was around 4.5 billion grivnas.

The Federation of Trade Unions of Ukraine and its constituent organizations were using all the rights available to them to protect the legal rights of workers. First of all, the trade unions had encouraged the submission of wage claims to the courts for the recovery of wage arrears from employers, as well as representing the interests of workers in the courts. As a result, the courts had adopted decisions concerning the recovery of more than 406 million grivnas in wages in 2000. The trade unions also instigated the termination of employment contracts with those directors of enterprises and organizations which violated the national legislation on wages. In 2000, at the initiative of the trade unions, 144 contracts had been terminated. In addition, the trade unions were making use of the system of collective agreements. At the request of the trade unions, in the general collective agreement for 2001, the Government and the employers had committed themselves to the full repayment of the wage arrears owed to the workers of enterprises, organizations and institutions of the country in 2001.

He indicated that in his opinion measures should be taken to improve the situation. First, the adoption of the Law on the procedure of repayment of debts of taxpayers to the budget and state special purpose funds should be accelerated. This Law would allow enterprises the freedom to determine independently the ways and amounts of their resources to be used. Secondly, changes needed to be made to the Law on the insolvency of the debtors or the adjudication of bankruptcy respecting the priority of the payment of wages in the event of bankruptcy or liquidation of enterprises. Thirdly, the existing procedures for the purchase and sale of property, which did not provide for the mandatory acceptance by the legal successor of obligations concerning the repayment of wage arrears, would need to be changed. Fourthly, the Government should ask the ILO for technical assistance concerning the observance of Convention No. 95 in Ukraine and the transformation of the wage system in Ukraine.

The Worker member of the Russian Federation recalled that this question had already been discussed by the Committee the previous year and he expressed his support for the workers of the Ukraine. He stated that the information provided by the Government concerning the measures taken to improve the situation was very similar to the information provided the previous year, which meant that the efficiency of these measures had been very low. Six years ago, when the similar case of the Russian Federation had been discussed, it had been considered as a relatively rare incident. Last year, there were already 12 such cases. Now the report of the Committee of Experts contained information on violations of Convention No. 95 in 17 countries. This meant that the problem of wage arrears had become global in its nature.

He added that the solution to the problem of the transfer of money out of the country to the accounts of "virtual", or fake, companies located in offshore zones could contribute to resolving the problem of the full payment of wages in such a rich country as Ukraine in terms of its natural and human resources. The workers of Russia, who are very familiar with this problem, considered the claims of the workers and trade unions of Ukraine to be fully justified. They also shared the conclusion of the Committee of Experts concerning the need for the Government to take very urgent measures to improve the situation, not only in respect of Convention No. 95 in general, but also to comply with its individual provisions.

The Worker member of France emphasized the worsening of the situation with regard to violations of the Convention throughout the world. Wages were the only means of subsistence for employed persons. They were therefore priority claims which needed to be given absolute preference over all the other debts of enterprises and in the budgets of the State and local authorities. He reaffirmed the fact that the right to a wage was an essential right which made all the difference between free work and forced labour. Violations of the provisions of the Convention were therefore an extremely serious matter. Payment in vouchers and coupons was not acceptable unless they were easily, freely and immediately transferable at the same value as the wage that was due. Although payment in kind was possible, it depended on the services or goods provided. For example, with the consent of the workers, housing and food could represent part of the wage. However, it would be unacceptable for an enterprise which produced pottery to pay its workers in pots. He doubted that the Employer members were justified in claiming that privatization would be the solution to the problem, in view of the fact that private enterprises appeared to have the highest level of wage arrears. The Government needed to make the regular payment of wages its absolute priority. He added that the Government should take all possible measures to ensure the regular payment of wages and the liquidation of arrears. The very dignity and subsistence of workers and retirees was being undermined, which had very serious personal consequences for many of them. In conclusion, he called on the Government to resolve the issue in collaboration with the social partners, particularly through the adoption of sanctions. The requirement to pay interest on wage arrears should be included in the legislation.

The Employer member of Ukraine said that employers suffered from the problem of wage arrears more than anybody else. He pointed out that the problem of wage arrears existed in 17 countries and that it was therefore necessary to speak of a certain trend in labour relations. The roots of this problem in Ukraine could be found in the process of the transition from an administrative system to a market economy. He also indicated that this was the first year that business in Ukraine had started to emerge from the crisis. For the solution of the problem, it would be necessary to improve the tripartite relations in the country and to strengthen the role of employers in the formation of tax and economic policy in the country. He expressed the hope that these measures would be taken in the very near future and that, with the participation of the new Government and the assistance of the ILO, it would not be necessary for the Committee to examine the problem of wage arrears in Ukraine again.

The Worker member of Côte d'Ivoire stated that the case of Ukraine was of great importance at a time when the ILO was advocating decent work for all. Although the principles of the Convention were known to all, they were not applied in Ukraine, where workers remained without wages for months on end, unable to feed their families or provide them with the basic necessities for a normal life. Decent work, which was an activity through which human beings were fulfilled, would lose its entire meaning. The report of the Committee of Experts showed that the crux of the Government's arguments consisted of figures, increasing and decreasing rates which it was the only one to understand. What value did these figures have for workers who worked and had not been paid? The Government claimed to have designed reforms to achieve prosperity and had established a public supervisory department. He questioned the nature of these two measures which, in his opinion, constituted window dressing, set out in generic terms to appease and distract from the real situation of Ukrainian workers. The Government's arguments had not changed, but the actual situation was constantly deteriorating. Concrete measures and firm commitments had to be made by the Government. There was no justification for withholding payment of wages for work that had been performed, even in the event of economic crisis, a problem which the whole world faced. The statement made by the Government representative had only one purpose, to gain time. The mere fact of not paying wages regularly was a very dangerous practice which must be stopped immediately before it spread to other countries. He urged the Government to take concrete measures to end the suffering of the Ukrainian workers, and expressed support for all the proposals made by the Trade Union Confederation of Ukraine.

The Government representative expressed appreciation for the comments made by the Employer and Worker members. He emphasized that in 2000 and 2001, for the first time, a trend of economic recovery had emerged and that the Government believed that the resolution of the problem of wage arrears was closely linked to such economic recovery. He assured the Committee that the Government would make every effort to achieve an effective solution to the problem of wage arrears and the timely payment of wages. He pointed out that significant progress had recently been achieved in this respect. He hoped that the ILO would provide advice and technical assistance to resolve the problem and that the case of Ukraine would not be discussed by the Committee once again next year.

The Worker members noted once again non-compliance by the Government with Convention No. 95 and the gravity of the problem which affected millions of workers. They noted the efforts that were being made, especially to strengthen labour inspection in an effort to resolve the problem. They called upon the Government to take vigorous measures to guarantee the practical application of the Convention, including the importance of sanctions on those who committed violations and measures to compensate the damages suffered. They encouraged the Government to request the technical assistance of the ILO. Such assistance should not only apply to the problem of wage arrears but also to the entire wage structure.

The Employer members still expressed some difficulty in understanding the exact nature of the legal and labour market institutions that were in place in Ukraine and whether they were of the nature required to facilitate the resolution of the problem. They therefore requested the Government to provide information to the Committee of Experts on these matters. They also requested clarifications on what was meant by state-owned and private property, and what was considered to be a private enterprise. Without such information, it would not be possible for the supervisory bodies to assist in the resolution of this vital and complex issue.

The Committee noted the oral information provided by the Government representative of Ukraine and the discussion that followed. It recalled that the Committee of Experts had commented for the past six years on the serious problem of the failure to pay wages or delays in the payment of wages to millions of workers and that the Conference Committee had already discussed this case on two previous occasions.

In noting the Government's efforts, the Committee was nevertheless obliged to express its regret that there were still more than 5 million workers whose salaries had not been paid or who had experienced delays in the payment of their wages. The Committee observed that, according to the information provided by the Government, new legislation had been adopted with the aim of strengthening penal or administrative sanctions in cases involving wage arrears or unpaid wages. The Committee also observed that other legislation had been adopted with the aim of compensating workers for losses suffered due to delays in the payment of their wages or to enable the management of the enterprises concerned to pay workers' salaries on a priority basis, prior to paying their taxes due to the State. The Committee recalled that the problem of delays in the payment of wages or failure to pay wages was typical of an economy in transition.

Nevertheless, the Committee was once again obliged to note that the measures taken to reinforce the legal machinery of the State were not sufficient to resolve this urgent problem; it was also necessary that measures be taken at the practical level to guarantee the effective application of the legislation to lead to an effective solution of this grave problem. In this context, the Committee also noted that the monitoring functions carried out by the Labour Inspectorate had been reinforced and that special committees, established at the various state levels, were already in operation, with the aim of resolving the problem of unpaid wages or wage arrears in the payment of the wages of state employees (central and local government and municipalities) as well as in the private sector. The Committee took particular note of the statement of the Government representative indicating that the payment of wages was a priority issue for his Government. The Committee urged the Government to double its efforts so that the legislation adopted would be effectively enforced and so that the practical measures taken could be consolidated in order to achieve a rapid solution to this serious problem.

Consequently, the Committee requested the Government to provide a detailed report for examination by the Committee of Experts at its next session in November/December 2001, asking that the report include specific information regarding the progress achieved in the implementation of the legal and practical measures described and regarding measures that might be adopted in order to render them genuinely effective. The Committee also requested that the report include information on the measures adopted to implement the provisions of the Convention relative to the prohibition against the payment of wages with coupons or promissory notes, the payment of wages in kind, the effectiveness of measures taken to permit employees to place priority on the payment of workers' wages over the payment of their debts to the State and the sanctions imposed in the event of violations. The Committee also requested the Government to communicate statistical data which would permit an assessment of the progress achieved in resolving the worrisome problem of unpaid wages or wage arrears of millions of workers.

Lastly, the Committee urged the Government to take the necessary measures so that the Committee could confirm that genuine progress with regard to resolving these problems had been made, and that it involved the social partners to that end. The Committee hoped that the Government would avail itself of the technical assistance of the Office to assist it in its struggle against the problem of unpaid wages or wage arrears, considering that the payment of wages was a fundamental right of workers.

Individual Case (CAS) - Discussion: 2000, Publication: 88th ILC session (2000)

The Government has communicated the following information:

On the instructions of the President and the Cabinet of Ministers of Ukraine, on the basis of information from ministries and other central and local executive bodies and inspections by the State Labour Inspectorate, the Ministry of Labour and Social Policy of Ukraine carried out a study in 1999 on the observance of labour laws, the timely payment of wages and outstanding wage arrears.

I. Wage arrears by sector

The last four months of 1999 saw a steady decline in the level of unpaid wages. On 10 January 2000, for the first time in four years, wage arrears were reduced by 111,200,000 grivnas (1.8 per cent since January 1999). In 1997 and 1998 wage arrears increased by 22.9 per cent and 26.2 per cent respectively. The number of employees whose wages were not paid on time decreased by some 1,500,000 (14 per cent).

As at 10 January 2000 unpaid wage arrears in all branches of the economy amounted to 6,399,500,000 grivnas, of which 35.8 per cent was in the state-owned sector, 63.3 per cent in collectively owned enterprises and 0.6 per cent in enterprises of other types. Since the beginning of the year 2000 wage arrears declined in 19 sectors out of 39, among them education (-41.2 per cent), social security (-39.4 per cent), health (-37 per cent), culture (-37 per cent) and forestry (-31.9 per cent).

The largest increases in wage arrears were registered in banking (+380.6 per cent); information technology (+117.3 per cent); non-productive public services (+80.3 per cent); housing (+52.7 per cent); commerce (+48.9 per cent); and fisheries (+46.2 per cent).

The proportion of unpaid wages to total earnings taking all types of enterprises into account, was 17.1 per cent (21.8 per cent in 1998). In sectors owing wage arrears, unpaid wages accounted for 22.8 per cent ( 33.6 per cent in 1998).

In the publicly financed sphere wage arrears fell by 337.7 million grivnas (38.5 per cent) since 10 January 1999; accounting for 540.6 million grivnas (8.4 per cent of all wage debt in the country's economy), a decrease of 13.5 per cent since January 1999. Wage arrears in the industrial sector have fallen since January 2000 in 20 out of 41 branches in the sector, notably gas (-88.4 per cent); oil (-46.9 per cent); non-ferrous metallurgy (-46.8 per cent); hydro-electric power (-45.8 per cent), fisheries (-44.9 per cent); and ferrous metallurgy (-29.1 per cent).

The steepest rises in wage arrears in the industrial sector were recorded in micro-biology (+51.1 per cent); flour-milling, cereal and mixed-feed production (+47.1 per cent); in glass and porcelain (+ 37.5 per cent); nuclear power (+34.9 per cent); and in leather, furs and footwear (+33.6 per cent). The proportion of unpaid wages to total earnings for all enterprise types was 16.7 per cent (22.8 per cent in 1998). In enterprises with outstanding wage arrears, unpaid wages accounted for 27 per cent (32.3 per cent in 1999).

In 1999 wage arrears from previous years were settled in the amount of 4,709,400,000 grivnas (72.7 per cent of the debt for the corresponding years).

The figures for January 2000 on most regions and in a broad range of sectors suggest, in comparison with last year's figures, that measures recently undertaken by the Government at national and local levels will continue the positive trends regarding the wage debt.

The driving factor in the wage-debt dynamic was Presidential Decree No. 958/98 of 31 August 1998 "on additional measures for containing artificial increases in wage arrears". The Decree made it possible not only to slow the rate of increase in wage arrears over a period of one and a half years, but also to reduce the wage debt across the board by 92 million grivnas (1.4 per cent). At the same time, average wages have risen by 140 per cent. Wage arrears in the industrial sector, which formed the main object of the Decree, have nearly stabilized.

The chief impediments to the solution of the wage arrears problem are the financial straits of the enterprises, extensive debtor and creditor liabilities and the fact that operations can go on even though materials and labour may not have been paid or other financial obligations met. One of the main reasons for strained finances and the accumulation of wage arrears is, in our submission, the prevalence of unprofitable enterprises. All this makes it more difficult for enterprises to settle wage and mandatory pay-related contributions.

To a degree, articles 33 and 34 of the wage law, which link wages and compensation for unpaid wages to inflation, have also delayed the settlement of wage arrears.

II. Monitoring wage arrears payments

The steady increase in wage arrears has made the monitoring of compliance with labour legislation a high priority. The State Labour Inspectorate of the Ministry of Labour and Social Policy has accordingly focused on breaches of wage legislation, identifying underlying causes of those breaches, preventing further breaches and prosecuting offenders. The Labour Inspectorate is responsible for monitoring compliance with decrees and orders by the President and the Cabinet of Ministers governing the payment of wage arrears, indexation and compensation for late payment of wages. The Ministry of Labour and Social Policy reports to the Cabinet of Ministers on a quarterly basis.

Order No. 19508/2 of 8 August 1999 by the Cabinet of Ministers, which responded to a presidential request of 4 August 1999 was issued in order to ensure the timely payment of wages in state-owned undertakings, to increase the volume of dividends paid on shares held by the State and to terminate the contracts of heads of enterprises who infringe wage laws. Pursuant to that Order, the State Labour Inspectorate investigated (September-December 1999) the payment of wage arrears in joint-stock companies in which the State held shares.

Inspections were made of 1,107 companies. In 934 of them (84.4 per cent) the State lacked a controlling interest and was, therefore, unable to exert a direct influence on the payment of wage arrears. Thanks to the work of the Labour Inspectorate progress was made: arrears in the amount of 43.5 million grivnas were paid, which in some undertakings constitutes full settlement of the wage debt. The conditions of payment of wages and wage arrears to employees of joint-stock companies partially owned by the State were brought to the attention of entities with legal personality that exercise corporate rights.

A particularly acute and complicated situation has emerged during the restructuring of the mining sector, which has seen long delays in the payment of wages, third-party claims, and lump-sum allowances. According to information supplied by the State Statistics Committee wage arrears as of 10 January 1999 amounted to 731.7 million grivnas, approximately 12 per cent of aggregate wage arrears in Ukraine. Measures undertaken by the Government, ministries and other central and local executive authorities late in 1999 made it possible to reduce the increase of wage arrears in the mining sector. Statistical data indicated as of January 2000 a 6 per cent reduction in wage arrears, which came to 687.5 million grivnas. In keeping with resolution No. 1699 of 15 August 1999 by the Cabinet of Ministers the State Labour Inspectorate investigated the payment in kind of wage arrears with food and consumer goods in 69 enterprises in the mining sector. The investigation showed that in a majority of undertakings in the sector the payment in kind of &wages and wage arrears was exceedingly rare. A programme to reform mining sector undertakings and improve their financial position for the year 2000 has been drawn up. The programme was approved by resolution No. 1921 of 19 October 1999 of the Cabinet of Ministers. The programme is broad in scope and seeks inter alia to eliminate tensions associated with wage arrears.

Wage arrears owing to employees in the agricultural sector have an adverse knock-on effect on wages throughout the country. This especially critical situation has arisen with the reorganization of collective agricultural enterprises. The State Labour Inspectorate has carried out a study of compliance with labour legislation in 427 collective agricultural concerns engaged in the reform process. It was expected that employees of reorganized collective enterprises in the agricultural sector would receive land and property in partial settlement of wage arrears. In only 40 per cent of the reformed enterprises that were investigated had legal successors been designated. In the remaining 60 per cent the legal problems have yet to be resolved. Forty-three per cent of the undertakings that were investigated (184 enterprises) had failed to reach a final settlement with their employees. As to the employees of reformed collective agricultural undertakings, only one in five had received property in partial payment of wage arrears. To minimize social tensions in the agricultural sector a programme of reform was drawn up which made the designation of a legal successor an essential feature of reforms in order to resolve wage arrears problems.

In 1999 the State Labour Inspectorate monitored compliance with labour law in 29,014 enterprises. This represents an increase of 42 per cent over 1998. Also in 1999 the Inspectorate conducted 15 inspections which paid special attention to the timely payment of wages. The work of the Inspectorate led to 82,200 proposals concerned with the settlement and prevention of breaches of laws. Heads of enterprises, institutions or other bodies which were found to have infringed labour laws were issued 26,000 administrative orders. Penalties were imposed in 1,742 instances for failure to comply with the lawful demands of state labour inspectors. The courts received 2,299 cases of alleged administrative offences, and 1,349 decisions have been rendered calling for administrative penalties. Offending parties were ordered to pay penalties in the amount of 101,000 grivnas.

In accordance with Order No. 141 of 21 August 1998 by the Minister of Labour and Social Policy, the Labour Inspectorate rigorously inspects all enterprises, institutions or other bodies which have accumulated wage arrears. Its efforts have led to the payment of 888.5 million grivnas, which represents 33.2 per cent of outstanding wage arrears. Further evidence of the effectiveness of these inspections is the decrease in wage arrears recorded in 17 regions throughout Ukraine. One in every seven heads of enterprises with wage debts (i.e. 3,399 people), was prosecuted under administrative law, and penalties were imposed in the amount of 255,400 grivnas. Internal enterprise-disciplinary procedures were brought against 153 heads of enterprises.

Pursuant to Presidential Order No. 1-14-1834 of 29 December 1999 the Ministry of Labour and Social Policy and the Ministry of Justice have drafted and submitted to the Supreme Soviet of Ukraine a bill amending the Criminal Code of Ukraine and the Code of Ukraine on Administrative Offences to increase the liability of heads of enterprises for untimely or partial payment of wages. The bill was approved in the first reading.

