Facts and Analysis. Tailoring the Work and Leisure Trade-Off

The Lithuanian Free Market Institute prepared an analysis of the regulations of working hours across the CEE countries. EU sets minimum levels of regulation with respect to working hours. The research shows that the countries tend to comprehensively follow the set EU standards with regard to the maximum duration of work during the day, minimum periods of rest and some aspects of annual leave.

Yet certain differences exist in cases where EU law does not stipulate specific regulations. For example, given that EU law does not regulate the remuneration of non-standard working hours, countries enjoy a wide margin of appreciation.

The research report suggests that rigid regulations on working time, e.g. limiting working days or setting rigid remuneration schemes, do not comply with modern-day labor market trends. The report provides valuable insights and recommendations for the revision of legal regulations of working hours.


1. Assumptions for flexible regulation of working time

1.1. The need for flexibility is based on technological change, globalization, business restructuring, changes in the organisation of business, increased demand for services, a large variety of workforce, an increasingly diverse lifestyle and a career approach. The flexibility of working time regulation thus responds to the trends of the modern labor market and creates the conditions for market development.

1.2. Rigid regulation of labor relations does not encourage employment, restricts mobility among market sectors. The employers are not encouraged to change their workforce and hire new employees. Legislation aimed at protecting existing workers does so at the expense of new potential employees. In cases of labor force shortages, employers tend to compete with each other to create better conditions for the employees to make the workplace more attractive. Therefore, the most effective means of securing the individual interests of employees is the competition of employers. Rigid legal restrictions lead to unutilised opportunities for both parties of the employment relationship.

2. The concept of working time

2.1. Working time is defined by the employee being at the employer’s disposal and carrying out work duties. When legislation does not strictly define the elements that determine working time, for example, it does not indicate that working time depends on the employee’s presence at a particular address, the parties to the employment relationship are provided with the possibility to negotiate on the basis of individual interests.

2.2. The definition of on-call duty varies between countries and there is no harmonized regulation at the EU level. It is therefore important that the interpretation of the concept of on-call duty and its regulation should avoid a centralized, too detailed definition of on-call duty. According to the analysis, the regulation must be such as to enable employees and employers to decide in cooperation on the conditions for the performance of work functions, respectively on-call duty related aspects.

3. Remuneration for non-standard working hours

3.1. Rigid regulations of overtime, work during a rest day or night work create complications in determining the adequate workload and remuneration of an employee. Consequently, this leads to ineffective labour regulations. Centralized working time regulations limit the ability of the market participants to secure their interests and to adapt to change. Thus, legal regulations should create the proper precondition for labor market parties to negotiate such conditions that best meet their interests, including the number of overtime hours per week (because general minimum rest requirements apply to overtime).

3.2. In most of the countries, an employee is considered a night worker if he/she works at least one quarter of his/her time at night. Estonian law establishes the requirement of one third of the total working time, thus Estonia’s regulation in this context is considered more flexible. There are special restrictions on night work, so a longer period of time when the employee is not regarded as a night worker (compared to 1/3 in Estonia and 1/4 in Lithuania) ensures more opportunities for negotiation and less restricts on the functioning of the labor market.

4. Restrictions regarding working days and days-off

4.1. A tendency to ban work on certain days is becoming more evident. Prohibiting work, for example, on holidays, Sundays, would affect consumers, workers, businesses, public finances and overall economic development. This would reduce the number of jobs and salaries in the trade sector, which would limit the ability of companies to use their existing resources properly, so restrictions on working on certain days should be discouraged because such restrictions would adversely affect the functioning of the labor market.

5. Suggestions for improving the regulation of working time arrangements for holidays and paid days-off

5.1. Shortening the working day on the eve of holidays increases the employer’s costs, as he has to compensate for the time during which work functions are not actually performed and then he may also have to compensate by paying for overtime (if the work cannot be completed on the shortened working day). Such regulations also limit the employee’s ability to choose how to effectively distribute their working hours, and they may need to compensate by working more hours on the next business day. As production and operational specifics change, for some entities the shortening of the working day on the eve of the holidays may be meaningless, because the amount of time spent at the workplace may not be in line with the actual work performed if work is evaluated by the results produced. In order to achieve flexibility of labor relations, and that the Labor Code would ensure the ability of the labormarket to promptly adapt to changes, the ability to negotiate working time at the individual level would best suit the interests of the employment parties.

5.2. “Zero-hour” employment contracts suit the interests of young workers, low-skilled workers and those in long-term unemployment. Allowing “zero-hour” contracts would make it easier for potential workers to enter the labor market. The possibility of entering such contracts would allow employers to distribute the workforce efficiently according to the specifics of their operations, would provide the employees with the opportunity to earn additional income and to balance work and leisure.

5.3. Prohibition to work on public holidays does not correspond to the multiculturality of the society, the peculiarities of the changing work functions due to the application of technologies, the peculiarities of production. Such restrictions unduly limit the ability of employers and employees to personalise their activities in order to secure their interests. Therefore, the regulatory framework should create conditions to individually agree on days-off.

This report was prepared by the Lithuanian Free Market Institute in cooperation with the Institute of Market Economics (Bulgaria), the Center for Economic and Market Analyses (the Czech Republic), the Center for Free Economic Thought at the Estonian Business School (Estonia), the Civil Development Forum (Poland) and the Institute of Economic and Social Studies (Slovakia)

The report “Tailoring the Work and Leisure Trade-Off” may be found here.