Instead of fees, entrepreneurs should pay the actual cost of a work permit

A very interesting hour and a half conversation with Mirko Habijanec, the CEO of Križevci’s Radnik and the president of HUP’s Association of Employers in Construction, revealed another dimension of this manager – social intelligence and a willingness to criticize the state of society despite being a member of HDZ. He does not hesitate to highlight good practices and clearly proposes solutions to the problems plaguing the construction industry. This manager took over the company in 1997 and managed to save it from bankruptcy; today it is the third strongest in Croatia. When asked if he is tired, he says he will work as long as he can. He and his son Krešimir together hold 50.36 percent of the company’s share capital, which generated 178 million euros in revenue last year, and this year it will reach 200 million euros. Net profit will be at last year’s level – around 11 million euros. Consolidated, the interlocutor expects 270 million euros in revenue, compared to 245 million euros last year. The Radnik group has 950 employees, of which the parent company has 400, including about 150 foreigners.

Where are the foreigners from?

– Most of them are from Bosnia and Herzegovina, some from Serbia, North Macedonia, Ukraine, Uzbekistan, Egypt, and a few from India and Nepal. Some of them, like workers from Bosnia, come with their families, but we also allow those whose families are in Bosnia or neighboring countries to work for three weeks, and when it’s payday, to go home for five days.

What are their salaries like?

– Decent. Foreign workers fill the necessary number for us, but we should have them in Germany where we also have a company, especially those from third countries. We are working on this with the help of HUP and the German embassy to obtain visas. Otherwise, higher quality workers come from countries that had a socialist system similar to ours. For example, Uzbeks have proven to be quite good, as have workers from Bosnia; Egyptians as well.

Everyone complains that the deadlines for issuing work permits have been extended after the amendments to the Foreigners Act in March. New ones are now being prepared.

– The Ministry of the Interior is overloaded, they need to hire additional people where the burden is, but instead of symbolic fees, entrepreneurs should pay the actual cost of a work permit; they cannot get them for free. We cannot expect everything from the state and the Ministry of the Interior. However, if a company no longer needs someone or if they are not a good worker, or if we do not have work for them, it should take care not only of canceling the work permit but also ask where that person will go now, whether they have accommodation, or if they need to be returned to their country. That’s how they did it in Germany. They would say: ‘You brought him, please escort him, why should we do it?’ The problem is not only with the Ministry of the Interior and the Employment Service but also with the procedures of the home countries of these foreign workers.

For some time now, there have been forecasts that there will be a surplus of workers in construction.

– Currently, there is good conjuncture in construction, but the problem is that it is not evenly distributed; sometimes there is too much work, and sometimes too little. Currently, there is a lot of it thanks to EU money, not only for earthquake recovery but also from other funds. We just need to have quality salaries; they should be above half of the German ones. If the minimum wage in Germany is 13 euros, ours should be at least seven euros and higher according to complexity groups, and we have 11 groups according to the Collective Agreement for Construction. And, of course, our education system lags behind the German one. The former School of Students in Economy was better than today’s vocational education system. Today’s curriculum is just a form without content; there is no practice. I don’t know why this cannot be improved. We have had many meetings, but we have not found understanding from the Agency for Vocational Education and Adult Education, nor from other institutions. A lot of money has been given for competence centers, and we do not have enough qualified craftsmen or engineers. There should be a dual system principle everywhere, from vocational schools to universities. So who are we educating?! The economy will struggle to absorb those who lack professional knowledge and have not acquired practical skills.

Can today’s salaries attract young people to vocational schools?

– They can, especially since salaries need to be even higher. To achieve this, we need a bigger step – all branches of the economy need to have branch collective agreements (GKU) because they are practically a kind of salary law. We only have a few GKUs: in construction, tourism, hospitality, the wood industry, and trade. But some other activities do not have them. On the other hand, the Labor Law must contain not only the rights of workers but also their responsibilities. Salaries and productivity need to be better. So, the education system is one branch we need to develop, and the other branch, the GKU, is equally important, and we need to incorporate it into the Public Procurement Act (ZJN) as an important lever that can affirm that economic entities wishing to compete for jobs in public procurement respect the application of collective agreements.

Work is being done on it, and I know that as the president of HUP’s Association of Employers in Construction, you advocate that a condition for companies to participate in public tenders should be the signing of a collective agreement (KU). Will this pass?

– The Association has intense correspondence with the Ministry of Economy. We have sent many letters, and they respond that everything is in public consultation. We have told them not to engage in cosmetic changes; it should be legalized that companies that do not respect the KU cannot participate in tenders, and it should not be an optional condition. This way, we would eliminate unfair competition, especially in construction.

This seems like a reasonable, good idea to me. Why don’t they want it?