To foster further measures governing the payment of wage arrears, allowances, pensions, scholarships and other social benefits the Cabinet of Ministers by a resolution entitled "Further measures concerning the payment of social benefit arrears out of budgets at all levels" placed a duty on ministries, other central and local executive authorities and local self-governing bodies to approve and monitor compliance by state and communal enterprises with schedules of wage arrears payments by increments of no less than 10 per cent per month of outstanding wage arrears.

Under the General Agreement for 1999-2000 the Government committed itself to settling all wage arrears owed by state-budgeted entities by the end of 2000.

III. Reform of the State Labour Inspectorate

The current structure of the Labour Inspectorate does not fulfil the requirements of the ILO in respect of the Inspectorate's independence from local executive authorities. For this reason, contrary to the provisions of the General Agreement for 1999-2000 signed by the Cabinet of Ministers of Ukraine, the Confederation of Employers of Ukraine, and the trade unions, it has not been possible to ratify the Labour Inspection Convention, 1947 (No. 81), and the Labour Inspection (Agriculture) Convention, 1969 (No. 129).

At the same time, massive breaches of labour law, particularly in respect of wages, labour agreements, working time and periods of rest, benefits, guarantees and compensatory payments, call for more vigorous state control.

To this end, the Ministry of Labour and Social Policy of Ukraine has proposed the establishment under its authority of a new governmental body, a Department of State Supervision of Compliance with Labour Legislation, based on the State Labour Inspectorate. By conferring governmental status on the new department, the Government intends to safeguard the legal and social functions associated with so important an institution as the State Labour Inspectorate.

In addition, before the Conference Committee a Government representative, the Minister of Labour and Social Policy, indicated that his Government realized that the problem of wage arrears was an obvious incompatibility with Convention No. 95, which provided for the payment of wages on a regular basis in accordance with the legislation. He explained that the main reasons for that were the difficult economic and financial conditions in the country, due to radical structural transformations, the privatization of state property, as well as radical transformations in the agricultural sector. The process of adaptation to the new conditions of a market economy had turned out to be more lengthy and complex than was initially expected. In such difficult conditions, the President and Government of Ukraine were vigorously pursuing measures to stabilize the economy. Nevertheless the steady growth in gross national product and increase in the industrial output in the second half of last year and earlier this year illustrated that the economy was gradually stabilizing and that the preconditions for a positive social environment were being created. The new Government had drawn up a programme of activities entitled "Reforms in the name of prosperity" which was the only way of creating the conditions necessary to raise the standard of living and overcome poverty.

The Government representative stated that, thanks to the coordinated efforts of his Government, employers and workers had witnessed a steady monthly decrease in wage debt in the country since the second half of last year. On 1 January 2000 and for the first time in four years, wage arrears were brought down by 120 million grivnas. Taking into consideration that wage arrears went up by 23 per cent and 26 per cent respectively in 1997 and 1998, this should be considered as a significant step forward. Moreover, the number of employees whose wages were not paid on time went down by some 1.5 million. The Government representative went on to describe the allocation of wage arrears in various sectors of the economy as of 1 January 2000. State-owned enterprises and institutions accounted for 36 per cent of the total wage debt. Joint-stock companies and collectively owned enterprises accounted for 64 per cent of the total wage debt. The proportion of unpaid wages to total earnings for all types of enterprises was 17 per cent as opposed to 22 per cent in 1998. In the publicly financed sphere, wage arrears had fallen by 337.7 million grivnas (some 40 per cent) since 10 January 1999.

This year there was 100 per cent financing of current wage payments and other social expenditures in the publicly financed sphere. His Government had adopted a resolution entitled "on further measures concerning the payment of social benefit arrears out of budgets at all levels". This resolution instructed ministries, agencies and regional bodies of the Executive to utilize additional non-budgetary sources in order to pay wage arrears of the previous years. This allowed the reduction in wage arrears in the publicly financed sphere to be maintained this year. The comparison of the indicators of this year with those of last year led to the conclusion that the positive trend in the matter of payment of wage arrears would be preserved in the non-budgetary sector. The Presidential Decree "on additional measures for limiting artificial increases in wage arrears" had contributed to this trend to a significant degree. Furthermore, the Government had undertaken measures aimed at reducing contributions depending on the amount of wages. A bill abolishing primary payments to the budget had been drafted and submitted to the Supreme Rada of Ukraine (Parliament). This would allow enterprises to choose their own payment priorities, i.e. timely wage payments ahead of other payments.

With regard to the issue of monitoring wage arrears payments, the State Labour Inspectorate of the Ministry of Labour and Social Policy had focused on breaches of wage legislation, identifying underlying causes of those breaches, preventing further breaches and prosecuting offenders. The Ministry of Labour and Social Policy reported to the Cabinet of Ministers on a quarterly basis in respect of these matters. Pursuant to the Order of the Cabinet of Ministers in 1999, the State Labour Inspectorate investigated the payment of wage arrears in joint-stock companies in which the State held shares. In the majority of joint-stock companies that were inspected, the State lacked a controlling interest. The executive bodies were therefore unable to exert a direct influence on the payment of wage arrears. In the speaker's view, this task could be accomplished more efficiently together with the social partners, primarily the trade unions. Collective agreements were constantly being improved to that end. Thanks to the work of the State Labour Inspectorate, progress could be reported: arrears in the amount of 43.5 million grivnas were paid, which in some undertakings constituted full settlement of the wage debt.

A particularly difficult and acute situation had emerged in the mining sector. Nevertheless, largely due to measures undertaken by the Government late in 1999, it had been possible to reduce wage arrears in the mining sector by 6 per cent. Measures had additionally been undertaken this year to preserve this positive trend. A programme to reform mining sector undertakings and improve their financial position for the year 2000 had been drawn up by the Government. This programme was broad in scope and sought, inter alia, to eliminate tensions associated with wage arrears. Wage arrears owing to employees in the agricultural sector had had an adverse knock-on effect on wages in general. In order to improve conditions in the agricultural sector, the reform of collectively owned agricultural enterprises was currently under way. The State Labour Inspectorate paid special attention to the observance of labour legislation in collectively owned undertakings.

The law of Ukraine on wages stipulated that wages should be paid in legal tender. The payment of wages in the form of promissory notes, vouchers or in any other form was prohibited. These provisions fully complied with the requirements of Convention No. 95. Regarding the payment of wages in the form of allowances in kind, the law allowed, as an exception, the partial payment of wages in such form in those sectors where such payments were customary or desirable for the employees. In 1999, 13.6 per cent of the total amount of wages was paid in the form of allowances in kind. In the first quarter of 2000, such payments had been significantly reduced, amounting to 7.9 per cent. In 1999, the State Labour Inspectorate had monitored more than 29,000 enterprises. The work of the inspectorate had resulted in 26,000 administrative orders issued to heads of enterprises and institutions where infringements of labour laws were discovered. Penalties were imposed in 1,742 instances for failure to comply with the legitimate demands of state labour inspectors. The courts heard 2,299 cases of alleged administrative offences and 1,349 decisions had been rendered calling for penal- ties. Offending parties were ordered to pay penalties in the amount of 255,000 grivnas. As a result of the activities of the State Labour Inspectorate, wage arrears were settled in the amount of 885,800,000 grivnas. Finally, the Ministry of Labour and Social Policy and the Ministry of Justice had drafted and submitted to the Supreme Soviet of Ukraine a bill amending the Criminal Code of Ukraine and the Code of Ukraine on Administrative Offences to increase the liability of heads of enterprises for untimely or partial payment of wages. The bill was adopted at the first reading.

In conclusion, the speaker indicated that the process of stabilization was under way and that the final resolution of the problem of wage arrears depended on overcoming the economic crisis. At the same time, his Government counted on further cooperation in this matter with the ILO and its experts.

The Worker members emphasized that non-payment of wages was a worldwide problem that affected millions of workers. It was thus normal that this question was once again on the agenda of this Committee. The implementation of Convention No. 95 by Ukraine had given rise to observations from the Committee of Experts in 1994, 1995, 1996, 1997, 1998 and 1999 and had been discussed by this Committee in 1997. It then observed that, in spite of certain measures adopted, the situation had not improved. The failure to implement the Convention by Ukraine revealed a contradiction between national legislation and practice. If the comments of the Committee of Experts focused on the implementation of Article 12, paragraph 1, supplementary information was also requested regarding: prohibition on the payment of wages in the form of vouchers or coupons; regulations on payment of wages in kind; the rank of the employee as a privileged creditor for wages due in cases of bankruptcy; and the sanctions imposed for violations. The Committee of Experts had also emphasized the need to adopt efficient measures to ensure supervision, and effective application of sanctions, as well as reparations. In this respect it must be noted that the situation had not improved but rather it had worsened. The Government's reply to observations of the Committee of Experts gave a contrasted picture of the changes in salary arrears. Consequently, the information provided did not provide a clear and accurate picture as to the extent of these arrears. The high amount of these arrears was both clear and alarming. In this regard, the results of a study carried out by the ILO in 1999 on industrial enterprises in Ukraine which employed more than 500,000 workers was just as alarming: 80 per cent of the factories admitted having great difficulty in paying wages, four out of five had not paid the full contractual amount, and on average these firms had arrears in excess of 20 weeks. The rapid regularization of the situation, promised by the Government during the previous discussion, did not take place in practice. Moreover, it was to be noted with concern that only very modest sanctions had been handed down against persons responsible for these arrears. The fines imposed were not commensurate with the extent of these arrears and most often were not even paid. The Government admitted that the tribunals which examined violations tended to minimize the responsibility of the guilty parties. It was impossible to fight efficiently against these practices without a genuine will to sanction those who were responsible.

The Worker members shared the concerns expressed by the Government regarding the State Labour Inspectorate. It must take all necessary measures to strengthen the independence and efficiency of this inspectorate, which played a pivotal role in solving this problem.

In conclusion, it appeared that the detailed criteria of the Committee of Experts concerning the implementation of the Convention: efficient supervision, appropriate penalties, and reparation, were not translated into practice. Under these circumstances, recourse to technical assistance from the Office would again appear to be appropriate.

The Employer members noted the statement of the Government representative acknowledging that there was a clear violation of the Convention by Ukraine. The Government representative had further recalled the reasons which had given rise to this deplorable situation and had enumerated the political objectives of his Government in order to resolve the problems encountered. Taking due note of the statement, the Employer members observed from previous discussions in this Committee that it was not only Ukraine but also many other countries, undergoing the transitional period from a centrally planned economy to a market economy, that were facing the same problems.

As regards the written information provided by the Government, they noted that the problem of wage arrears was only mentioned in respect of state-owned enterprises and collectively owned enterprises. It was their view therefore, that no private enterprises existed in Ukraine or that such enterprises had no arrears in wage payments. The Employer members noted measures taken by the Government, including the supervision of wage arrears payments, in order to resolve the problem. These measures apparently had led to a partial payment of wages. They further noted that under the terms of the General Agreement for 1999-2000 concluded between the Cabinet of Ministers, the Confederation of Employers and the trade unions, wage arrears should be paid off by the end of 2000 in state-owned enterprises. The Employer members doubted however, that the problem of wage arrears could be solved in the near future. This problem was closely related to the establishment of a functioning market economy. For this purpose, framework regulations were needed such as provisions providing for workers' entitlement to the enforcement of the court decision concerning the payment of his or her wages which would be immediately executory by means of the granting of a provisional injunction. Another important legal aspect concerned the readiness of employers to pay the wages on time. The Employer members recalled the legal situation in other democratic States where the non-payment of wages was considered as fraud under the Penal Code if the employer employed a worker knowing in advance that the latter's wage would not be paid. This aspect was important and needed to be incorporated in the legal framework to be established. Nevertheless, the problem could not be solved merely by adopting legal provisions or by establishing statistics illustrating the problem but rather in creating sound economic and legal conditions in a country in order to enable it to establish a stable and transparent market economy. In order to achieve this objective, the ongoing existing elements of a centrally planned economy had to be relinquished quickly.

In conclusion, the Employer members emphasized the problem could not be solved by issuing a large number of decrees and regulations but by establishing a legal framework which was oriented towards enabling the country to establish a viable market economy. The Government should of course report on the measures taken in this respect.

The Worker member of Ukraine stated that the reasons for the ongoing non-payment of wages was mainly due to unresolved economic problems and non-efficient industries. As a result, wage arrears, all in all, were not falling but continuing to increase. As of today, they exceeded 6.4 billion grivnas. Today the average wage debt per worker was 726 grivnas, hence each worker in average had not received more than three months of wages. Fifty per cent of persons working in the agricultural, construction or industrial sector had not been paid or had been partially paid for six months or more. The longest terms of delay in the payment of wages (three years or more) were to be found in agricultural enterprises. However, the largest amount of wage debt per employee was to be found in the mining, metallurgy and construction industries.

He pointed out that the Federation of the Trade Unions of Ukraine had repeatedly submitted its proposals to the Government aimed at the stabilization and development of national industry; redirection of credit and investment policy of the State towards long-term capital investments in those enterprises that were competitive and had good prospects; conduct of efficient structural policies; increase in efficiency of privatization and management of state property; improvement in tax collection; and strengthening of state control over the observance of labour legislation. These measures would permit the radical resolution of the wage arrears problem. The speaker, who himself was a Member of Parliament, had introduced a bill aimed at increasing the criminal liability of those responsible for untimely or non-payment of wages. Moreover, the Federation of Trade Unions of Ukraine supported the individual claims of workers before the courts for recovery of wage arrears and represented their interests in courts. For example, in 1999 more than 243,000 individual claims of workers for payment of wages had been brought to the courts which rendered decisions on the payment of around 310 million grivnas. However, in practice, judgements were not enforced promptly due to the lack of resources of the enterprises and the ineffectiveness of the executive authority to enforce court decisions.

Furthermore, at the insistence of the trade unions of Ukraine, the Government and the employers of Ukraine committed themselves to pay wage debts and strengthen enforcement of the payment of wages in the General Agreement for 1999-2000. Finally, the trade unions of Ukraine had repeatedly carried out nationwide protests to ensure the prompt payment of wages. However, these efforts were not sufficient, and it was for this reason that the Federation of Trade Unions of Ukraine had again submitted a representation to the ILO. The speaker pointed out that the mere fact that this Committee was discussing this problem had obliged the Government to look more actively for a positive resolution thereto. Hence, two weeks ago, the President of Ukraine, speaking to a congress of enterprises, had said that the fact that Ukraine was not observing its obligations to workers and that it had to explain its position twice in three years to the Committee was a scandal and had urged employers to ensure prompt wage payments. Moreover, pursuant to the meeting of the heads of the Tripartite Commission with the Prime Minister of Ukraine, an agreement was reached that wage arrears would be paid by the end of 2000. The speaker trusted that this would be achieved.

The Worker member of Denmark, speaking on behalf of Nordic workers, supported what had been stated by the Worker members as well as the Worker member of Ukraine. It was sad to read in the Committee of Experts' report that the problem of wage arrears was increasing, especially since almost 50 per cent of workers were affected by this problem. In this context, one would have expected the Government to deal with the issue very seriously. This appears not to have been the case. The efforts undertaken by the Executive were proven to be ineffective. It was further mentioned in the Committee of Experts' report that the level of fines was very low and imposed only on a few persons responsible. It was also mentioned that the courts, when examining violations of labour legislations tend to tone down the culpability of those responsible because of the difficult financial situation and to often make inappropriate decisions in view of the social tensions caused by such violations.

This Committee had received further written information from the Government. According to this information, in the last four months of 1999, there should have been a steady decline in the level of unpaid wages. On the other hand, the Government stated that inspections were carried out in 1,107 companies. Unfortunately, the State lacked a controlling interest in many of these companies and was unable to exert a direct influence on the payment of wage arrears. Moreover, an ILO press release dated 25 April 2000 contained information on the first results of a major survey of industrial enterprises in Ukraine covering over half a million workers. The survey which was carried out in 1999 covered a representative national sample of 690 firms employing 583,679 workers and found that over 80 per cent of all factories reported that they had great difficulty in paying their wages. With this information, it was quite understandable that the Committee of Experts urged the Government of Ukraine to continue its efforts to take all possible measures to improve the present situation. This should be reflected in the Conference Committee's conclusions.

The Worker member of Japan pointed out that, despite the explanations given by the Government representative, the situation of Ukrainian workers had actually deteriorated. The average wage of a Ukrainian worker was US$36 per month which meant that most of the Ukrainian population was living below the poverty line. Furthermore, the average wage of public sector workers was much less than in other sectors of the economy. For example, the wage for nurses was US$15 per month and that for doctors was US$20-25 per month. Although the Government representative had indicated that average wages had risen by 140 per cent, prices had increased at a much higher rate. Finally, although the Government had promised to settle all wage arrears owed by state-owned entities by the end of 2000, this Committee should not forget the same promise was made by the Ukrainian Government three years ago to settle all wage arrears by the end of 1997. He urged the Committee to request the Government to send any information illustrating that it had fulfilled its obligations in line with the Convention by next year.

The Employer member of Ukraine fully understood that Ukraine was responsible for arrears in wage payments and that employers should ensure the prompt payment of wages. He pointed out, nevertheless, that this phenomenon was due to the prevailing economic situation in the country. To improve the situation, the Government would have to undertake fundamental reforms in the field of investment as well as in the credit and banking sectors. He underlined, however, that the new Government understood that the problem had not been resolved due to the absence of a proper market economy. Moreover, there was, for the first time, a general agreement between the Government, workers and employers that proper support needed to be given to the manufacturing industry. Additionally, the President of Ukraine had stated that the budget for 2001 would be based on a new tax code. Finally, the Parliament had examined a bill on employers' organizations this year which, if adopted, would increase criminal liability of employers for the non-payment of wages. Hence the speaker believed that the problem of non-payment of wages or wage arrears would eventually be resolved. He pointed out, nevertheless, that this problem was not only the responsibility of employers but also of trade unions which had signed collective agreements which covered about 70 per cent of all enterprises.

The Worker member of the Russian Federation stated that a year ago, this Committee had examined a similar case concerning the Russian Federation. Having listened to the Government representative and other speakers, he had some doubts as to whether the combination of all the measures taken and promised by the Government could resolve the tragic situation in the country. In fact, this problem of wage debt was being encountered in a number of countries which were undergoing a transitional period from a centrally planned to a market economy and was not being resolved due to the absence of properly coordinated measures. In the report of the Committee of Experts for example, there was a list of 12 countries where the wage debt was a very serious problem in 1999. This problem was aggravated by a lack of action on the part of the authorities concerned. Hence, although the Government referred to problems pertaining to the state budget to explain the current situation, in fact it was simply a question of the Government facing up to its responsibilities and realizing that it had entered into a contract with the workers concerned. This was also true of employers in the case of private undertakings. The Government should be called upon to take urgent measures to remedy this disastrous situation. The Ukranian Government should take strict measures against companies whose tax debt to the State is comparable to the whole amount of unpaid wages in the public sector. Attention should also be paid to so-called virtual companies registered in off-shore zones, which every year transferred sums equivalent to a year's unpaid wages. He was surprised to hear the suggestion of the Employer member of Ukraine that unions should share the responsibility of wage arrears because they signed collective agreements.

