While public debate continues about the possible reduction of overtime pay rates, the reality is quite different – most overtime work in Latvia is neither recorded nor paid for at all. The current 100% overtime rate looks good on paper, but in practice it has become an obstacle to fair pay and more flexible work organisation. By preserving this “Soviet-era legacy”, are we truly protecting employees, or merely hindering business development and labour market efficiency?
The Saeima has begun discussions on amendments to the Labour Law concerning overtime pay. At present, overtime must be paid at a 100% supplement on top of the basic hourly rate, while the proposed amendments would set the minimum supplement at 50%. This proposal has prompted a variety of opinions, many of them unfounded and creating a misleading impression of the supposed negative impact of the Labour Law changes. Some claim that reducing the minimum overtime rate to 50% will worsen working conditions for many employees. I looked at this issue from my own perspective: with 30 years of experience in both the public and private sectors, in junior and senior positions alike. During this time I have worked many overtime hours, yet I cannot recall ever having been paid an overtime supplement. This raises the question – am I the only one, or is this the case for many others?
Statistics on overtime are also quite minimal: official data show only very small amounts of registered overtime, which suggests that overtime is mostly neither recorded nor paid, or is paid informally. In any case, the current system does not really work and provides little to no benefit for most employees. Who, then, are the people who actually receive overtime pay?
My view is that a significant share of paid overtime occurs in the public sector. In the private sector, money must be counted more carefully, and paying double is very expensive – something companies can afford only in exceptional circumstances. Of course, there are sectors where overtime is unavoidable, such as security services. If a company must ensure service continuity under a contractual obligation, it must do so even if an employee falls ill. Statistics also reflect this: the security sector consistently shows the highest number of overtime hours. In the private sector, overtime is also limited by the fact that any paid hour must be earned – unlike in the public sector, one cannot simply request additional funding from the government, for example from contingency funds. Furthermore, aside from industries where overtime is indeed unavoidable, large amounts of overtime usually indicate poor work organisation.
Overtime pay in the public sector must also be viewed in light of the currently strained state budget and the need to save public funds in order to allocate them to priority areas such as defence. Latvia’s public debt is also rapidly approaching a critical threshold – once crossed, debt servicing costs will increase significantly, with negative consequences for the national economy. Setting the minimum overtime rate at 50% would help move in the direction of necessary public expenditure savings.
If overtime is seen as an opportunity to earn extra income, the minimal official overtime figures show that the private sector – which has no interest in paying double — does everything possible to avoid overtime. On the one hand, this encourages better work organisation; on the other, it deprives employees of the chance to earn extra income, as employers do not offer overtime because it is too expensive. Given the labour shortage, if the overtime rate were more reasonable, more employers could offer opportunities to earn extra by working additional hours. Many employees already take on side jobs to supplement income, for example driving taxis in the evenings. A more reasonable overtime rate would allow them to earn extra income in their primary workplace.
My final question regarding overtime is this: whom do we want to resemble? The graphic comparing European overtime rates is striking: in the vast majority of European countries, the minimum overtime supplement is 50% or even less, while there are three countries – Russia, Belarus, and unfortunately Latvia – where the minimum overtime rate is 100%. Is this really the “club” we want to belong to, and the model we aspire to? This is a surviving fragment of the Soviet overtime compensation system. Do we truly want to preserve this legacy?
Author: Jānis Endziņš, Chairman of the Board, Latvian Chamber of Commerce and Industry (LTRK)
Source: ltrk.lv (translated with an artificial intelligence tool)
