YANA MIKHAILOVA, Foreign Investors Council President – Shadow Economy Remains Big Obstacle

It is very difficult to understand the salary slip, the new law should simplify this

We talked about labor law and business environment with Foreign Investors Council Pres-ident Yana Mikhailova.

You are president of FIC, independent association that has over 120 members, who invest-ed more than €33 billion and employ over 100.000 people. Moreover, it gathers companies which are amongst the best employers on the Serbian market. What is the current status of the reforms in labour field which is one out of your 5 priorities?

— Labour regulations and improvements in this important area are amongst our top five priorities for the future. Although discussed many times in different forums with many stakeholders, further reforms in this field did not happen yet. First, I need to confirm your statement that FIC gathers companies which are amongst best employers on the Serbian market. As such, FIC member companies are the role model and we would like others to follow our lead: respect the laws, pay full taxes and benefits, protect employees and invest in people. Foreign investors recognise that Serbia has great people and excellent employees. However and in order to advance further in business climate evolution and continue to attract investors, acceleration of reforms generally speaking is necessary and in particular in this area. Investors who target to develop the business in Serbia, want to have the similar environment they used to have elsewhere in the developed countries of European Union and therefore we believe that three things are needed: a) to modernize the regulations; b) to introduce digitalization; c) to make sure that that all players on the market respect the regulations. There are many examples of needed modernization of laws but I would mention one: Current Labour Law has a very complex model of salary calculation, which overburdens the companies and doesn’t give additional value to the workers. It is very difficult to understand the salary slip, the new law should simplify this.

Human capital is very important for the success of each company. What is the status of reforms in this field and what do you sug-gest should be improved?

— The already adopted National Qualifications Framework provides the possibility for the economy to shape the educational system through formal and informal education. This solution might largely contribute to the modernization of old syllabuses and study programmes while creating a competitive workforce in the market that satisfies needs of the economy and keep abreast of its development. With the adoption of the Law on Dual Education, students of vocational (trade) high schools have been given the opportunity to spend part of the total number of classes at schools, and the other part of their classes at the employer’s, i.e. at companies in a special employment and training arrangement. In this manner, students of vocational schools are going to“learn while working” and acquire not only theoretical knowledge but also the necessary practical skills in a relevant economy branch. This is useful at several levels – both for accelerating and facilitating youth employment and from the aspect of company competitiveness, as companies have the opportunity to hire young workforce that already has the qualifications for working in the relevant economic sector. Although we recognized positive developments, there is still a room for improvement. We believe that improvements of the educational system should be continued and that based on an analysis of needs of the economy and the real sector, new educational profiles should be created and implemented and the university enrolment quotas should be adjusted in line with the market needs. Then, there is the need to define the legal framework for the employer-student relation to simplify implementation of vocational internships in parallel with regular education, define the legal framework for preparing persons with high education profiles to work independently in their profession, regardless of whether they fulfill the requirements for taking an expert exam that is conducting internship program. The National Employment Action Plan should clearly define, redefine and widen the range of educational profiles that are going to be included into the action plan and employment policy, i.e. be attuned to the needs of the market and employers.

Are the foreign investors satisfied with Serbia workers?

— Serbia employees have a solid professional education, and through good working conditions, competitive benefits and educational programs they are motivated to continually improve their productivity and efficiency. However, the educational structure and the labour market indicate that finding the candidates who meet the requirements of high-level, expert and strategic positions is challenging. Retention of high-skilled workers and development of own resources are still very popular trends, having in mind market conditions. In order to address the problem, Serbia needs to work on creating market environment and conditions in which young and talented professionals (Serbians and foreigners) choose Serbia as the place to live and work. And further, modernize of educational system which better fit market needs will be a good contribution to strengthening Serbia’s competitiveness.

What is FIC position on dual education?

In November 2017 the Law on Dual Education, was adopted in Serbia, regulating the content and implementation of dual education, as well as mutual rights and obligations of all participants, material and financial security of students, and other issues relevant for the dual education system. The adoption of the Law on Dual Education led to some progress relative to the previous situation, setting the general legal framework for the future implementation of this kind of education system in Serbia. Thanks to the support of and cooperation with European countries that have developed a successful dual education practice, a large number of vocational schools in Serbia introduced this model of education into their programmes through various projects over the past years, and an increasing number of large companies are taking part in such projects. In addition, the Serbian Chamber of Commerce initiated and organized the training and licensing of trainers. We think that by-laws should be adopted to regulate certain aspects of the Law in more detail and enable a more efficient implementation of the Law in practice. A sustainable dual education funding model and possible incentives to attract companies in Serbia to join this system should be defined. Provisions on payment of students by the employer should be regulated in more detail, especially in terms of evaluating the performance of the engaged students and the possibility of introducing a pay for performance compensation system.

Finally, we come to the one topic that is also very important for FIC – fighting against illicit trade. Linking it to the topic of labour, can you tell me what is FIC view on labour market practices, especially informal em-ployment (shadow economy)?

Thank you for this question. Shadow economy remains big obstacle to the strengthening Serbian economy, that’s why FIC is willingly participating in initiatives targeting fighting shadow economy. Shadow economy Includes informal employment, it creates uneven playing field and disable protection of employees’ rights. Besides creating more flexible regulations (like with changes of the Labour Law), the state should ensure strict supervision of implementation and thus protect the rights of both employees and employers in practice. This is especially important in the area of employment where in the past years we have witnessed significant number of ill practices. These practices first affect right of employees but also create unfair competition between companies who register their employees and pay all contributions and those who employ in the shadow economy. This is why FIC constantly indicates how important it is to establish a system, in this case, efficient labour inspections, and improve capacity of public administration.


The Law on Staff Leasing has been in public focus for many years. It seems that the positions are different among the key stakeholders regarding this topic. Some argue that the Law is not needed and on the other hand you think that this area should be regulated. What are FIC key positions regarding this important Law?

— We do not see here the dilemma. We strongly advocate for regulation of staff leasing and Serbia should adopt a separate law on staff leasing in accordance with the best EU practices and in line with the UN Convention that Serbia signed. The current situation, in which we have staff leasing in practice, but without regulation, is creating uncertainty. Our key recommendations are the following: The law should specify all important issues, incl. relationship between all 3 parties, occupational health and safety, etc. It should make a clear distinction between the concept of staff leasing and employment relationship and make sure that relationship between employee and the company user does not result within creation of an employment relationship. Work and licensing of agencies, incl. licensing fees should be regulated by the law and not the by-laws in order to ensure legal certainty.

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