The Worker member of Zimbabwe asserted that the problem of wage arrears was very serious and not at all fair for workers. More than 50 per cent of workers were affected by this problem in Ukraine and the average worker had not received more than three months of wages. Moreover, it appeared that the problem of wage arrears was continuing to increase. As a result, the Government should be urged to take the appropriate measures rapidly.

The Government representative indicated that his Government would take all possible measures to improve as quickly as possible the situation concerning the payment of wages to all employees and avoidance of any wage arrears in the future so that the requirements of Convention No. 95 were fully met. Despite the difficult economic situation in the country, his Government intended to decrease wage debt to an absolute minimum. However, 65 per cent of the wage debt was to be found in the private sector. His Government was trying to seek a solution to this problem in consultation with the social partners. Finally, his Government intended to step up the enforcement powers of the State Labour Inspectorate and to increase the criminal liability of those responsible for non-payment of wages. The speaker assured the Committee of his Government's intention to resolve the problem and believed the discussion in the Committee would have a direct impact on government action in the future.

The Worker members noted the seriousness and persistence of Ukraine's failure to comply with Convention No. 95. It was plain from the statements by the Worker member of Ukraine that between 8 and 9 million workers were affected by the problem of salary arrears and that those arrears could be measured in years. Steps already taken would have to be evaluated by the social partners with a view to reinforcing them and ensuring that they were effective, thus guaranteeing that the Convention was duly implemented. The Government should, as the Committee of Experts requested, provide detailed information on action taken to remedy the situation and on the results achieved. The dialogue with the Committee of Experts on various matters of legislation should be pursued. The Government should also provide information on its commitment to settle all salary arrears in the public sector by the end of 2000. Lastly, the Worker members considered that technical assistance from the Office should effectively serve to improve the situation. That assistance, which had been requested by the Government, should form the subject of an express programming decision.

The Employer members indicated that this issue had been examined and discussed extensively. With regard to the statement by the Government representative concerning the difficult budgetary situation of the State, they pointed out that this only affected state-owned enterprises. Hence, more state-owned enterprises needed to be privatized since it was not incumbent upon any government to assume responsibility for paying private debts. This solution would then improve the budgetary situation of the Government. They further welcomed the view of the Employer member of Ukraine who had advocated the implementation of a fair and transparent tax system. This was an important element to be taken into consideration in the legal framework which needed to be established in the country. While agreeing that the responsibility for non-payment of wages lay with the employer, they pointed out that the establishment of such a system of liability would only constitute a short-term emergency measure which would not resolve the root cause of the wage debt problem. In order to resolve the problem, the Government needed to take overall measures in order to establish a certain legal and socio-economic order in the country and not just take measures with a view to resolving a very specific problem. Hence, it was important not to overlook the very central issue, i.e. the context in which the problem originated which was the lack of a functioning market economy.

The Committee took note of the written and oral information given by the Minister of Labour and Social Policy and the subsequent discussion which took place. Noting the information regarding the volume of outstanding wage arrears, the Committee expressed its deep concern about the continuous violation of the Convention and the serious situation experienced by millions of workers in Ukraine. According to the information provided by the Minister, the number of workers whose wages were not paid on time had decreased; however, the figures revealed that, whereas in certain sectors there had been some improvement, in others the situation had become even worse. The Committee considered that, even though the adoption of legislative texts contributed to resolving the problem of wage arrears, there were structural problems, in particular the poor economic structure and financial conditions, and the generalized debts of enterprises, for which the Government had to resort to other types of measures. Furthermore, the Committee stressed that the role of labour inspection, as the Government itself recognized, was critical for handling this serious matter. The Committee insisted therefore, that the Government pursue actively its efforts with a view to implementing the reforms in respect of labour inspection. The Committee urged the Government to continue, with the assistance of the Office, to adopt effective measures to ensure the application of the Convention, not only for the regular payment of wages, but also for the prohibition of payment in the form of promissory notes, coupons or allowances in kind and the treatment of workers as privileged creditors in the event of bankruptcy, as well as effective penalties for any violation thereof. The Committee requested the Government to submit a detailed report for this year's meeting of the Committee of Experts, providing information concerning any measures taken on all the issues raised, including the labour inspection reforms. The Committee asked the Government to communicate detailed statistical data allowing the exact effect of all the measures taken to be evaluated.

Individual Case (CAS) - Discussion: 1997, Publication: 85th ILC session (1997)

A Government representative stated that the Government was fully aware that delays in the payment of wages were a flagrant violation of Convention No. 95. The main reason for the delays was the grave economic and financial situation in the country, which had also resulted in high unemployment, reduced wages and lower standards of living. The President of the Ukraine and the Government were taking resolute measures to liquidate the budgetary debt with respect to wages. The Decree of the President of 28 February 1997, No. 187 covering "measures to ensure replenishment of the state budget and strengthening of financial and budgetary discipline" established that all enterprises and organizations in the budget sector should use the available financial resources in the first place to ensure payment of wages and similar payment. The Government was systematically consulting trade unions and employers' organizations and the tripartite dialogue on this problem continued. According to the agreement reached with the trade unions in January-April 1997, 75 per cent of the state budget resources were used to finance wages and social benefits, and since May the current payments with respect to wages in the budgetary sector were being paid at the 100 per cent level. As a result of these measures, the increase of the state budget indebtedness with respect to wages had been stopped at present and as a rule current wages were paid regularly and without delays. The most serious problem remained the settling of debts accumulated in previous years, particularly after the signing of the macroeconomic memorandum with the international financial bodies aimed at controlling inflation before and after the introduction of the new national currency.

The Cabinet of Ministers guaranteed to the social partners to cover the indebtedness from the state budget with respect to wages, pensions, stipends and other social benefits for 1996 amounting to 1,489,000,000 grivnya before 1 November 1997. The timetable of the payments was agreed with the trade unions and published in the mass media. In May 1997, 82 million grivnya of debts for 1996 had already been settled.

With respect to the self-managing enterprises, the Government had accepted the suggestion of the Federation of Trade Unions of Ukraine, according to which 50 per cent of current payments into their current accounts were to be used to cover wage debts.

In addition, the Government had submitted to Parliament a draft law concerning payments on the territory of Ukraine and the fulfilment of tax obligations which directed the financial resources of enterprises to cover, in the first place, their wage debts to workers. The Government had agreed with the Federation of Trade Unions to propose to extend this provision of the draft law to cover the total amount of wages without any limits of payments.

The complex approach to this problem included a number of additional measures: the use of budgetary resources was restricted on any non-priority purposes; the incomes from privatization of state property were strictly controlled; the reform of the state administration was aimed at decreasing the number of ministries and agencies as well as a 25 per cent reduction of public employees; a number of measures were taken to strengthen discipline in collecting taxes under the supervision of inspection and judicial authorities. Since the beginning of 1997, the state labour inspection service had carried out more than 5,000 inspection visits, including over 3,000 concerning the fulfilment of the legislation on wage protection; 5,400 recommendations had been given, including 2,800 obligatory instructions, and 220 cases had been referred to tribunals. The judicial authorities, as a result of the inspections carried out this year have imposed sanctions on over 600 government officials; the overall sum of fines imposed on the government officials responsible for violating labour legislation amounted this year already to 37,000 grivnya. The analysis showed that over 40 per cent of all violations of labour legislation was concerned with the non-payment of wages.

Following the Decree of the President of the Ukraine, the contracts concluded with the managers of state enterprises now included additional requirements concerning the need to ensure the timely payment of wages and strict compliance with the timetable on the coverage of wage indebtedness. The failure to fulfil these contract requirements was considered to be sufficient grounds to break the contract at the instigation of the Ministry. The Ministry of the Mining Industry, for example, had broken, on these grounds, the contracts with the directors of nine coal conglomerates and of 34 coalmines; the Ministry of Industry had broken contracts with managers of 54 enterprises; Ministry of Transport - nine; Ministry of Forestry - with four general directors of state forest industrial complexes and 40 directors of state forest and hunting enterprises; the Ministry of Agriculture - 214 managers.

The Government understood that a definitive solution to the problem of wage indebtedness required stabilization of production and of the whole of the economy of the country. At the same time the Government also counted on strengthening cooperation with the International Labour Organization and its experts in this question as well. This was the first time that the Government had to appear before the Conference Committee on the Application of Standards. Taking this opportunity the Government representative wished to thank the ILO for the efforts already deployed and to ensure that the dialogue in this Committee would attract the full attention of the Government.

The Employers' members took due note of the extensive information provided by the Government representative who had informed the Committee both about the measures which had been initiated and those which had been envisaged to improve the situation. This problem had already been touched upon in the report of the Committee of Experts where it had indicated that the problem of wage arrears was linked to the special situation of the country's transition to a market economy. It appeared, however, that the main elements of a market economy had not yet been introduced in Ukraine.

The cases of non-payment or delayed payment of wages had mostly occurred in the public sector or in enterprises owned by the State. Referring to the Government representative's statement that the necessary precautions had been taken so as to prevent such a situation arising in the future, the Employers' members pointed out that the main problem was how to pay off arrears which had accumulated until 1996. Thus, although according to the Government representative, a certain percentage of the arrears accumulated until 1996 had been paid by May 1997, there was still a considerable delay in paying the remaining amount.

In relation to the measures enumerated by the Government and cited in the observation of the Committee of Experts, the Employers' members expressed the hope that these measures would lead to the desired effects in practice. At the same time, they recalled that a free market economy was considered an integral part of a State based on the rule of law where individual workers had to be able to assert their rights and push through their claims. Convention No. 95 itself stipulated that appropriate action be provided for but it was up to the Government to define what constituted this appropriate action.

Finally, they considered that the Government should submit a detailed written report providing information on the specific level of debts and the concrete measures envisaged to avoid problems in the future. The number of inspections carried out and their results should also be shown in this report as well as details on the judicial proceedings. They expressed the hope that this Committee would not be obliged to discuss this case in the future.

The Workers' members thanked the Government representative for the detailed information provided and noted that they appreciated the initiatives taken by the authorities as well as the Government's will to establish a dialogue. It was indispensable to discuss at least one of the cases concerning the application of this Convention which had had a determining influence on national legislation and the problems of application of which concerned several tens of millions of workers in the world. The ILO and the member States should renew their efforts to apply this Convention which the present Committee was called upon to consider on a regular basis. The problems of application stemmed, to a large extent, from the economic difficulties resulting from the transition towards a market economy, from the application of structural adjustment programmes and from the loss of market shares. However, their magnitude and persistence was aggravated by other factors such as the absence of the respect for the rule of law, of efficient control mechanisms or of procedures to claim payment of wages and damages.

Although the Government had listed Bills or decisions by the President of the Republic aiming at reinforcing the protection of wages and labour inspection or to stabilize the financial situation of enterprises, observations from workers' organizations still continued to pour in. This lent credence to the Committee of Experts' impression that, in practice, the situation had not improved. Payment of wages by promissory notes contravened both Article 3 of the Convention and the Act on Payment of Wages of 24 March 1995, but such payments continued to be used in practice.

As the Committee of Experts had clarified in its observation in this case, as well as in paragraph 73 of the General Report, the application of this Convention should comprise three essential elements: efficient control; appropriate sanctions; and means to redress the injury caused. This latter element had two components: payment of the amounts due and compensation for the losses incurred by the delayed payment. The Government should reinforce its efforts in each of these aspects in cooperation with the workers' organizations. Furthermore, it should submit to the Committee of Experts, for scrutiny, detailed information on the present situation, namely with respect to the number and nature of decisions by tribunals or other institutions concerning the regular payment of wages. It should finally also provide reports on investigations carried out, violations noted and sanctions imposed, in order to permit the Committee of Experts to evaluate the real impact of the measures taken. The Government should be encouraged to pursue a constructive dialogue with the Committee of Experts.

The Workers' member of Ukraine recalled that the right to the regular payment of wages was guaranteed by article 23 of the Constitution of Ukraine adopted on 28 June 1996, but this basic right had been violated for the past two years. According to the trade union estimate, the total wage debt at the beginning of June 1997 amounted to 4,757,200,000 grivnya, which was approximately 2.6 billion dollars. The average delay in the payment of wages was between two to three months, which prevented millions of workers from properly feeding their families. The non-payment of wages on time, as prescribed also by article 115 of the Labour Code and article 24 of the Law of Ukraine on the payment of wages, was the major factor of social unrest in the country, which was approaching the boiling point, at which time the situation would become irreversible, unless urgent measures were taken by the Government and by the employers.

In his statement, the Minister of Labour had explained the non-payment of wages by the economic and financial difficulties of the transition period, and one could not but support this point of view. However, the magnitude of the problem was aggravated by the incapacity of the Government and the local authorities to adopt measures ensuring application of the existing laws. For example, contrary to the law of Ukraine concerning the state budget for 1996, the credit side was fulfilled only at the rate of 87.6 per cent; the State had not received 4.3 billion grivnya, which resulted in the non-payment of wages, pensions and other benefits.

In this situation, the Federation of Trade Unions of Ukraine had organized on 17 October 1996 a national action of protest against the mass delays in the payment of wages, in which one and a half million people participated. Following this action the Government and the trade unions had conducted a new series of negotiations which led to the establishment of a timetable, approved by the Government, to settle outstanding debts in wages, pensions, stipends and other social benefits until 1 November 1997. Notwithstanding, the situation remained critical, with good reason to believe that this timetable would not be fulfilled. It was because nearly 11,000 enterprises, principally in the energy sector, where enormous financial resources were involved, did not pay any taxes to the state budget. The hidden deficit of the state budget of 1997 might surpass 16 billion grivnya or 8.8 billion US dollars, and would be placed on the workers' shoulders.

The Committee of Experts pointed out that Convention No. 95 required not only the full payment of wages, but also of the sums compensating the delays in the payment of wages. In this respect, the fact that the Government was postponing the adoption of the rules for compensating workers the partial loss of wages because of delays in their payment reflected their policy of always postponing matters. The Ukrainian trade unions fully understood that wages of the employees in the budget sector depended on the performance of the enterprises. Today, about 40 per cent of enterprises in Ukraine were paralysed. The Government still could not implement the economic reforms that it had announced. It placed too much hope on foreign investment, and particularly on help from the World Bank and the International Monetary Fund, which promised to give substantial credits for the development of the productive sector but conditioned them on the virtual liquidation of the existing system of social protection for the workers. The trade unions have recently demanded the resignation of the Vice Prime Minister and the Minister for Economic Affairs, because of the negative impact of the economic reforms on the workers.

The Ukranian Workers' members thought that the ILO might recommend the Ukrainian Government to speed up the submission of the draft laws to Parliament, aimed at strengthening not only the administrative but also the penal responsibility in case of delays of wage payment and other violations of the labour legislation. This Committee could also ask the Government to supply, by November of 1997, the information about the settlement of wage indebtedness according to the adopted timetable. If this timetable were not respected, the Ukrainian Trade unions would organize a new nationwide action of protest and would demand the dissolution of the Government, and the adoption of reforms which would ensure for the Ukrainian workers fair and regular wages.

The Workers' member of the Russian Federation stated that this case was a terrible violation of Convention No. 95 which concealed the impoverishment of thousands of families and reduced them to starvation and marginalization. The fact that the total wage debt amounted to 2.5 months of the country's payroll and that in 70 per cent of cases workers did not receive wages for over three months, indicated that there was an economic catastrophe which might lead to social upheaval. Many workers had lost trust in the fundamental values and institutions, such as democracy, social justice, responsibility of the Government and social partnership.

The Committee of Experts rightly emphasized the need for appropriate penalties to prevent and to punish such violations, as well as measures to compensate the damages which resulted from the delays in the payment of wages in conditions of creeping inflation. The Russian trade unions fully understood the suffering of their Ukrainian brothers, because the Russian workers experienced the same problem on a much larger scale. This problem became, in fact, an inescapable attribute of transition to the market economy. In the Russian Federation, for example, the wage debt exceeded 9 billion US dollars. The speaker inquired whether the price paid by the workers of the Ukraine, the Russian Federation and Belarus, and many other countries could be justified by the aims of the so-called transition? Should the truly democratic transformations in these countries turn out to inflict such enormous sufferings on their populations? These questions still awaited a reply, including from the ILO. There were millions of Russian workers who would not understand how this same problem of a much greater scope, in respect to their country, could have been taken out of the discussion by the International Labour Conference, by invoking purely legal arguments. They considered that cases of violation of Convention No. 95 in Ukraine and in other countries would be a real test for survival of the ILO itself, showing its ability to adapt to the new realities of the changing world.

The speaker explained the views of the Russian trade unions on the approach to be taken to ensure a prompt and effective solution of the problems linked to the application of Convention No. 95 in the countries concerned, covering state regulation of prices, tax and investment policies, the fight against corruption and the establishment of the effective state supervision in the application of the national legislation and implementation of sanctions. The ILO might provide additional advisory and technical assistance to the social partners in the Ukraine and other countries concerned in all those areas, either directly or through its multidisciplinary teams. The speaker also suggested that the basic principles and responsibilities established by Convention No. 95 should be enshrined in the new Declaration on the fundamental objectives of the ILO, the elaboration of which was being discussed at the present session of the Conference.

The Workers' member of Germany supported the detailed statements made by the Workers' members. Although he acknowledged that the economic situation was difficult in the country, he emphasized that only workers bore the burden of the situation which was inequitable. In addition, extreme poverty and extreme wealth were the consequences of the present economic situation. He believed that this would create a climate of high social tension that would have a negative influence on further social and economic development. The workers affected had lost their confidence in democracy and the need for economic restructuring. He appealed to the Government to establish a system which provided for compensation for the delayed payment of wages and for severe sanctions in the case of the non-payment of wages. Finally, he recommended that the ILO and the Bretton Woods institutions examine this case together with the Government in order to ensure the establishment of a situation that was in conformity with the Convention.

The Workers' member of Niger, wished to support the different declarations concerning the inappropriate accumulation of unpaid wages which clearly contravened the Convention and which had already been denounced on several occasions. The replies by the Government to the questions by the Committee of Experts could give the impression that it had become aware of the gravity of the situation where wages were no longer paid on a regular basis to 75 per cent of the civil servants and where certain enterprises paid their wages in kind. Still, the acts and decrees which had been adopted did not seem to have had any concrete effect to judge from the continued denunciations by the trade unions of significant delays in the payment of wages. This was a factor which discouraged workers and would hardly enhance the development of the national economy. The case of Ukraine was unfortunately not an isolated case: there were numerous developing countries, in particular in Africa, who were experiencing the same type of problems with an accumulation of arrears in the payment of wages. In Niger, the Government had even proposed to pay such wages in kind. The Government should be called upon to take all necessary measures to ensure an effective application of the Convention, as the normative system might otherwise collapse.

The Government representative thanked the Committee for the positive as well as the critical statements made in connection with the major problem that his country was experiencing. He hoped that labour legislation would be fully implemented soon. He appreciated the understanding shown by the Employers' members towards the problems experienced by a country with an economy in transition. His country had also been badly affected by the Chernobyl incident. Nevertheless, he understood the concerns expressed by the Workers' member of Ukraine and gave assurances that his country would adopt the maximum possible number of necessary measures to address those concerns. His Government was determined to take action to ensure that the obligations stemming from this Convention were fulfilled. He counted on continuing a positive dialogue with the ILO.

The Committee took note of the oral information provided by the Minister of Labour and the subsequent discussion in the Committee. The Committee noted that the problem was rooted in the existing incompatibility between the practice on the one hand and the national legislation and the provisions of the Convention on the other. The Committee noted with concern that the situation had not improved, in spite of the adoption of the legislative measures described by the Government. The Committee stated that this situation could not be prolonged and urged the Government to institute control mechanisms, sanctions and means to redress the injury caused, in order to ensure a regular payment of wages. The Committee urged the Government to apply the provisions of the Convention and to submit to the ILO a detailed report before the end of the summer for the Committee to be examined at its next session. The Committee requested the Government to include in this report information on the compliance with the schedule of payment of wages pursuant to the protocol entered into between the parties. Finally the Committee sincerely hoped that next year it would be able to observe specific progress and a normalization of the situation.

Observation (CEACR) - adopted 2023, published 112nd ILC session (2024)

Observation (CEACR) - adopted 2021, published 110th ILC session (2022)

Observation (CEACR) - adopted 2020, published 109th ILC session (2021)

Observation (CEACR) - adopted 2019, published 109th ILC session (2021)

Direct Request (CEACR) - adopted 2018, published 108th ILC session (2019)

Observation (CEACR) - adopted 2018, published 108th ILC session (2019)

Direct Request (CEACR) - adopted 2013, published 103rd ILC session (2014)

Observation (CEACR) - adopted 2012, published 102nd ILC session (2013)

Observation (CEACR) - adopted 2011, published 101st ILC session (2012)

Observation (CEACR) - adopted 2010, published 100th ILC session (2011)

Article 12(1) of the Convention. Regular payment of wages. The Committee recalls that the wage arrears situation in Ukraine was again examined by the Conference Committee on the Application of Standards at the 99th Session of the International Labour Conference (June 2010). In its conclusions, the Conference Committee expressed deep concern about the worsening wage crisis and requested the Government to provide updated information for the present session of the Committee of Experts concerning: (i) concrete measures to improve the application of the Convention in practice and the results achieved, including statistical information on the wage arrears situation; (ii) the activities of the labour inspection services or other monitoring bodies with regard to wage protection; (iii) any developments concerning the adoption of the law on the protection of workers’ wage claims in the event of the employer’s insolvency; and (iv) the working conditions, including pay conditions, prevailing in the mining sector.

The wage arrears situation. The Committee notes that according to the State Statistics Committee of Ukraine, the total amount of wage arrears as of 1 July 2010 stood at 1.79 billion Hryvna (UAH) (approximately 166.7 million euros). By sectors of economic activity, the industrial sector represents 52.8 per cent of the total amount of wage arrears, construction represents 15.8 per cent and transport and communication 8.5 per cent. As regards the structure of the wage debt, nearly 70 per cent from the total amount belongs to economically active enterprises and 30 per cent to bankrupt or inactive enterprises. The Committee also notes that based on figures presented at the national tripartite Conference on “Recovering from the crisis: Implementing the Global Jobs Pact in Ukraine” held in Kiev in May 2010, wage arrears increased 2.5 times in 2008 and 2009, and the situation apparently continues to worsen.

The Government indicates that the situation is constantly scrutinized by interim commissions which have been created within executive and local municipal bodies to deal with the repayment of wage arrears. Since the beginning of 2010, these commissions held 5,185 sessions during which 16,643 heads of enterprises were warned about the disciplinary liabilities, 94 contracts were terminated and 3,797 other measures were taken. The Government further indicates that the results of these activities are frequently discussed in targeted meetings of the Cabinet of Ministers, often with the participation of the social partners. Moreover, the Government indicates that on 11 August 2010, the Ministry of Labour drafted and approved a decree on a plan of urgent measures for the repayment of wage arrears. The Committee asks the Government to describe in detail the urgent measures envisaged in the Decree of 11 August 2010 and to provide concrete information on its practical implementation. The Committee would appreciate receiving a copy of that Decree. More generally, the Committee asks the Government to keep the Office informed of the evolution of the situation and to report on any new measures or initiatives aimed at resolving the wage crisis in the country.

Labour inspection activities. The Committee notes the Government’s indications concerning the activities of the State Department for the supervision of observance of the labour legislation (Gosnadzortuda) in the field of wage protection. According to the Government’s report, Gosnadzortuda controls the observance of the implementation of Presidential Decree No. 292 of 2001 on urgent measures aimed at accelerating the repayment of wage arrears and of Presidential Decree No. 576 of 2004 on urgent measures for completing the settlement of wage arrears. Since the beginning of 2010, Gosnadzortuda and its regional bodies carried out 5,831 inspections in 4,598 indebted enterprises, and drew up 3,947 reports of administrative offences. Overall, some 6,095 officials of indebted enterprises were found administratively liable for non-payment of wages and a total amount of UAH2.4 million (approximately 225,000 euros) of punitive sanctions was imposed by courts and labour inspectors. With specific reference to the situation in the Lugansk region and the state enterprise “Luganskugol”, the Government indicates that in 2009–10, this enterprise and its separate subdivisions were inspected on 36 occasions which revealed numerous violations of the labour legislation, including non-observance of applicable minimum wage levels. The Committee asks the Government to continue supplying up-to-date statistics on labour inspection results and all other activities aimed at ensuring compliance with national laws and regulations on wage protection.

Draft legislation on workers’ protection in insolvency – Pay conditions in the mining sector. The Committee notes that the Government’s report does not contain any information concerning the process of adoption of new legislation on the protection of workers’ wage claims in the event of the employer’s insolvency, to which reference was made by a Government representative at the Conference Committee discussion of June 2010. Similarly, the Government’s report does not elaborate on the working and pay conditions in the coal industry which experiences considerable difficulties and is undergoing restructuring. Referring to the conclusions of the Conference Committee on the Application of Standards, the Committee again asks the Government to: (i) indicate any further developments concerning the preparation of new legislation aimed at modernizing existing legislation on the protection of workers’ claims in the event of insolvency proceedings; and (ii) provide an updated account of the employment situation in the mining sector, particularly as regards the prevailing working conditions and the regular payment of wages.

The situation in the Lugansk region and the Nikanor-Nova mine. The Committee notes the comments of the Independent Trade Union of Miners (ITUM) of the Nikanor-Nova coalmine, dated 27 July, 22 October and 1 November 2010, concerning ongoing wage problems in the Nikanor-Nova coalmine. According to ITUM, there is deliberate and systematic non-compliance with labour legislation in force and applicable minimum wage standards and, as a result, workers are deprived of the possibility to earn a decent living. In addition, ITUM considers that as of July 2010, the minimum monthly wage for workers engaged in underground work should be UAH1,129 (instead of UAH888 currently paid) and UAH1,042 for all other workers. In its reply dated 11 October 2010, as well as in its reply to earlier comments made by the Confederation of Free Trade Unions of the Lugansk Region (KSPLO) on the same issue, the Government indicates that the Lugansk regional state inspectorate continuously monitors coal mining enterprises and has frequently detected violations of the labour legislation, including payment of wages at a rate below the applicable minimum wage. The Government further indicates that all inspections are carried out with the direct involvement of KSPLO representatives and that managers who permitted such violations have been charged with administrative offences.

Finally, the Committee notes that the Government has requested the Office to undertake a technical assistance mission with a view to better understanding the current wage debt situation. The Committee understands that this mission is now planned for early 2011 to be followed by a national tripartite event on the timely and full payment of wages. It hopes that the mission will give an opportunity to review and evaluate the wage arrears situation and trusts that the Office will seek to address pending issues and hold separate meetings with government authorities, institutions or services, employers’ and workers’ organizations – including the KSPLO – and other associations interested in the matters in question.

Observation (CEACR) - adopted 2009, published 99th ILC session (2010)

Article 12, paragraph 1, of the Convention. Regular payment of wages. The Committee notes with regret that the Government’s report does not provide up to date information on the wage arrears situation on which the Committee has been commenting for a number of years. Unlike previous years, no statistical or other indications are given concerning the accumulated wage debt, any new legislative measures or relevant inspection results. The Government merely refers to its intention to elaborate a legal mechanism in order to protect workers’ wage claims in the event of the employer’s insolvency through a wage guarantee fund. To enable the Committee to effectively evaluate compliance with the Convention in law and practice, the Government is once again requested to transmit detailed information on any persistent problems with regard to the regular payment of wages, including the sector(s) concerned and the number of workers and enterprises affected, the total amount of outstanding payments, the average delay in the payment of wages and any negotiated schedule for the settlement of accumulated wage debts. In the absence of such a schedule, the Government is asked to initiate negotiations to this end.

In addition, the Committee continues to receive voluminous communications concerning the ongoing problem of unpaid wages in the Nikanor-Nova mine. By letters dated 5 and 30 May 2008, the Workers’ Union of the Nikanor-Nova Coal Mine ((NPG) denounced the extensive problems of non-payment of wages and also complained about the deteriorating living conditions of miners, especially in the town of Zorinsk. In its reply, dated 11 September 2008, the Government indicates that there is currently a one-month delay in the payment of wages at the Nikanor-Nova mine with the total wage debt amounting to 197,200 hryvna (UAH) (approximately €16,500). The Government further indicates that all mine workers, including those at the Nikanor-Nova mine, have been transferred as from 1 April 2008 to the new wage and salary scales based on a minimum monthly wage of UAH525 (approximately 43.5 euros). With respect to allowances intended to improve the living conditions of miners, the Government refers to the new Act on enhancing the prestige image of coalminers’ labour adopted on 2 September 2008, which amends the Mining Act and introduces an allowance for electricity, gas and central heating for workers employed in mining enterprises. Finally, the Government indicates that in the first seven months of 2008 the Nikanor-Nova mine spent UAH1.5 million (approximately 124,000 euros) on improvement of the occupational safety and health standards while the Ministry of Coal Industry is planning the acquisition of new protective equipment.

While noting the Government’s explanations, the Committee observes that in a new communication received in November 2008, the Confederation of Free Trade Unions of the Lugansk Region (KSPLO) refers to a resolution adopted in the KSPLO Congress of October 2008 which alleges continued failure of executive authorities to pay adequate wages punctually and calls upon public authorities to make every effort to rectify the situation. In another communication received in February 2009, the NPG complains about violations of labour legislation, in particular the delayed payment or non-payment of wages, and provides statistical information on the sums owed to the pension fund at the Nikanor-Nova mine.

Moreover, the Committee notes the communication of the NPG, dated 23 July 2009, and a similar communication of the KSPLO, dated 26 August 2009, by which the two workers’ organizations transmitted copies of recent correspondence with the labour inspectorate of the Ministry of Labour and of Social Policy, the Ministry of Coal Industry, and the management of the state enterprise “Luganskugol” pointing at the following facts: (i) in accordance with applicable collective agreements, the minimum guaranteed remuneration as from 1 July 2009 should be not lower than UAH786 (approximately 65 euros) (605 x 1.3 adjustment factor) for workers engaged in underground work and UAH726 (approximately 60 euros) (605 x 1.2) for all others; (ii) the management of the state enterprise “Luganskugol” has admitted that it is unable to pay workers at the new minimum wage rate (i.e. UAH786) for lack of sufficient financial resources; (iii) in accordance with section 3 of the Act on enhancing the prestige image of coalminers’ labour, the salary scales of coalminers must be established on the basis of a rate of the worker of category 1 which exceeds the statutory level of the minimum wage by at least 30 per cent; and (iv) the labour inspectorate last visited the state enterprise “Luganskugol” on 23 February 2009, and found that the enterprise is in violation of labour legislation for non-observance of the applicable minimum wage levels. It also observed that even though at the time of inspection no wage arrears were found, wages were paid irregularly, there were accumulated liabilities to the pension fund, and the compensation for the delay in payment was not always paid on the day of settling the wage arrears. In light of the foregoing considerations, the two workers’ organizations denounce a deliberate and systematic failure of the state enterprise “Luganskugol” (and other state-owned coal production enterprises such as “Donbassantratsit” and “Sverdlovatratsit”) to comply with state social guarantees in the field of remuneration thus depriving coalminers of a decent standard of living.

By letter, dated 8 October 2009, the Deputy Minister of Labour and Social Policy replied to the latest communication of the NPG indicating that the Territorial State Labour Inspection in the Lugansk region carried out in 2009 inspections at the coalmine Nikanor-Nova and at the state enterprise “Luganskugol”. As a result, it was found that the minimum guarantees of labour remuneration were not observed and that the wage rate of workers was fixed without taking into account the provisions of the general and sectoral collective agreements. The Deputy Minister indicates that disciplinary action was taken against the managers of the enterprises concerned in accordance with section 188-6 of the Code of Administrative Offences, while the inspection results were forwarded to law enforcement bodies as provided for in section 95 of the Code of Criminal Procedure.

As pointed out in previous comments, the Committee is of the view that the wage situation in the Nikanor-Nova mine is not an isolated phenomenon but rather symptomatic of the difficulties of the Ukrainian coalmining industry as a whole, that is high unemployment, low profitability and poor safety record. The Committee accordingly requests the Government to communicate full particulars on the employment and working conditions prevailing in the mining sector – including the several hundred illegal mines reportedly operating in the country – and the measures taken or envisaged to ensure the regular payment of wages in the coalmining industry in accordance with applicable collective agreements.

[The Government is asked to supply full particulars to the Conference at its 99th Session and to reply in detail to the present comments in 2010.]

Observation (CEACR) - adopted 2007, published 97th ILC session (2008)

The Committee notes the Government’s report which replies only partially to the previous observation concerning the ongoing situation of accumulated wage arrears in the country. Contrary to past years, the Government, in its last report, has not provided any statistical data on the evolution of the wage debt by industry or sector, nor has it given an up to date account of labour inspection activities and the results obtained in terms of wage money recovered or sanctions imposed. Recalling that the Government has recently indicated a significant increase both in the overall amount of wage arrears accumulated by economically active enterprises as well as in the number of employees experiencing delays in the payment of their wages, the Committee asks the Government to supply detailed information regarding the evolution of the wage debt by industry or sector and geographical region, the number of workers affected, and the average delay in the payment of wages. It also asks the Government to report on any new measures or initiatives aiming at resolving the persistent wage crisis in the country.

With respect to the difficulties experienced in the coal industry, the Committee has been in receipt of a considerable number of communications concerning the Nikanor-Nova mine by which the Confederation of Free Trade Unions of the Lugansk Region (KSPLO) and the Independent Miners’ Union of Ukraine (NPG) call upon public authorities to put an end to the delayed payment of wages and to the payment of wages below the statutory minimum rate. Recalling the Government’s indication that the dispute has been referred to arbitration, the Committee requests the Government to provide full particulars on the outcome of the arbitration process and the current pay conditions in
the Nikanor-Nova mine. The Committee understands that the situation in the Nikanor-Nova mine is not an isolated phenomenon but rather characteristic of the present-day realities facing the coalmining industry in the country, i.e. high unemployment, low profitability and a poor safety record. The Committee also understands that the declining working conditions in state-run mines have led a significant number of workers to seek employment in one of the several hundred illegal mines operating in the country. The Committee requests the Government to communicate more detailed information on the employment and working conditions prevailing in the mining sector and the measures taken or envisaged to ensure the regular payment of wages at public-owned mines.

Finally, the Committee wishes to draw attention to certain points left unanswered in the Government’s report and asks the Government to address the following matters in its next report: (i) whether the practice whereby enterprises were allowed to settle wage debts by “selling” part of their own production to their employees at an agreed price and treating those sales as salary received, is no longer tolerated in law and practice, and if so, by virtue of which legal provision; (ii) whether the new draft legislation aiming at reinforcing the criminal and administrative sanctions in the event of delayed payment of wages has been adopted, and if so, whether a copy has been transmitted to the International Labour Office; and (iii) whether any concrete proposals have been formulated, in consultation with the social partners, regarding targeted activities on wage protection and the recently ratified Convention No. 173, and if so, whether such proposals have been submitted for consideration to the competent technical services of the Office.

[The Government is asked to reply in detail to the present comments in 2008.]

Observation (CEACR) - adopted 2006, published 96th ILC session (2007)

The Committee notes the Government’s report and its detailed replies to the numerous communications received from workers’ organizations regarding the ongoing wage crisis in the country.

The wage arrears situation

1. The Committee notes that, according to the latest statistics provided by the Government, in July 2006, the overall wage debt was 1.1 billion grivnas (approximately US$218 million), which represents a 17.4 per cent decrease compared to the corresponding figures of July 2005 and an almost 85 per cent decrease compared to the record amount (7.2 billion grivnas) reached in 1999. The Government indicates that practically half of the current wage debt is owed by enterprises which are either in the process of being liquidated or have ceased their production in past years, mostly in industry and agriculture. As regards the wage arrears accumulated by economically active enterprises, the Government states that those arrears increased by 28.1 per cent at the beginning of 2006 and by another 10.5 per cent in June 2006. The number of employees experiencing delays in the payment of their wages has increased by 23.5 per cent at the beginning of 2006 and is now estimated to 500,000, the average delay being around three months for 79.2 per cent of those employees.

2. Referring to the particularly complex situation in the coal industry, the Government reports that at the beginning of 2006 the accumulated wage debt increased by 24 per cent and stood in July 2006 at 131.8 million grivnas, or 22.2 per cent of the overall amount of wage arrears of all economically active enterprises.

3. According to the statistical data provided by the Government, labour inspection results confirm that the non-payment of wages remains the most frequently observed infringement of the labour legislation, especially among private companies and agricultural enterprises. The enterprises experiencing wage arrears are subject to specific controls often giving rise to monetary fines and administrative or disciplinary sanctions against the managers of the enterprises concerned.

4. Moreover, the Committee notes the observations of the Joint Representative Body of All-Ukrainian Trade Unions and Trade Union Associations made on 23 January 2006 according to which not only has the wage arrears situation not improved but on the contrary it has considerably worsened. The Joint Representative Body alleges that, compared with the beginning of 2005, there has been a 90 per cent increase of wage arrears in the Sevastopol region, a 73 per cent increase in the Rivne region and a 66 per cent increase in the Odessa region. The Donetsk and Dnipropetrovsk regions are most affected with wage arrears totalling 268 and 106 million grivnas respectively (approximately US$53.1 and 21 million), or 24 per cent and 9 per cent of the country’s total arrears. The Committee further notes the communication of Public Services International (PSI) dated 27 January 2006 fully supporting the legitimate demands of the Ukrainian trade unions and urging the Government to pay all wage arrears and provide compensation for the delays.

5. The Committee notes with concern that the phenomenon of wage arrears proves particularly persistent and continues to defy the Government’s sustained efforts. It also notes with concern that at the Cabinet of Ministers’ meeting of December 2005, the Commission on issues relating to the payment of arrears of wages, pensions, grants and other social benefits expressed the view that the current measures taken by central and local executive authorities to pay off wage arrears are inadequate. The Committee therefore asks the Government to keep it duly informed of the evolution of the situation and to report on any new measures or initiatives aimed at resolving the wage crisis in the country.

The situation in the Lugansk region and the Nikanor-Nova mine

6. The Committee notes that, according to inspection results referred to in the Government’s report, in June 2006 there were no wage arrears in the Nikanor-Nova mine, while in July 2006 a wage debt of 620,000 grivnas (approximately US$123,000) was observed affecting 1,623 workers. The labour inspection services also reported that 257 workers had not been paid their annual leave. The Government adds that the workers in the Nikanor-Nova mine, which is part of the public-owned enterprise Luganskugol, are paid at a rate which is in violation of collective agreements and relevant Ministerial orders fixing the minimum wage for coal-industry workers at 120 per cent of the national minimum wage. The Government states that consecutive meetings held in May-June 2006 have not succeeded in resolving the dispute between the mineworkers and the director of Luganskugol, and therefore the dispute has now been referred to arbitration. The Committee asks the Government to continue to closely monitor the wage situation in the Nikanor-Nova mine, as regards both accumulated wage arrears and sub-minimum wage levels, and to provide detailed information on the outcome of the arbitration process currently under way.

7. In this connection, the Committee notes the communications of 26 September 2005, 4 November 2005, 14 February 2006 and 5 July 2006 in which the president of the Confederation of Free Trade Unions of the Lugansk region (KSPLO) transmits detailed information on the working and living conditions of those employed in the Nikanor-Nova mine. According to the KSPLO, coalmine workers in the Lugansk region continue to suffer from systematic violations of the labour legislation, in particular the delayed payment of wages or the non-payment of legally binding increases of the minimum wage and, as a result, they and their families have to endure constantly deteriorating living conditions. In its replies, the Government refers to its continuing efforts to resolve the wage crisis, especially through the intensification of inspection visits, the imposition of fines or the possible initiation of criminal proceedings against managerial staff and, more generally, the placing of the entire coal industry under close scrutiny. While noting that the situation with respect to wage arrears is getting slowly stabilized, the Committee requests the Government to provide detailed particulars on the settlement of past wage debts and, most importantly, on the sums paid in compensation for the injury suffered as a result of the delayed payment.

The payment of wages in kind

8. The Committee notes with interest that the maximum permissible percentage of the wages which may be paid in kind under section 23 of the Wages Act, 1995, as amended, has been reduced from 50 to 30 per cent. According to the Government’s report, at present, the partial payment in kind is limited to rural areas and is mainly practised in forestry and fishing. A multi-year study on methods of cashless payment of wages demonstrates that this method is no longer used when signing new employment contracts while manufactured products are sometimes offered to workers free of charge as a bonus. Noting these explanations, the Committee requests the Government to confirm that the earlier practice, whereby enterprises were allowed to settle wage debts by “selling” part of their own production to their employees at an agreed price and accounting those sales as salary received, is now definitely abandoned without exception.

Protection of wage claims in the event of the employer’s insolvency

9. The Committee notes with interest the ratification by Ukraine of the Protection of Workers’ Claims (Employer’s Insolvency) Convention, 1992 (No. 173), which was registered on 1 March 2006. It also notes the Government’s reference to Act No. 2597-IV of 31 May 2005 which amends section 31 of the Act on the debtor’s liquidation or bankruptcy and grants first rank privilege to workers’ wage claims thus giving effect to Article 8 of ILO Convention No. 173. The Committee would appreciate receiving a copy of the above Act.

10. Moreover, the Committee notes the Government’s reference to new draft legislation amending previous laws on the regular payment of wages aimed at reinforcing the criminal and administrative sanctions for those responsible for delayed payment of wages. Noting that the draft bill has already received the Government’s approval and will be submitted to the Parliament shortly, the Committee asks the Government to transmit a copy of the new legislation as soon as it is adopted.

11. With regard to the possible establishment of a wage guarantee institution, the Committee notes the Government’s view that such measure is believed to be premature for the time being because of the lack of public funds to finance a guarantee institution and also because of the need to diminish labour costs for employers. The Government adds that the acceptance of Part III of Convention No. 173 dealing with the protection of wage claims through a wage guarantee fund could be envisaged after the adoption of the draft law on a single social security contribution and of other legislative instruments which are designed to improve the financing of the social security system. The Committee requests the Government to keep it informed of any further developments in this respect.

Request for technical assistance

12. The Committee notes the Government’s request for ILO technical assistance in view of the persistent difficulties encountered in the practical application of the Convention. The Government indicates that it would welcome the technical support and expert advice of the Office in two main areas: first, preparing for the eventual acceptance of Part III of Convention No. 173 and the setting up of a wage guarantee fund; and, second, enhancing the enforcement of ratified Conventions Nos. 81 and 129 concerning labour inspection. The Government suggests targeted activities such as the organization of a national seminar on wage guarantee funds, legal counselling in drafting relevant legislation, and the establishment of a permanent training centre for labour inspectors. The Committee recalls that certain activities of a similar nature have already been carried out in collaboration with the Office with positive results, such as the National Tripartite Conference addressing the problem of non-payment of wages and the establishment of a wage guarantee fund in Ukraine, which was held in February 2004. The Committee trusts that the Government will continue to draw upon the advisory services of the International Labour Office and therefore invites the Government to submit to the competent services of the Office concrete proposals for prioritized, collaborative and result-oriented activities in the field of the protection of wages and labour inspection.

Observation (CEACR) - adopted 2005, published 95th ILC session (2006)

The Committee notes the Government’s report and the detailed information communicated in response to its previous observation. Regarding the wage arrears situation in the Nikanor-Nova coalmine, the Government states that the labour inspection services of the Lugansk district carried out repeated inspections in the period 2003-05 and reported a number of violations relating to the regular payment of workers’ wages. Among other irregularities, the inspection revealed that wages are paid once a month in contravention of section 115 of the Labour Code; wages are not paid for the three days before the beginning of a period of leave in contravention of section 21 of the Act on leave; and also that only a part of the company’s turn-over is used to pay wages although section 97(5) of the Labour Code provides that workers’ wages must be paid as a priority before any other payments can be made by the employer. According to the latest statistics, the wage debt continued to increase, and in March 2005 stood at 9.7 million grivnas. Moreover, the Government indicates that administrative proceedings had been initiated against the three acting directors of the mine who had been appointed in the last three years for failure to put an end to violations of labour legislation and also for non-implementation of compliance orders issued by labour inspectors.

The Committee notes with concern that the wage crisis in the Nikanor-Nova coalmine appears to be out of control despite the changes in management, regular controls, and imposition of sanctions. It asks the Government to step up its efforts to contain the further deterioration of the wage debt before it reaches critical proportions. The situation seems all the more distressing as, according to the Government’s account, the problem is not always related to liquidity difficulties but rather to mismanagement of available resources. The Committee further recalls that in some earlier comments the Workers’ Union of the Nikanor-Nova coalmine had indicated that the wage rates applied at the enterprise were much lower than the statutory minimum pay rates depriving the entire population of the town of Zorinsk of a decent level of living. The Committee requests the Government to look into these allegations and provide full particulars in its next report together with up-to-date information on the evolution of the wage arrears situation in the coalmine in question.

Moreover, the Committee notes the information supplied by the Government in reply to the comments made by the Confederation of Free Trade Unions (KSPU). According to the workers’ organization, the figures provided by the Government showing a downward trend in wage arrears are questionable as in August 2004, the total amount of the wage debt exceeded 2 billion grivnas (approximately US$450 million), including 796 million grivnas in the coal industry. Based on the statistics communicated by KSPU, the wage arrears in certain mining companies amounted to eight times, ten times and even 32 times the monthly wage bill and totalled from 12 million grivnas (US$2.2 million) to 67 million grivnas (US$12.6 million). The KSPU further alleges that employers persisted in the practice of paying workers their entire wages in goods and products produced at their own factories. It also criticizes existing insolvency legislation which provides that if the value of assets of an undertaking following liquidation is insufficient, workers’ wage claims are deemed to be settled.

In its reply, the Government acknowledges that wage arrears is a widespread and long-standing problem but specifies that in only ten months in 2004, the total amount of those arrears fell by 1 billion grivnas, or 57.5 per cent, to 763 million grivnas and the number of state-employed workers not receiving their wages on time fell by 890,000 or 68 per cent. With reference to the situation in the coal industry, which the Government describes as “extremely tense”, the Government indicates that state-owned enterprises have been provided with interest-free loans from the budget in order to pay off wage debts, and as a result arrears in the coal industry have fallen by 455 million grivnas, or 79.4 per cent, to 118 million grivnas. It adds that timetables for enterprises to clear their current wage arrears by the end of the year were drawn up by central and local executive authorities in consultation with trade unions and that additional sources of funding were being sought for this purpose. As regards the partial payment of wages in kind, the Government insists that payment in kind currently takes place only in agriculture, forestry and fisheries, i.e. in those sectors or industries in which payment in kind is customary and also one of the principal material incentives for workers.

While noting the Government’s explanations, the Committee considers that the wage situation in the country remains a source of serious concern. As the Committee has emphasized in the past, every effort should be made to prevent a “culture” of deferred payment of wages from infecting the national economy as a whole, and also that effective corrective measures should seek not only to remedy current deficiencies but most importantly to guarantee with a reasonable degree of certainty that phenomena of this nature and this scale would not be experienced again in the future. The Committee therefore asks the Government to continue devoting the necessary time, energy and resources to the supervision and control of the wage crisis, especially in the sectors where firm action is most needed, such as the mining industry, and to keep the Committee informed of all further developments in this regard.

In addition, the Committee notes the communication of the Confederation of Free Trade Unions of the Lugansk Region (KSPLO), which was received on 17 August 2005 and forwarded to the Government on 20 October 2005, regarding the social situation in the Lugansk region and in particular the problem of non-payment of wages by the state-owned Nikanor-Nova mine. The Committee requests the Government to transmit for its next meeting its observations in this regard so that it may examine in detail the points raised in this communication.

With respect to the possible establishment of a wage guarantee fund for the settlement of workers’ wage claims in the event of the employer’s insolvency, the Government refers to a draft bill concerning the protection of workers’ financial claims in the event of the employer’s insolvency which is now in the process of revision following the 2004 presidential elections and the ensuing Government change. According to the Government’s report, certain government agencies have recently raised objections to the creation of the fund and have expressed reservations as to the availability of adequate budget funds and the additional expense which employers would incur as a result. The Committee understands that the Government has taken steps, in consultation with its social partners and with the technical assistance of the Office, to examine the possibility of setting up a wage guarantee institution in line with the provisions of Convention No. 173 for the protection of future workers’ claims arising from bankruptcy or insolvency situations. The Committee would appreciate receiving more specific information on the current state of revision of the draft bill and recalls that the advisory services of the Office are at its disposal in this regard.

[The Government is asked to reply in detail to the present comments in 2006.]

Observation (CEACR) - adopted 2004, published 93rd ILC session (2005)

Further to its previous observation, the Committee notes the Government’s reply to the comments made by the Workers’ Union of the Coalmine Nikanor-Novaya concerning the growing payroll debt of the state-owned enterprise. The Government states that as of October 2003, wage arrears at the mine stood at 7.8 million grivnas, that is 2.8 million grivnas more than the amount which had been communicated by the workers’ union. The mine also owes some 5.3 million grivnas for work done by construction enterprises which therefore experience difficulties in paying the wages to their own employees. The Government states that in the period 2002-03, several inspections carried out which revealed an increasing accumulation of wage arrears, unpaid compensation for loss of income resulting from delays in payment and other contraventions of the legislation relating to the payment of wages. The Committee notes with concern that despite the numerous changes in the management of the mine, the administrative sanctions imposed on successive directors for failure to implement the instructions of the state labour inspectorate and the important state subsidies for offsetting production costs, technical refitting and upgrading safety and health, the wage arrears situation is rapidly deteriorating. The Committee asks the Government to closely monitor further developments in the Nikanor-Novaya coalmine and to supply full particulars on any new measures taken with a view to eliminating outstanding wage debts. Moreover, the Committee would appreciate receiving the Government’s comments on the alleged sub-minimum wage rates applied at the enterprise.

In addition, the Committee notes the communication of the Confederation of Free Trade Unions of Ukraine (KSPU), which was received on 12 October 2004 and forwarded to the Government on 20 October 2004 regarding the application of the Convention. The Committee requests the Government to transmit for its next meeting its observations in this regard so that it may examine in detail the points raised in this communication. The Committee will also examine at its next session the Government’s report on the other questions that were raised in its previous observation.

Observation (CEACR) - adopted 2003, published 92nd ILC session (2004)

The Committee notes the discussion of the Conference Committee which took place during the 91st Session of the Conference (June 2003). It also notes the information provided in the Government’s report and the observations communicated by the Workers’ Union of the Coalmine Nikanor-Novaya.

According to the allegations of the Workers’ Union of the Coalmine Nikanor-Novaya, the workers of the state-owned coalmine in Nikanor-Novaya are not paid on a regular basis and as a result the accumulated payroll debt of the enterprise amounts to some 5 million grivnas. It is also alleged that the wage rates applied at the enterprise are much lower than the minimum pay rates provided for in the national legislation depriving the entire population of the town of Zorinsk of an acceptable level of living. The organization further indicates that the entire working team of the enterprise has decided to halt and suspend all works at the mine until the repayment of all wage debts and the introduction of new pay rates and salary scales. The Committee asks the Government to provide detailed information on the above observations and to indicate the measures it intends to take for the prompt settlement of any outstanding wage debts in the Nikanor-Novaya coalmine.

The present situation with respect to wage arrears

1. According to the latest information provided by the Government, as compared to May 2001, the total amount of wage arrears was reduced by 48.1 per cent to 2.3 billion grivnas, i.e. half the average national monthly wage bill. In 2001, this figure was nearly 4.6 billion grivnas, or one-and-a-half times the monthly wage bill. The number of workers concerned decreased by 3.3 million persons, or 58 per cent. At present, they number 2.1 million persons, or 17.9 per cent of the total workforce, compared to 5.4 million or 41.8 per cent of the workforce in April 2001. Half of these workers are owed less than three months’ wages. By way of comparison, at the end of 2001 the number of workers who were not paid their wages on time was over 30 per cent of the workforce.

2. Moreover, the Government indicates that wage arrears were reduced in virtually all types of economic and industrial activity, and in all territorial units. The most marked changes took place in the state budget-financed sector where arrears were reduced by two-thirds and now amount to 1.5 per cent of the total amount of arrears (35.8 million grivnas). In the non-state sector, the most substantial reductions in arrears were registered in agriculture where they were cut by 71.3 per cent and now total 423.2 million grivnas. As regards the payment of wages in kind, the Government states that the amount of wages paid in kind from January to March 2003 was reduced by 59.5 per cent compared to the figure for the same period in 2001 and now represents 11 million grivnas. The proportion of the total wage bill paid in kind amounted to 2.3 per cent in the first quarter of this year, compared to 5.2 per cent in the same period of 2001.

3. The Committee takes note of the latest statistical data which show a clear improvement of the situation both in respect of accumulated wage arrears and the amount of wages paid in kind. It also notes, however, that the decrease of wage arrears has been much slower in certain sectors such as coalmining while half of the workers affected by wage arrears continue to suffer delays in the payment of wages of more than three months. Under the circumstances, the Committee can only echo the observations of the Conference Committee emphasizing that the payment of wages in full and at regular intervals is a fundamental right of workers and an absolute prerequisite for healthy employment relations, economic progress and social welfare. The Committee therefore urges the Government to continue to mobilize its assets and energy in the ongoing endeavour to resolve the wage crisis and to report fully and objectively on the evolution of the situation.

4. As regards the situation at the Voltex plant in Lutsk, the Government states that in January 2003 bankruptcy proceedings were initiated against the Voltex enterprise and that the register of creditors’ claims includes wage arrears owed to employees totalling 2.2 million grivnas. The Government further indicates that following the decision of the creditors’ committee to reorganize the company under a restructuring plan approved by the Volyn Regional Economic Council in April 2003, the wage arrears owed to Voltex employees are expected to be settled according to the reorganization plan. The Committee requests the Government to specify the exact conditions under which the settlement of wage arrears is intended to proceed according to the reorganization plan and to continue to provide detailed particulars on the situation until the total repayment of the wages due to the workers of the Voltex company.

Enforcing the legislation relating to the payment of wages

5. With respect to supervision and punishment of offences relating to the payment of wages, the Government indicates that, in 2002, 1,044 managers of enterprises in arrears in their wage payments were subjected to disciplinary proceedings initiated by the state labour inspectors, including 278 whose employment contracts were terminated, or a 36 per cent increase compared to the 2001 figure of the total number of managers sanctioned. In addition, in 2002, administrative proceedings were brought by state labour inspectors against 19,629 managers of enterprises, accounting for 77.8 per cent of the enterprises in arrears which were inspected. Finally, in 2002, criminal proceedings were instituted against 485 managers of enterprises in arrears, which is over two-and-a-half times higher than the figure for the same period last year. While noting these largely positive inspection results, the Committee requests the Government to maintain its tight scrutiny over any practices which might be violating the workers’ wage rights and to continue to communicate detailed statistical information in this regard.

Legislative developments

6. The Committee notes with interest the Government’s indication that a number of draft laws has been prepared with a view to facilitating the settlement of wage arrears by giving them priority over other payments and considering them as privileged debts in the event of judicial liquidation of an enterprise. The Government adds that the creation of a wage guarantee institution, in accordance with the Protection of Workers’ Claims (Employer’s Insolvency) Convention, 1992 (No. 173) is also under consideration, while the transformation of the labour inspection system has allowed the introduction to the Supreme Council of Ukraine of draft laws on the ratification of the Labour Inspection Convention, 1947 (No. 81) and the Labour Inspection (Agriculture) Convention, 1969 (No. 129).

7. In this connection, the Committee finds particularly encouraging the letter of the Minister of Labour and Social Policy, dated 4 August 2003, by which the Government requested the technical assistance of the Office principally for the purpose of drafting legislation to give priority to the payment of wages over other mandatory payments, studying other countries’ experience in setting up wage guarantee funds for the payment of wages in the event of insolvency, and counselling on measures to increase the effectiveness of labour inspection in supervising the timely payment of wages. The Committee firmly trusts that the Government will not fail to draw on the Office’s technical support and expert advice and that it will soon be in a position to report concrete progress in enacting new legislation in these matters.

[The Government is asked to report in detail in 2004.]

Observation (CEACR) - adopted 2002, published 91st ILC session (2003)

The Committee notes the Government’s reports and the comments made by the Federation of Trade Unions of Ukraine and Ukrainian Employers’ Confederation. It notes the amendments made to section 23 of the Act on labour remuneration which entered into force in July 2002, establishing limits for the payment of wages in kind, which is henceforth only permissible up to a ceiling of 50 per cent of the wage set out in the employment contract, on the understanding that the price of the goods in kind must not exceed their cost price.

Wage arrears in the Voltex company

1. With regard to the comments made previously by the Free Trade Union of the Voltex company concerning the non-payment or the delayed payment of wages in the Voltex silk production industrial complex, the Government indicates that the new management of the factory has adopted practical measures with a view to paying wage arrears. According to the information provided by the Government, wage arrears in 2002 in this factory exceeded 2.17 million grivnas in January and 1.85 million grivnas in July, although the maximum level was reached in April at over 2.78 million grivnas. The company management took the decision to sell property belonging to the enterprise with a view to the payment of the wage arrears and developed a plan for the payment of arrears in accordance with which 0.8 million grivnas in arrears are to be paid before the end of 2002 and the remainder in 2003. The Government adds that over the first seven months of this year dismissed workers received wage arrears amounting in total to 1.08 million grivnas, paid in cash and in kind. The Government also indicates that the payment of current wage arrears takes place, with the agreement of the workers, at the rate of 70 per cent in kind and 30 per cent in cash.

2. The Committee expresses concern at the situation that exists in the Voltex factory, where the problem of the non-payment of wages has persisted now for several years and in which wage arrears have only been reduced very slightly since 2000 at which time they amounted to 2 million grivnas. It recalls that, according to the Free Trade Union of the Voltex company, large proportions of wages are paid in kind and are much lower than the subsistence level.

3. In view of the above, the Committee requests the Government to indicate the conditions under which the payment in kind of 70 per cent of the total arrears took place, and the appropriate measures which have been taken to ensure, in accordance with Article 4, paragraph 2, of the Convention, that such allowances in kind are appropriate for the personal use and benefit of the workers and their families and that the value attributed to them is fair and reasonable. Furthermore, while noting the measures adopted with a view to the total payment before the end of 2003 of wage arrears in this enterprise, the Committee requests the Government to continue informing the International Labour Office of developments in the situation with regard to the enterprise Voltex. It also calls upon the Government to take all appropriate measures to ensure that the total amount of unpaid wages due to workers over many years are paid to them in practice as rapidly as possible, also taking into account the fact that the State is a shareholder in this company to a total of 26.22 per cent of its capital.

Developments in the situation with regard to wage arrears

4. In the information brought to its knowledge, the Committee notes that there has been a clear improvement in the problem of arrears in the payment of wages, although the pace of the payment of wage arrears has not yet reached a satisfactory level. As of 1 August 2002, the total amount of wage arrears was 44 per cent lower than the previous year for the same period and the number of workers who had not received their wages on time had been reduced by 45.3 per cent in comparison with the same period in 2001. According to the latest figures available, the total amount of the wage debt was 2,472,100,000 grivnas in August 2002, constituting only a slight improvement from what it was in the month of April 2002, when it amounted to around 2,510,000,000 grivnas. According to the Government, arrears in the payment of wages due for the period between January and June 2002 amounted to 1,030,000,000 grivnas, which represents a fall of 40 per cent in relation to the amount of arrears for the same period in 2001. The number of workers who have not received their wages on time is 2.45 million, which amounts to 20 per cent of the total number of workers in the Ukraine. The Government indicates that, of these workers, 46.4 per cent suffered delays not exceeding three months and that the wage debt has fallen by 29.2 per cent in the public sector and 50.9 per cent in the private sector in relation to the previous period. In comparison with the amount of arrears in July 2001, the reduction in the wage debt, according to the Government’s report, concerns all branches of the economy and industry, and all the regions of the country.

5. In this respect, the Ukrainian Employers’ Federation considers that since 2001 economic growth has made it possible to achieve a significant reduction in wage arrears in all economic and industrial activities and in all the regions of the country, which has led to considerable progress in the application of the Convention in practice. Wage arrears in the public and private sectors have been reduced, by over 40 per cent and 50 per cent, respectively. Practical measures have also been taken by the Government, the labour inspectorate and the judicial authorities to improve supervision of compliance with the labour legislation. The Employers’ Federation believes that joint action by the Government and employers’ organizations to resolve the problem of wage arrears and ensure the payment of wages in time are the means to comply with the comments of the Committee of Experts.

6. For its part, the Federation of Trade Unions of Ukraine believes that the problem of the non-payment of wages has not been resolved, at a time when the debts of the state budget have been totally liquidated and the debts of local budgets have fallen by 91.7 per cent. This organization considers that nearly 2.7 million workers are affected by the problem of wage arrears, or 21.7 per cent of the total number of workers. It estimates at 32.9 per cent the proportion of workers who do not receive their wages on time and suffer delays in their payment of over six months, and adds that 40 per cent of the total wage debt concerns wages which remain due for the year 2001.

7. While noting the information provided by the Government and the social partners, the Committee notes that in certain branches of economic activity, such as industry (extraction of coal, lignite and peat) and in certain services, such as health, welfare and education, wage arrears have increased since April 2002. It also notes that the two regions in which wage arrears are the highest, namely Donetska and Luhanska, are also those in which the reduction in the total amount of arrears was the lowest between July 2001 and August 2002, at 19.9 per cent and 28.1 per cent, respectively, and which have even experienced increases in wage arrears since April 2002. The Committee requests the Government to continue providing detailed information on developments in this situation, and in particular on branches of economic activity and regions of the country in which the rates of wage arrears are the highest.

Monitoring the payment of wage arrears and supervising the application of legislation respecting labour remuneration

8. According to the latest information provided by the Government, the situation with regard to wage arrears is still analysed every month by the State Department for the Supervision of Compliance with Labour Legislation, the results of which are submitted to the Council of Ministers and the Presidential Administration of the Ukraine, as well as the Board of the Ministry of Labour and Social Policy. The capacities of ministerial and local bodies and autonomous government agencies also continue to be used in support of efforts to resolve the problem of wage arrears and they are empowered to examine reports by heads of enterprises. A more in-depth supervision procedure has been established for the 270 enterprises which have accumulated the highest wage arrears.

9. The Government recalls in its reports the machinery established to supervise compliance with the legislation on the payment of wage arrears. It indicates that the national legislation provides for disciplinary, administrative and penal liability in the event of violations of the legislation respecting labour remuneration. During the course of 2001, this machinery enabled the labour inspectorate to supervise around 40,000 enterprises, institutions and organizations and to report over 13,000 heads of establishments for violations of the legislation on labour remuneration and to forward the cases to the competent courts, which handed down penalties totalling around 1.3 million grivnas against the heads of these enterprises. The Government adds that labour inspectors themselves imposed 5,670 penalties in the form of fines, totalling over 500,000 grivnas, upon heads of enterprises who failed to comply with their injunctions. In overall terms, administrative action has been taken against 19,279 heads of enterprises for violations of the labour legislation in general, or 48.9 per cent of those who were inspected. According to the Government’s reports, the number of inspections carried out during the course of 2001 was around 30 per cent higher than for the year 2000. Furthermore, for the same period, the number of court rulings imposing penalties on heads of enterprises, following the reporting of violations by labour inspectors, rose by 97.9 per cent. The amount of the fines imposed in 2001 by the labour inspection services also increased substantially by 97.7 per cent, while the courts handed down 6.5 times as many penalties. The Government also provides figures relating to compliance with labour legislation in the first half of 2002, when inspections of 16,584 enterprises led to 6,724 reports of violations of the legislation respecting labour remuneration and the forwarding of the cases to the competent courts. According to the information provided by the Government, the levels of the penalties imposed by labour inspectors and the courts during the first half of 2002 with a view to ensuring compliance with the legislation on labour remuneration rose substantially in comparison with the figures for 2001. During the first three months of the current year, there was a rise of 64.7 per cent in the fines imposed by labour inspectors and an increase of 26.5 per cent in the penalties imposed by the courts.

10. The Ukrainian Employers’ Federation observes that the Government, the labour inspectorate and the judicial authorities have strengthened the application of the legislation respecting the disciplinary, administrative and penal liability of those with political responsibility and of employers for non-compliance with the intervals prescribed for the payment of wages.

11. The Federation of Trade Unions of Ukraine, however, points out that the directives of the Head of State concerning the elimination of the wage debt before the end of 2001 were not given effect to, and that this did not result in severe penalties against the directors of the central and local authorities. The above organization, while noting the increase in the activities of the national labour inspectorate, emphasizes the need to extend its powers and duties with a view to accelerating the payment of wage debts to workers.

12. The Committee notes the progress achieved in the effective supervision of compliance with the legislation on labour remuneration. Nevertheless, it notes with concern the fact that the inspections carried out by labour inspectors found in one case out of three during the course of 2001, and in one case in 2.6 out of 2002, violations of the above legislation. It requests the Government to provide its observations to the International Labour Office on the comments made by the Federation of Trade Unions of Ukraine with regard to the activities of the state supervisory bodies and their results. It also requests the Government to continue providing precise and detailed information on compliance with the national wage legislation, and particularly on the results achieved through the activities of the national labour inspectorate.

13. The Committee notes that certain improvements have been achieved with a view to resolving the problem of wage arrears that the country has been experiencing for a number of years and the reduction by 44 per cent in the amount of wage arrears in comparison with the previous year. In view of the information brought to its knowledge, the Committee is however bound to express its concern at the persistence of the problem of wage arrears throughout the country and in all sectors of the economy. It notes that in practice, since April 2002, there has been a slowing down in the payment of arrears, and even an increase in arrears in certain sectors since that date. The Committee recalls that sustained efforts and an open dialogue with the social partners are necessary to bring an end to the phenomenon of wage arrears. It therefore urges the Government to continue unceasingly and as a national emergency its action against the disastrous consequences of the problem of wage arrears, which continues to place nearly 2.5 million workers and their families in great hardship in their everyday existence. It also requests the Government to continue to keep it informed of any new developments in this respect.

Legislative developments

14. The Government states in its report that the problem of the payment of wage arrears is under constant supervision by the leaders of the country and that action is being taken at the legislative level. Since the Government’s previous report, the Act on labour remuneration has set limits on the payment of wages in kind, which is now only authorized up to the ceiling of 50 per cent of the wage and the allowances paid in kind must be deducted from the wage at a rate which does not exceed the cost price. The Government states that in practice payment in kind is principally found in the forestry and fishing sectors and that the list of goods prohibited for the purposes of payment in kind by Order No. 244 of the Council of Ministers of 3 April 1993 limits the practice of the payment of wages in kind.

15. According to the Federation of Trade Unions of Ukraine, the new provisions respecting the payment of wages in kind differ substantially from those which were in force previously and should result in a reduction in the proportion of wages paid in kind and contribute to increasing the cash income of the population from wages. The Federation notes, however, that the Act respecting the elimination of the debt relating to wages and other forms of remuneration, the objective of which is to accelerate the payment of debts in this field, has been vetoed for the fifth time by the Head of State. It adds that up to now the legislation has not given priority to the payment of wages over other compulsory payments, despite several parliamentary initiatives to this effect. Since September 2001, the Supreme Council of the Ukraine has on three occasions adopted the Act respecting the priority payment of wages but, once again, the Head of State has used his veto to block the promulgation of the text. Nor has the issue of the exceptional payment of wages to workers in the event of the bankruptcy or liquidation of enterprises benefited from a legislative solution, with the result that in such cases, according to the Federation, the workers do not receive the whole of their termination allowances or their wage arrears. In consequence, the Federation of Trade Unions of Ukraine urges the adoption of a law giving priority to the payment of wages, as well as a legislative solution to the issue of the exceptional payment of wages in the event of the bankruptcy or liquidation of enterprises. On this subject, the Federation states that its President, a member of the Supreme Council of the Ukraine, took the initiative of submitting for examination by the Council a Bill providing for the exceptional payment of wages in the event of the bankruptcy or liquidation of enterprises intended to bring the national legislation into conformity with the Convention.

16. In this respect, the Committee recalls that, under the terms of section 31 of the Act respecting the renewed solvency of the debtor or confirmation of bankruptcy, the payment in whole of the debt constituted by the wages is given second place after the acquittal of the debt constituted by the loan and the payment of the expenses of the liquidation procedure. Under the above Act, where the assets of the bankrupt enterprise are insufficient, the wage claims of workers are considered as being settled. As it has done in the past, the Committee is bound to express its concern at this provision which does not give adequate guarantees to workers and would result in their wage claims not being settled in the event of the bankruptcy of enterprises. Furthermore, while noting the comments of the Federation of Trade Unions of Ukraine concerning the Act respecting the priority payment of wages adopted by the Supreme Council of the Ukraine, but vetoed by the Head of State, the Committee urges the Government to take the necessary measures to afford the workers real and effective protection of their wages in the event of the bankruptcy of enterprises, in accordance with the spirit and letter of Article 11 of the Convention.

Other provisions of the Convention

Article 12, paragraph 1, in conjunction with Article 1 of the Convention. The Committee notes that, by virtue of section 16 of the Act respecting local state administrations, the latter exercise control, each within its area of geographical competence, over the payment of wages on time and in proportions which must not be lower than the amount of the minimum wage in force in the country. The Committee recalls that, in accordance with Article 1 of the Convention, the term "wages" means remuneration or earnings capable of being expressed in terms of money and fixed by mutual agreement between the parties to the employment relationship or by national laws or regulations. As a consequence, unless the workers have been recruited at the level of the minimum wage, the wage which must be paid to them and to which they are entitled is not the minimum wage, but the wage set out in their contract of employment. The local authorities responsible for compliance with the legislation on the payment of wages therefore have to ensure that the wage that is paid to workers is paid on time and is in practice the wage to which they are entitled, and not only the minimum wage established for the country, unless the latter wage is the wage set out in their contract of employment. The Government is requested to take all the necessary measures to bring this provision of the national legislation into conformity with the Convention.

Observation (CEACR) - adopted 2001, published 90th ILC session (2002)

The Committee notes the Government’s reports and the information supplied by the Government to the Committee on the Application of Standards at the Conference in June 2001. It also notes the comments communicated by the Free Trade Union of the Voltex Company concerning the non-payment or partial payment of wages due to company workers. Those comments were transmitted to the Government in August 2001 but no reply has so far been received.

According to the allegations of the Free Trade Union of the Voltex Company, since 1994-95 the non-payment or delayed payment of wages has been standard practice at the industrial complex of silk of Lutsk Voltex. The wage arrears have come to affect about 2,000 workers and amount to 2 million grivnas. It is also alleged that wages are sometimes paid in kind, not only partially, and well under the subsistence level. The Committee asks the Government to provide detailed information on the above observations and indicate the measures it intends to take for the rapid settlement of outstanding wage debts in the Voltex Company.

The evolution of the situation with regard to wage arrears

The Committee notes that the Government has been reporting on some positive developments with regard to the settlement of wage arrears, and affirms that the situation has improved in general in all branches, in the public and private sectors of the economy, and in all areas. The Committee recalls, in particular, that in addressing the Conference Committee on the Application of Standards in June 2001, the Government emphasized that in 2000 and 2001, for the first time, a trend of economic recovery had emerged and that the resolution of the problem of wage arrears was closely linked to such economic recovery. According to the latest figures supplied by the Government, the wage arrears in Ukraine as of 10 September 2001 totalled 3,447.8 million grivnas, and thus dropped by 40.8 per cent with respect to the same date in the previous year and by 52 per cent compared to the maximum level registered in August 1999. The number of workers whose wages were not paid in time decreased by 3.89 million persons, or 37.4 per cent, in the course of the year. The ratio of unpaid wages to the total amount of wages, including all types of enterprises, was reduced by more than two times, i.e. 5.9 per cent against 14.3 per cent as compared to the same index of the last year. The Government indicates that the reduction in the arrears of wages has a stable downward trend. For the first six months of 2001 the total amount of unpaid wages decreased by 510.8 million grivnas.

As to the distribution of wage arrears, of the total wage debt as of 10 July 2001, 31.6 per cent was in the state sector, and 68.4 per cent in the non-state sector. The wage arrears in the state sector totalled 1,395.8 million grivnas, and thus dropped by 36.1 per cent with respect to the same date in the previous year whereas in the non-state sector the wage arrears amounted to 3,021.3 million grivnas, which is by 27.8 per cent lower than last year’s total. Available information shows that in the first nine months of 2001 wage arrears were reduced in all regions and in 22 out of the 26 branches of the economy, with the highest rates of decreasing arrears being observed in health care and education where arrears dropped by 70.7 and 78.3 per cent respectively, and in the nuclear power industry and the electric power industry where wage debts dropped by 99 and 52.9 per cent respectively. The arrears of wages were cleared off in full at the hydroelectric stations, the underground railway construction industry, gas industry, fish industry, leather, fur and footwear industry and the metalwork industry. In other sectors the situation improved at a slower pace, for instance, in the coal industry wage arrears decreased by 10.3 per cent since the beginning of the year.

However, the Government recognizes that in certain sectors the situation has considerably worsened. According to the Government’s latest report, compared to the situation as of 10 August 2000, a growth of wage arrears was registered in four branches of the economy, including fishery by 29 per cent, air transport by 47.7 per cent, the insurance sector by 27 per cent and in non-industrial consumer services by 13 per cent. The Government also indicates that in the industrial sector, wage arrears increased in the oil-refining industry by 4.2 times and in the textile industry by 1.9 per cent.

The Committee requests the Government to continue to supply information on the evolution of the situation, especially in those sectors where according to the Government’s report there has been little or no progress in relation to the regular payment of wages.

Monitoring of the settlement of wage arrears

According to the information supplied by the Government in May 2001, the real capacities of the local bodies of the executive authority and self-governing bodies have been used in the effort to tackle the problem of wage arrears, and special committees operate at the regional, city and district level examining on a regular basis, but not less than once a month, the progress reports concerning the process of paying off accumulated wage arrears. These committees exercise particular control over the enterprises of state and communal ownership, state budget-financed organizations and the joint stock companies with the state participation exceeding 50 per cent.

Moreover, the Government indicates that the evolution of the situation with respect to wage arrears is analysed monthly by the State Department of the Supervision over the Observance of the Labour Legislation, and that the results of these deliberations are submitted to the Board of the Ministry of Labour and Social Policy, the Cabinet of Ministers and the President. The Cabinet of Ministers examines twice a month the progress reports of the ministers, heads of the other central bodies of the executive authority while reports of the officials in charge are examined weekly at the meetings of the Governmental Commission on the matters related to timely and full payment of taxes and clearing off the wage arrears, pensions, grants and other social benefits. While noting that public authorities consider the rate of settling outstanding wage debts to be unsatisfactory, the Committee requests the Government to provide information on any action undertaken to follow up on previous measures as well as on any new initiative to the same end.

Strengthening of the supervision and inspection machinery

The Government indicates that, with a view to bringing the bodies exercising control over the observance of labour legislation into conformity with the requirements of the ILO Labour Inspection Convention, 1947 (No. 81), further measures were taken to reform the labour inspection services. Concretely, by decision of the Cabinet of Ministers No. 1351 of 30 August 2000, the State Department of the Supervision over the Observance of the Labour Legislation was established within the Ministry of Labour and Social Policy. By decision of the Cabinet of Ministers No. 1771 of 29 November 2000, the Regulations on the State Department of the Supervision over the Observance of the Labour Legislation were approved. Under those Regulations, the main function of the new body is to exercise state control over the observance of the labour legislation and of the legislation on universal compulsory state social insurance by the enterprises, institutions and organizations of all types of ownership, as well as by natural persons making use of employed labour. The Committee also notes the Presidential Decree No. 292 of 7 May 2001 on Urgent Measures Aimed at Accelerating the Payment of Arrears of Wages and the decision of the Cabinet of Ministers No. 959 of 9 August 2001 which regulates staffing matters of the territorial bodies of the Labour Supervision Department.

The Government states that in the course of 2000, state labour inspectors checked 23,178 enterprises experiencing wage arrears. As a result, 3,333 reports on administrative offences of the managers of the enterprises were established and submitted to the courts, and 1,909 fine warrants were delivered. During the first eight months of 2001, 27,878 enterprises were controlled, 8,942 reports on administrative offences were transmitted to the courts and 3,488 fine warrants were issued for a total sum of 752.6 thousand grivnas. In the year 2000 and the first quarter of 2001, the contracts of 222 managers of enterprises were terminated for related reasons. According to the Government, the efficiency of state control over the observance of the legislation in the field of labour remuneration has been improved. While in 1999 state labour inspectors applied administrative sanctions to every fifth manager of the inspected enterprises with wage debts, in 2000 they applied such measures to every third manager, and in the first quarter of 2001 practically to every second manager. As a result of the reinforced measures taken by the labour inspection services, 4,436 cases of wage arrears were settled representing a total amount of 631.9 million grivnas. The Committee requests the Government to continue to supply statistical information concerning inspection results, with special reference to those sectors for which the Government indicates no improvement, and even worsening, of the situation.

Legislative developments

The Committee notes the Government’s statement that the issue of paying off the arrears of wages is closely monitored by public authorities and this has been reflected in the national legislation. The Government also states that through the improvement of the legislation in force the legal parameters of the protection of workers’ labour rights are better defined in the context of the current economic situation and the transition to market-based relations. The Committee notes that the Law of Ukraine on the Procedure of Clearing Off Liabilities of the Payers to the Budgets and State Trust Funds, which came into effect on 1 April 2001, repeals the procedure of making compulsory preferential payment to the budget and grants the managers of enterprises the right to determine the order of priority of making any payment. The new Law contains also a clause providing that own resources of a legal person used for paying off wage arrears cannot be used as the sources of paying off tax debt of a taxpayer by his own decision or by a decision of an exempting authority. The Committee also takes note of the adoption of the Law No. 2050-III on Paying Compensation to the Citizens for the Loss of Part of their Earnings due to Non-Observance of the Periods of their Payment which entered into force on 1 January 2001. By its decision No. 159 of 21 February 2001, the Cabinet of Ministers adopted the Regulations on the Procedure of Compensation to the Citizens for the Loss of Part of their Earnings due to Non Observance of the Periods of their Payment. The compensation for work performed as from 1 January 2001 is calculated on the basis of the wages due (after deduction of taxes and other mandatory payments) multiplied by the increase of the index of consumer prices (inflation index) expressed in percentage points, divided by 100.

In addition, the Committee notes the Decree of the Supreme Rada No. 2293 III of 15 March 2000 regarding the State of Implementation of the Law on the Remuneration of Labour at the Enterprises, Institutions and Organizations of all Forms of Ownership which fixes the time limits of paying off wage arrears and determines the tasks of the various executive bodies in this field. It notes, in particular, that the Supreme Rada qualified as insufficient the work accomplished so far and called upon the Cabinet of Ministers to ensure that all wage arrears be settled before January 2002 at the latest and not allow this phenomenon to happen again in the future. Finally, the Committee notes the adoption of the Act to amend the Penal Code and the Code of Administrative Offences of 21 September 2000, with the aim of amplifying the penal and administrative liability of employers for untimely payment of wages and other social benefits. The Committee would appreciate receiving copies of any legislative or regulatory texts which may not have been transmitted to the Office in previous reports.

While noting the Government’s ongoing efforts to control and eventually eliminate the problems of income insecurity and wage arrears which severely handicap the national economy in its transition process, the Committee is nevertheless obliged to express its concern about the fact that the phenomenon of wage arrears persists throughout the country and concerns all sectors of the economy. All the more so as despite the Government’s commitment, increased awareness and mobilization of means, wage arrears continue unchecked in certain economic sectors. The Committee recalls that putting an end to the accumulation of wage arrears calls for sustained efforts, an open and continuous dialogue with social partners and a wide range of measures, not only at the legislative level but also in practice. As it has been pointed out on numerous occasions by the Committee but also other ILO supervisory bodies, the fact that the national legislation is in conformity with the requirements of the Convention does not suffice in itself to ensure that the Convention is satisfactorily applied, unless the legislation is effectively and strictly enforced. The Committee understands that the problem of delays in wage payment is symptomatic of a transition economy, but once again stresses that this cannot stand as a valid excuse year after year for the continued failure to honour employment contracts by paying workers regularly their dues. The Committee urges the Government to continue relentlessly its fight against the disastrous consequences of the problem of wage arrears which strains the lives of almost 5 million workers and those of their families.

The Committee notes the Government’s statement to the effect that the question of eradicating the phenomenon of wage arrears is set as a priority objective of government action in 2001. It also notes that the Government hopes that the ILO would provide advice and technical assistance to resolve this problem. The Committee can only encourage the Government to avail itself to the fullest extent possible of the expert advice and technical services offered by the Office in designing and implementing appropriate solutions to the problem of wage arrears. The Committee urges the Government to tackle the problem of liquidation of accumulated wage debts as a matter of national urgency and continue to report on any further developments in this regard.

Other provisions of the Convention

The Committee recalls its previous observation in which it requested the Government to supply detailed information on the measures adopted to effectively apply in practice the provisions of Articles 3, 4, 11 and 15 of the Convention. With respect to Article 4 on payment of wages in kind, the Government indicates that under article 23(3) of the Wage Act of 24 March 1995, the partial payment in kind is exceptionally allowed under a collective agreement at prices not lower than cost prices, but it is prohibited to replace cash payment by goods listed in the Decision of the Cabinet of Ministers No. 244 of 3 April 1993 regarding the List of Goods Prohibited as a Means of Payment of Wages in Kind. The Government indicates that the payment in kind is additionally regulated in article 19(4) of the Law on Enterprises. According to the Government, this form of payment is practised more often in agriculture and partially in forestry and fishery. Neither the General Agreement between the Cabinet of Ministers and the Confederation of Employers and the trade unions associations nor the sectoral agreements provide for payment of wages in kind. This is only provided for by a sectoral agreement between the Ministry of Agrarian Policy and the central committee of the trade unions of the workers of the agricultural and industrial complex. Between January and April 2001, the amount of wages paid in kind was reduced, the volume of wages paid in kind constituting 6 per cent of the total amount of wages.

Regarding Article 11 of the Convention, article 21(2) of Act No. 2343 of 14 May 1992 on Bankruptcy provides that the liabilities to workers of an insolvent enterprise come second among priority claims. The second rank privilege is also recognized by article 31(2) of the Law on Restoring Solvency of a Debtor or Declaring Bankruptcy which also provides that salaried employees and wage workers, or organizations representing them, may initiate bankruptcy proceedings at a local merchant’s court. As regards Article 15(c) of the Convention, the Committee notes, as mentioned above, that by virtue of Act No. 1979-III of 21 September 2000, section 133 of the Penal Code as well as section 41 of the Code of Administrative Offences were amended and now provide for stricter penal and administrative sanctions against employers for non-compliance with the requirements of labour legislation concerning the regular payment of wages, pensions and other social benefits.

The Committee again urges the Government to intensify its efforts in order to collect and communicate full information on the implementation of the Convention in practice, especially with reference to the payment of wages in kind, the preferential treatment of workers’ wage claims in the event of bankruptcy or judicial liquidation of an enterprise, and sanctions imposed for violations of the labour legislation on wage protection.

[The Government is asked to report in detail in 2002.]

Observation (CEACR) - adopted 2000, published 89th ILC session (2001)

The Committee notes the Government’s report and the information supplied by the Government to the Committee on the Application of Standards at the Conference in June 2000.

The Committee notes that the Government’s report contains no additional information to that given to the Conference Committee in June 2000, nor does it update the figures given on that occasion. The Committee nonetheless wishes to raise the following points.

Wage arrears by sector

The Committee notes the Government’s indication that, thanks to coordinated efforts, the wage debt in the country has dropped considerably since the second half of last year. For the first time in four years, in January 2000 wage arrears dropped by more than 100 million grivnas (equivalent to 1.8 per cent since January 1999) and the number of employees whose wages were not paid in time dropped by 1.5 million. As to the distribution of wage arrears in the various sectors of the economy, of the total wage debt of 6,399,500,000 grivnas, 35.8 per cent was in the state-owned sector, and 64 per cent in collectively owned enterprises. The Committee notes that the largest increases in wage arrears were registered in the banking, information technology, non-productive public services, housing, commerce and fisheries sectors. The proportion of unpaid wages to total earnings taking all types of enterprises into account was 17 per cent (as opposed to 21.8 per cent in 1998).

With regard to the mining sector, the Committee notes the acute and complicated situation that emerged during the restructuring of the sector, due to long delays in the payment of wages, third party claims and lump-sum allowances. According to data supplied by the State Statistics Committee, wage arrears as of 10 January 1999 amounted to 731.7 million grivnas. It also notes the measures taken by the Government at the end of 1999 to reduce wage arrears in the sector by 6 per cent, which is equivalent to 687.5 million grivnas. In keeping with resolution No. 1699 of 15 August 1999 by the Cabinet of Ministers, the State Labour Inspectorate investigated the payment of wage arrears in kind with food and consumer goods in 69 enterprises in the mining sector and found, following its investigation, that payment of wages in kind was rare. The Committee also notes that the Government prepared a programme to reform enterprises in the sector and improve their financial situation for 2000, which was approved by resolution No. 1921 of 19 October 1999 of the Cabinet of Ministers. The programme is broad in scope and seeks to eliminate tensions arising out of wage arrears.

With regard to the agricultural sector, the Committee notes the Government’s statement that the already very critical situation had been exacerbated by the restructuring of collectively owned agricultural enterprises. The Committee notes the study carried out by the Labour Inspectorate in 427 collectively owned agricultural enterprises involved in the reform. According to the Government, the original intention was to grant lands to the workers in the restructured enterprises in the sector in part payment for wage arrears. However, this actually occurred for only one worker in five, since only 40 per cent of the reformed enterprises that were investigated had legal successors, whereas 60 per cent of those remaining had outstanding legal problems and 43 per cent of the undertakings investigated failed to reach a settlement with their employees. The Committee notes the Government’s statement that, in order to overcome the tensions, a reform programme has been drafted establishing that a legal successor must be designated in order to resolve wage arrears problems.

The Committee observes that, according to the Government’s statement, the main reasons for the wage arrears were the country’s difficult economic circumstances due principally to radical structural transformations, the privatization of state property and the transformation of the agricultural sector. According to the Government, the process of adaptation to the new conditions of the market economy was more lengthy and complex than was originally expected, so the President and Government are pursuing measures to stabilize the economy. The steady growth in gross national product and the increase in industrial output in the second half of 1999 and early 2000 illustrate that the economy is gradually stabilizing and the preconditions for a positive social environment are being created. The new Government has drawn up a programme of activities entitled "Reforms in the name of prosperity", which is the only way of creating the conditions necessary to raise the standard of living and overcome poverty.

Monitoring the payment of wage arrears
and reform of the Labour Inspectorate

The Committee takes note of the information supplied by the Government to the effect that top priority is given to the work of the State Labour Inspectorate of the Ministry of Labour and Social Policy. It also notes the Government’s statement that the Inspectorate has focused on breaches of wage legislation, identifying their causes, preventing further breaches and prosecuting offenders. The State Labour Inspectorate is responsible for overseeing the application of the decrees and orders of the President and Cabinet of Ministers regarding the payment of wage arrears, indexation and compensation for late payment of wages. The Committee notes with interest Order No. 19508/2 of 8 August 1999 issued by the Cabinet of Ministers in response to a presidential request of 4 August 1999, in order to ensure the timely payment of wages in state-owned undertakings, to increase the volume of dividends paid on shares held by the State and to terminate the contracts of heads of enterprises who infringe labour laws. Pursuant to that Order, the State Labour Inspectorate investigated the payment of wage arrears in companies in which the State holds shares, and made some progress including payment of arrears amounting to 43.5 million grivnas, which in some undertakings constitutes full settlement of the wage debt. The Committee nonetheless notes that in most of the companies that were inspected, the State lacks a controlling influence, so the executive bodies are unable to exert a direct influence on the payment of wage arrears.

The Committee notes that in 1999 the State Labour Inspectorate monitored compliance with labour law in 29,014 enterprises, which represents an increase of 42 per cent over the previous year. In accordance with Order No. 141 of 21 August 1998 issued by the Minister of Labour and Social Policy, the Labour Inspectorate rigorously inspects all enterprises, institutions or other bodies which have accumulated wage arrears. Its efforts have led to the payment of 888.5 million grivnas, which represents 33.2 per cent of outstanding wage arrears, and a decrease in wage arrears in 17 regions of the country. Pursuant to Presidential Order No. 1-14-1834 of 29 December 1999, the Ministry of Labour and Social Policy and the Ministry of Justice drafted and submitted to the Supreme Soviet of Ukraine a bill amending the Penal Code and the Code of Administrative Offences, which was approved in the first reading, in order to increase the liability of heads of enterprises for late or partial payment of wages. The Committee also notes the Government’s reference to a resolution entitled "Further measures concerning the payment of social benefits arrears out of budgets at all levels" proposing that ministries, agencies and regional authorities use additional extra-budgetary sources to pay the wage arrears of previous years, in order to maintain the current tendency towards reducing wage arrears in the public sector. The indicators currently show that the positive trend in the payment of wage arrears will be maintained in the non-budgetary sector. Presidential Decree No. 958/98 of 31 August 1998 on "additional measures for limiting artificial increases in wage arrears" contributed to this trend to a significant degree, by making it possible to slow the rate of increase in wage arrears over a period of one-and-a-half years and to reduce the wage debt across the board to 92 million grivnas (1.4 per cent). The Committee also notes the measures taken by the Government to reduce contributions depending on the amount of wages, such as the preparation of a bill to abolish primary payments to the budget, which has been submitted to the Supreme Rada of Ukraine (Parliament), which will allow enterprises to choose their own payment priorities (for example, timely wage payments ahead of other payments). Lastly, the Government indicates that, although its intention is to decrease the wage debt to an absolute minimum, 65 per cent of this debt is in the private sector. The Government is therefore making efforts to resolve the problem and is consulting the social partners.

The Committee notes the information supplied by the Government to the effect that a new governmental body, the Department of State Supervision of Compliance with Labour Legislation, is to be set up under the authority of the Ministry of Labour and Social Policy, and is to be based on the State Labour Inspectorate.

The Committee notes in particular the specific measures taken by the Government to control the increase in wage arrears, reduce the increase in wage arrears in the mining and agricultural sectors and to foster further measures governing the payment of wage arrears, allowances, pensions, scholarships and other social benefits.

However, like the Conference Committee on the Application of Standards, the Committee expresses its concern about the continued violation of the Convention and the serious situation of millions of workers in Ukraine. The Committee notes that, while in certain sectors there has been some improvement, in others the situation has become worse to the extent that the orderly functioning of the labour market is imperilled. The Committee recalls that the fundamental problem - failure to apply the Convention in practice - still persists. It therefore urges the Government to take the necessary measures to ensure effectively that wages are paid and all wage arrears are settled. It also urges the Government to take effective measures to ensure that sanctions and redress for injury are properly enforced.

In the absence of information showing any other progress in the second half of the current year (2000), the Committee requests the Government to provide information in its next report on the payment of wage arrears, the regular payment of wages and the strengthening of the supervisory and inspection machinery.

Furthermore, the Committee notes the information supplied by the Government on existing legislation concerning Article 3 (payment with promissory notes or coupons), Article 4 (regulation of payment in kind) and Article 15 (sanctions in the event of violations) of the Convention. It nonetheless urges the Government once again to provide detailed information on the measures adopted to effectively apply the provisions of Articles 3, 4 and 15, and Article 11 (treatment of wages as privileged credit in the event of bankruptcy).

The Committee urges the Government to provide all the information requested both on the legislation and on the measures adopted to enforce it. The Committee again asks the Government to provide up-to-date information on the results achieved by the Inspectorate and the enforcement of penalties imposed for breach of wage protection standards.

[The Government is asked to report in detail in 2001.]

Observation (CEACR) - adopted 1999, published 88th ILC session (2000)

The Committee has been commenting on the application in practice of Article 12(1) of the Convention (Regular payment of wages) on which a number of comments were made by workers' organizations in various sectors. Since the last session of the Committee, a communication dated 21 July 1999 was received from the Federation of Trade Unions of Ukraine, which points out that the total wage arrears had continued to increase to reach 7,013,000,000 grivnas (US$1,750,000,000) of which 858,000,000 grivnas are owed to workers in the state or local budget sector; some 10.4 million workers (47.3 per cent of the workforce) are affected; an ever larger proportion of wages is being paid in kind. The Federation considers that the efforts by the executive authorities to monitor observance of legislation on the payment of wages is ineffective, and states that, while there were 20,247 reported cases of violations of legislation on wage payment, fines imposed on persons responsible amounted only to 64,000 grivnas, and less than one-third of the sum has actually been paid.

The Committee notes with interest that the Government supplied information in response by several communications in May and November 1999. The Government states in its latest communication that, according to the data supplied by the State Statistics Committee, the total wage arrears owed to workers decreased during August and September 1999 by 411,000,000 grivnas (5.8 per cent) and stood at 6,781,000,000 grivnas as of 1 October. Of the total, the arrears in state-controlled undertakings count for 35.4 per cent (2,400,000,000 grivnas) and the non-state owned undertakings 64.5 per cent (4,380,000,000 grivnas). The Committee recalls that in its previous observation it noted 5,600,000,000 grivnas of total wage arrears as of May 1998, including the arrears in the state budget sector of 836,000,000 grivnas.

As to the measures taken, the Government indicates that a comprehensive survey of undertakings still owing wage arrears was carried out by the labour inspectorate, which covered as of 25 October 1999 a total of 27,245 enterprises with wage arrears (about 42 per cent of the total number), and resulted in the payment of 814,100,000 grivnas (22.7 per cent of the total wage arrears at the undertakings surveyed), court summonses issued in 3,117 cases of non-compliance with wage legislation, 2,048 cases examined by the courts and fines totalling 122,100 grivnas imposed, and 33 cases of criminal proceedings initiated for gross violation of labour legislation. The Government further states that under the terms of the General Agreement for 1999-2000 concluded between the Cabinet, the Confederation of Employers and the trade unions, wage arrears should be paid off by the end of 2000 at state-owned undertakings and those in which the State has a stake of more than 50 per cent, and that, in addition, wage arrears (more than 20,000,000 grivnas) owed to workers of undertakings that have carried out work for the State would be paid by the end of 1999.

The Committee also notes that the communication received from the Government in May 1999 includes further information concerning the developments on the matter, such as the situation in different sectors of economy, various measures taken including references to a number of Orders of the Cabinet of Ministers, supervision of the settlement of wage arrears. The Committee notes that the Government mentions in this communication, among the consequences of the lack of funds to pay wages, the payment of wages in forms other than money (e.g. payment in kind or use of coupons). It also notes that the Government considers that the courts, when examining violations of labour legislation, tend to tone down the culpability of those responsible because of the difficult financial situation, and to often make inappropriate decisions in view of the social tensions caused by such violations.

The Committee notes the measures taken by the Government with a view to solving the problem of arrears in wage payment. However, taking account of the fact that considerably large figures are cited both by the Government and the Federation of Trade Unions of Ukraine as still outstanding arrears in wage payment, the Committee cannot but urge the Government to continue its efforts to take all possible measures to improve the present situation and to indicate in detail the measures taken to apply the Convention as well as the results obtained.

The Committee requests the Government also to report the measures taken to ensure the application not only of Article 12(1) of the Convention but all its other substantive Articles, in particular: Article 3 concerning the prohibition of payment with promissory notes or coupons; Article 4 concerning the regulation of payment in kind; Article 11 on the treatment of wages as privileged credit in the event of bankruptcy; and Article 15 on the sanctions in case of violation. It requests the Government to include information on any legislative measures, including the development regarding the Bill to amend the Criminal Code and the Code of Administrative Offences mentioned in the May 1999 communication, and copies of relevant legislative provisions (e.g. Cabinet Orders). Please continue to provide detailed information on all relevant measures taken to ensure supervision, actual application of penalties and the advancement in the settlement of wage arrears.

Observation (CEACR) - adopted 1998, published 87th ILC session (1999)

The Committee has been commenting on the application in practice of Article 12(1) of the Convention (regular payment of wages) on which a number of comments were made by workers' organizations in various sectors. It notes that the Government's report states that the total amount of wage arrears in May 1998 was 5.6 billion grivnas, including the arrears in the state budget sector of 836 million grivnas, and continues to grow.

However, the Government adds that the wage arrears have been reduced since the beginning of the year in certain branches of the economy: by 57 per cent in communication; 40 per cent in the bodies of state and economic authority and the governing bodies of cooperatives and public organizations; 21.4 per cent in shipping industry; 9.4 per cent in the finance, credit and insurance sector; 8.3 per cent in the commercial economic means of transport, as well as in some industries: by 16.7 per cent in thermal power stations; 14.8 per cent in wood processing and pulp industry, and so on.

According to the Government, it is continuing to take measures to ensure the payment of wage arrears: a government commission was set up to deal with the matter; the Finance Minister reports every week to Parliament on the work done with a view to eliminate the wage arrears; two Decisions were adopted by the Cabinet of Ministers (No. 76 of 24 January 1998 and No. 525 of 21 April 1998) which contain measures designed to find out additional sources so as to pay the wage arrears.

As to the inspection, the Government states that in 1997 and the first three months of 1998, 12,600 inspections were made regarding the payment of wages at 12,300 enterprises, during which more than 15,000 violations were identified, 19,100 proposals made and 9,100 instructions were prepared to eliminate the discovered violation. The total amount of wages paid through the measures including the request of the labour inspection amount to 100 million grivnas. During the same period, 1,093 persons were subject to disciplinary liability for violation of labour legislation. The officials guilty of serious violations of legislation concerning wages are subject to administrative liability. Based on the 1,031 reports on violations submitted by the labour inspectors, the courts of law adopted 535 decisions on administrative measures and on penalties amounting to 32,000 grivnas.

The Committee takes due note of all the information. However, it is difficult to appreciate the actual size of outstanding debts due to wage-earners since the Government has supplied information on the decrease of wage arrears in some sectors in percentages than in absolute figures, without indicating whether decreases have been observed in the majority of sectors. Neither is it clear if there are some sectors in which wage arrears are still increasing.

The Committee recalls that the present problem concerns the implementation in practice of the national labour legislation giving effect to the Convention, which requires a continued effort and a wide range of measures for effective supervision, strict application of penalties, and the settlement of existing wage arrears. It requests the Government to continue to provide information on all relevant measures taken to ensure the regular payment of wages and a rapid settlement of wage arrears as well as data showing their results. The Committee also asks the Government to provide a copy of the Cabinet decisions mentioned above and to refer in particular to any progress made regarding the draft law on penalties on the inappropriate use of funds, and the procedures for compensation of workers' loss from the untimely payments, which the Committee noted in the previous observation.

Observation (CEACR) - adopted 1997, published 86th ILC session (1998)

Further to its previous observation concerning the application of Article 12(1) of the Convention (regular payment of wages), the Committee notes the Government's detailed report and other communications, the information supplied by the Government to the Conference Committee on the Application of Standards in June 1997 and the discussions which took place in that Committee.

Comments made by workers' organizations

The Committee also notes the comments received from various workers' organizations on the non-payment or delayed payment of wages: the Central Committee of the Ukrainian Trade Union of Educational and Science Employees noted, in a comment received during the Committee's previous session, that their appeals, protests and negotiations with the Government had not led to any positive results; the Central Trade Union Committee of Geology, Geodesy and Cartography Workers of Ukraine states in their comment received in April 1997 that the Government's debt to the workers of the sector has grown to 25.8 million grivnyas (13.5 million US dollars); the Crimean Republican Trade Union Committee of Health Care Workers of Ukraine indicates in the comment received in April 1997 that no wages have been paid for more than five months; and the Kharkov Committee of the Trade Union of the National Academy of Science observes in the communication dated 9 July 1997 that the situation of non-payment of wages to the state employees of the National Academy of Science institutions has not improved, that the debts of the Government to the institutions of Kharkov are equal to wages for about six months, and that the debt repayment for 1996 arranged between the Government and trade unions to be started in May 1997 did not even begin as scheduled.

Measures taken by the Government

The Government transmitted several communications in response. In the communication received in June 1997, the Government indicates the conclusion of a protocol with sectoral trade union federations on 4 April 1997 (signed namely by the president of the Trade Union Federation of Ukraine, and the Chairman of the Ukrainian Committee of the Trade Union of Employees of the National Academy of Science) on the issue of ensuring the prompt payment of wages, payment of wage arrears, giving priority to wage payment, enforcing control over the compliance with the labour legislation. According to the Government, it has taken various measures in accordance with this agreement.

The Government notes in the communication dated 22 August 1997, that the Cabinet of Ministers of Ukraine adopted a comprehensive Resolution No. 879 on 13 August 1997, which envisages the complete (100 per cent) financing of current wage payments, the obligatory allocation of at least 75 per cent of the resources of bodies financed by the state budget to the payment of current wages and the settlement of wage debts, and the preparation of a draft legislation regarding the immediate allocation of grants and subsidies from the state budget to the settlement of wage debts.

According to the Government, the General Agreement for 1997/98 was signed on 18 October between the Cabinet of Ministers, Ukrainian Union of Industrialists and Entrepreneurs and the associations of trade unions of Ukraine. The parties to this agreement undertook, among other things, to guarantee effective monitoring of laws and other standards concerning the payment of wages, to approve this year the procedure for the compensation of workers for loss of earnings in connection with the non-observance of the deadlines for their payment, and to guarantee the punctual payment of current wages to workers in organizations dependent on the budget.

Penalties and compensation

At the Conference Committee of June 1997, the Government representative stated that, following a decree of the President of Ukraine, the managers of state enterprises are obliged by virtue of their contract to ensure the timely payment of wages and the strict compliance with the timetable for settling wage debts, and that the failure to fulfil this requirement is considered as sufficient grounds for terminating the manager's contract, which actually happened in several sectors as regards a number of managers. In the letter dated 22 August, the Government indicates that it is working on a draft law on the increase of criminal and administrative responsibility of directors of enterprises and organizations for the inappropriate utilization of funds intended for the payment of wages. In the first half of 1997, the courts of law examined over 36,000 private appeals concerning the non-payment of wages, 28.4 million grivnyas were exacted by court decisions in the workers' favour, and at least another 10,000 cases relating to wage debts are under examination. During the same period, the organs of Procuracy revealed approximately 13,000 violations of labour legislation and over 2,000 directors were charged with administrative responsibility.

As to the supervision, the Government also provides in the same letter detailed information on the activities of the State Labour Inspectorate, which conducted in the first half of 1997, more than 10,000 inspections: 15,623 violations of labour legislation were revealed, about 6,500 injunctions were issued and 12,500 proposals were made to eliminate the violations. The results of such inspection visits are examined by the Government and transmitted to other ministries concerned as necessary.

Information on the latest situation

At the Conference Committee of June 1997, the Government representative stated that, as a result of the measures taken in accordance with the agreement reached with the trade unions, at that moment, current wages were paid regularly and without delay. He added however that the most serious problem remained the settling of debts accumulated in previous years.

More recently, in a letter dated 6 November 1997, the Government notes the following figures: whereas in the first six months of 1997 the wage arrears increased each month in all sectors of the economy, from July to September they steadily decreased, i.e. by 9.5 per cent for the period. In organizations dependent on the state or local budgets, the wage arrears were reduced by 29.3 per cent in July-October. As a result, the total amount of wages owed at the beginning of October had decreased by 45.7 per cent in educational establishments, 32.4 per cent in cultural organizations, 28.7 per cent in the public health sector, and 23.3 per cent in the domain of social security. At the beginning of October 1997, 22 out of 25 provinces of Ukraine were not only ensuring 100 per cent payment of current wages to workers in the budget sphere, but were also paying off wage arrears in respect of last year's wages.

Information on specific sectors

The Government further supplied information in response to some of the comments made by the workers' organizations noted by the Committee. In the communication dated 19 February 1997, the Government refers specifically to the coal industry and states that various measures, including the creation of an interdepartmental commission composed also of trade union representatives to take operational steps for the timely payment of wages and the Government's financial aid to the coal industry, admitting nevertheless that it was not possible to overcome the state of crisis and to pay all the wage debts which remain rather large.

As to the scientific organizations, the Government indicates, in the letter of 6 November, that the wage debts were reduced by 15.4 per cent in the period of July to September, which made possible the full payment of the accumulated wages for the current year.

In a letter dated 18 November 1997, the Government refers to the health care workers in Kerch (Crimean Republic) and supplied the following information: measures taken include the setting up of the timetable for settling wage debts to municipal workers, and the rule that more than 80 per cent of cash coming into the budget should be used for wage payment and the settlement of wage debts; employees of health institutions receive payments through special bank accounts, where at each transfer, the amount paid in respect of 1996 wage arrears is specified; the amount of wage debts owed to health care personnel stood in October 1997 at 2.6 million grivnyas, including 390,000 grivnyas for 1996, and this amount had decreased in the last three months by 20.6 per cent, and in particular those for 1996 had decreased by 49 per cent.

As to the sector of geology, geodesy and cartography, the Government states the following in another letter dated 18 November 1997: state orders for work in this sector (geology and so on) are decreasing, whereas the number of workers is not decreasing in the same proportion; during the period of July-October 1997, the Government transferred to the enterprises of the sector 10 million grivnyas to cover the current debt for work already performed, which permitted the reduction of the period of delay in wage payments by six months. From September 1997, the contracts of directors in the sector include provisions to make them personally responsible for the payment of wages and the settlement of wage debts according to the timetable, the failure of which may cause their dismissal. The State Labour Inspectorate suggested that the State Committee of Geology and the trade union should conclude the sectoral collective agreement for 1997-98, since the provisions of the 1995 agreement are obsolete and would not solve the problem of wage payment.

Conclusions

The Committee notes that the Government has been taking comprehensive measures in all the three principal aspects mentioned in the previous observation: supervision, appropriate penalties to prevent and punish infringements and steps to make good the prejudice suffered. Various other measures are being taken to ensure the regular payment of wages and the settlement of wage arrears, including economic, financial and tax-related measures aiming at the improvement of financial situations of the enterprises and organizations. Social partners are involved especially in the procedures of supervision.

The Committee notes in particular that, according to the Government, the situation has been improving, as a result of all the measures taken, in the period more recent than that referred to in the comments from the workers' organizations mentioned above. It notes however that the Government has supplied more information in percentages than absolute figures, and it is therefore difficult to appreciate the actual size of outstanding debts due to wage earners.

The Committee recalls that the present problem concerns the implementation in practice of the national labour legislation giving effect to the Convention, which requires a continued effort and a wide range of measures. It requests the Government to continue to provide information on all relevant measures taken to ensure the regular payment of wages and a rapid settlement of wage arrears as well as data showing their results. The Committee asks the Government to refer in particular to any progress made regarding the draft law on penalties on the inappropriate use of funds, and the procedures for compensation of workers' loss from the untimely payments, mentioned above. The Committee also asks the Government to include any information on the actual amount outstanding as wage debts.

[The Government is asked to report in detail in 1998.]

Observation (CEACR) - adopted 1996, published 85th ILC session (1997)

Further to its previous observation concerning the application of Article 12(1) of the Convention (regular payment of wages), the Committee notes the comments received from various workers' organizations since its last session. The Central Committee of the Trade Union of the National Ukrainian Academy of Sciences indicates in the letter of January 1996 that in violation of both the national labour law and the Convention, the payment of wages of state employees of the National Academy institutions has been delayed for two to three months or more, because the Cabinet of Ministers of Ukraine constantly delays the financing of the National Ukrainian Academy of Sciences. The Kharkov Committee of the Trade Union of the National Ukrainian Academy of Sciences also noted the deterioration of the situation since its previous comments and refers to non-payment amounting to five months' wages in July 1996. The World Federation of Trade Unions in the letter dated 15 October 1996 mentions the prolonged non-payment of wages of up to eight months. Comments were also received from the Ukrainian Health Care Union in October 1996 about the non-payment of wages to health-care workers. The Committee further received during its session a comment about non-payment of wages from the Central Committee of the Ukrainian Trade Union of Educational and Science Employees, and will examine its contents at the next session together with the observations that the Government may make on it.

The Government refers, in its reply received in May 1996, to various measures to ensure the timely payment of wages to workers: (i) the setting up of an inter-agency commission comprising the leading central economic and other officials and trade unions; (ii) the establishment of the State Labour Inspection Commission whose main tasks include the control over the application of legislative provisions on wage payment; (iii) a draft law "on amendments to the Ukrainian Code on Administrative Offences" to strengthen the sanctions against officials guilty of the delays; (iv) another act envisaged to provide for compensation to workers of partial loss of wages due to delays in payment; (v) adoption of timetables of liquidation of wage arrears both from the State and local budgets, in pursuance of the Order of the President of Ukraine of 23 March and 22 April 1996; (vi) Decree of the President of 5 April 1996 on certain measures to stabilize the financial situations of enterprises; and (vii) an instruction of the President published concerning the urgent measures to guarantee the timely payment of wages, under which a new regime should regulate the use of government financial resources in order to ensure the payment of wages without delays. The Government further indicates that measures have been taken to stabilize the financial situation of coal mines, and that the payment of unpaid wages of scientific staff of the institutions of the National Ukrainian Academy of Sciences in Kharkov region for the months of June-September 1995 was executed in full in 1995.

As regards the Committee's earlier comment on Article 3 of the Convention concerning the prohibition of the payment of wages in the form of promissory notes, the Government has supplied the text of the Decree issued by the President of the Ukraine on 14 September 1994, No. 530/94, concerning the issuing and circulating of promissory notes to cover the mutual debts of entrepreneurs and enterprises, and states that it does not allow such payment in the case of payment of wages. It also indicates that section 23 of the Act on Payment of Wages of 24 March 1995 prohibits the payment of wages in the form of promissory notes as well as in other non-cash forms including bills of exchange.

The Committee takes due note of the information as well as the text of the Act on Payment of Wages of 24 March 1995. It however notes that some of the workers' organizations mentioned above submitted their comments several months after the Government's reply. This appears to signify that the situation has not improved in spite of the measures indicated by the Government.

The Committee recalls that the present problem concerns the implementation in practice of the national labour legislation which gives effect to the Convention. It again emphasizes that the effective application of the Convention, through the national provisions giving effect to it, should comprise three principal aspects: supervision, appropriate penalties to prevent and punish infringements and steps to make good the prejudice suffered. The Committee urges the Government to take all possible measures to ensure the regular payment of wages, and requests it to report on them and their effects, including for instance, extracts from official reports that show the details of investigations made, infringements observed and penalties imposed. It asks the Government to indicate in particular the manner in which section 34 of the 1995 Act on Payment of Wages (on the compensation of workers for losses of part of their wages resulting from delays in its payment) is applied in practice, and whether courts of law or other tribunals have given decisions concerning the regular payment of wages.

[The Government is asked to report in detail in 1997.]

Direct Request (CEACR) - adopted 1995, published 83rd ILC session (1996)

The Committee recalls that the Government referred, in its report received in February 1995, to the Remuneration of Work Decree, issued by the Council of Ministers on 31 December 1992, which would remain in effect until the Supreme Soviet of Ukraine adopts a new act on the subject. The Committee would be grateful if the Government would communicate a copy of the said Decree as well as information on the developments towards the adoption of the new Act.

Direct Request (CEACR) - adopted 1995, published 82nd ILC session (1995)

The Committee notes that the Government refers, in its report received in February 1995, to the Remuneration of Work Decree, issued by the Council of Ministers on 31 December 1992, which will remain in effect until the Supreme Soviet of Ukraine adopts a new act on the subject. The Committee would be grateful if the Government would communicate a copy of the said Decree as well as information on the developments towards the adoption of the new act.

[The Government is asked to report in detail in 1996.]

Observation (CEACR) - adopted 1995, published 82nd ILC session (1995)

The Committee notes the observations made by the Republican Council of the Trade Union of Workers of the Coalmining Industry of Ukraine. The said organization points out that, in violation of the Convention, as well as of the relevant national legislation, wages have not been paid in time and in full. It emphasizes the responsibility of the Government in view of the state ownership in the coalmining industry.

In response to these comments, the Government admits the existence of difficulty in the coalmining industry, in which the coal output has fallen sharply and enterprises faced outstanding debts of 15.6 trillion Ukrainian karbovantsi as of 1 December 1994. It has also supplied information on the measures it has taken, which include: holding a meeting of the ministries concerned to analyse the matter with the participation of the employers' and workers' organizations; the approval by the Cabinet of Ministers of a programme to develop the coalmining industry; the adoption by the Supreme Soviet of the market-oriented social and economic reform programme; allocations from the 1994 state budget, of which 21 trillion karbovantsi had been transferred to the Ministry of Coalmining Industry by 1 December 1994; the grant by the National Bank of short-term and long-term preferential credit to coalmining enterprises; the adoption of an Act exempting coalmining and coal-enriching plants from the payment of debts; and, preparing a decision, including the provisions for machinery to ensure the timely payment of wages, and increase in the managers' responsibility to meet wage payment dates.

The Committee takes due note of the above information and also of the Government's assurance to do its utmost fully to implement the Convention. It requests the Government to continue to provide information on this issue.

The Committee notes that the Government refers, among the above measures, to the Decree issued by the President of Ukraine on 14 September 1994, No. 53/94, on issuing and circulating promissory notes to cover the mutual debts of entrepreneurs and enterprises in Ukraine. Recalling that under Article 3 of the Convention the payment of wages in the form of promissory notes should be prohibited, the Committee asks the Government to supply a copy of this Decree and to indicate whether such promissory notes have also been used for the payment of wages.

[The Government is asked to report in detail in 1996.]

Observation (CEACR) - adopted 1995, published 83rd ILC session (1996)

The Committee notes the observations made by the Kharkov City Committee of Trade Union of the Ukrainian National Academy of Sciences pointing out the non-payment of wages for four months (June to September), which was affecting 5,000 families of the state employees of National Academy institutions. The Committee recalls that it previously noted the observations made by the Republican Council of the Trade Union of Workers of the Coalmining Industry of Ukraine with regard to a similar problem as well as the information supplied by the Government in response on various measures it had taken so as to ensure the timely payment of wages in accordance with Article 12(1) of the Convention.

The Committee recalls that the present problem concerns the implementation in practice of the national labour legislation which gives effect to the Convention. It again emphasizes that the effective application of the Convention, through the national provisions giving effect to it, should comprise three principal aspects: supervision, appropriate penalties to prevent and punish infringements and steps to make good the prejudice suffered.

Noting that the Government has not provided comments on the situation in Kharkov, the Committee invites it to do so. It hopes that the Government will continue to take all measures to ensure the regular payment of wages and will supply information on them with particular reference to legislative and other measures for ensuring the application of relevant provisions in practice. Please also include, for instance, extracts from official reports that show the number of investigations made, infringements observed and penalties imposed.

Besides, the Committee recalls that the Government referred in its previous report among various measures, to the Decree issued by the President of the Ukraine on 14 September 1994, No. 53/94, concerning the issuing and circulating of promissory notes to cover the mutual debts of entrepreneurs and enterprises in Ukraine. Recalling that under Article 3 of the Convention the payment of wages in the form of promissory notes should be prohibited, the Committee asks the Government to supply a copy of this Decree and to indicate whether such promissory notes have also been used for the payment of wages.