– It’s not that they don’t want it, but I think they are working in an administrative manner; they just say it cannot be implemented. But we argue that non-application of the KU means disorder, the gray economy, large tax evasion, and significant corruption. In Germany, non-compliance with salary according to the KU is a criminal offense. Namely, if you give part of the money as part of travel orders or fictitious daily allowances for transportation, you degrade that person; they will have a lower pension tomorrow. You do not pay taxes, and healthcare receives less money. We who do this properly pay 50 percent more contributions. According to HUP’s estimates, the state is missing one billion euros a year in taxes because of this. On the other hand, without the KU, unfair competition is possible because a company that does not adhere to it can offer a lower price in public procurement. I must emphasize that in Western Europe this applies to both private and public investments. In this sense, we have the support of the European Federation of Construction Industries, FIEC, and our country receives reprimands from the European Commission for not enforcing collective agreements.

How does this look in practice?

– We know that the jobs go to the cheapest companies that rely on some personnel and resources from others. It is allowed for a company to take an engineer who has been retired for years, who has made a hundred contracts. They register him for one hour a month, and that is sufficient proof that they have a contract with him and that he has references. This is our, Croatian invention of public procurement! Not only Croatian companies abuse this but also foreign ones because they do not have engineers here to lead construction sites, so they hire one of ours who fictitiously signs papers for them. This is unacceptable because we can only talk about the references of the engineer who is in permanent employment. If I had the power, I would give those who do not have collective agreements a deadline to hire engineers; otherwise, they would not have access to public money, no subsidies in agriculture, not even in the case of corona. This could be very easily regulated.

This would also prevent companies from China and Turkey from participating in tenders.

– Here we are talking about unfair trading practices and unfair competition. These countries are not signatories to the public procurement agreement with the EU, and it is suspected that their companies receive direct, indirect, or any hidden state subsidies. Secondly, salaries in these companies must also be according to the GKU in Croatia. But since it is difficult to obtain this data from these companies, we also suspect that they do not respect the GKU because they are twenty or thirty percent cheaper in tenders for large infrastructure projects from the start.

Why then do our public procurers not refer to the non-signing of agreements by these countries with the European Union?

– Yes, they have the right to exclude them. However, the problem lies in the regulation that the Ministry of Economy adopted three months ago, which states that companies from these countries will be excluded from tenders only if the public procurer prescribes it. Otherwise, no one can prohibit them from participating in the tender. HUP has proposed that bidders from third countries should generally be excluded, and if the public procurer believes that this cannot be handled by domestic or European operators, they can give them the job. The Ministry of Economy has turned the saw upside down, and now we have what we have. Few eliminate such companies from tenders; one of them is Hrvatske ceste, to praise them. But the problem is also with us entrepreneurs.

Why?

– We think that the administration, which has much less insight into what is happening in practice than we entrepreneurs, will write those laws. And the administration thinks so too. Therefore, the cooperation between HUP and state institutions is not sufficient. Not by the will of the Government, but by the will of the administration. They reluctantly discuss the details that need to be done. In Germany, the picture is completely different.

It is interesting that you are a member of HDZ, you have authority, you are at the head of the HUP association, and yet you cannot set things right.

– Being a member of HDZ is not crucial; I am an entrepreneur who runs a company properly. However, I would single out Minister of Construction Branko Bačić. He has put a lot of effort into the Construction Act and the Spatial Planning Act. We have collaborated very well with him and his associates. A working group was formed that included representatives of HUP, the Croatian Chamber of Economy, and the Croatian Chamber of Civil Engineers. We did not agree on everything, but we did on many things. However, with many others, it is not so.

Let’s return to salaries for a moment. Minister of Labor Marin Piletić recently announced at Lider’s conference ‘Day of Big Plans’ that the minimum gross salary in 2028 will be 1250 euros. He clearly stated that employers must come to terms with this. This has provoked a reaction from the business community. What do you say?

– They are contradictory. On the one hand, we have no workers, and we are fighting against rising wages. The solution is in two or three classes for minimum wages. I agree that in some sectors 1250 euros is too much, but in construction, it is not. In the Minimum Wage Act, someone has mixed up the terms that must be clearly defined. A low-skilled worker can have a minimum wage, while all others should have a base salary according to the complexity group of jobs. But here, the minimum wage is for all workers. If the minimum wage was 970 euros gross, and a skilled worker should have 1500 euros, that is then their base. However, some entrepreneurs abuse this and pay even skilled workers the minimum wage, claiming they comply with regulations. No, we need to separate the minimum wage for low-skilled workers and the base for skilled workers.

What do they say in the Croatian Construction Union (SGH)?

– We should increase the salary according to the GKU even more, but we cannot due to unfair competition. In this sense, we cooperate quite a bit with the Union. Thus, union members have found companies that have up to a hundred employees, many of whom are in the second and third groups, but workers who should be classified into those groups do not know how to build high-rise and low-rise buildings. We hardly need such workers given today’s technology. A person who knows nothing cannot operate equipment worth tens of thousands of euros; that is impossible!

There is work for the State Inspectorate of the Republic of Croatia (DIRH) here.

– I must say that the Tax Administration and the Ministry of Labor have started to conduct light controls of the application of the KU. We have agreed with the SGH that the Union can control this, and we propose that its confirmation for companies that salaries are paid according to the KU is valid as a competitive ability in public procurement. In that system, the State Inspectorate does not have enough inspectors. But employers, unions, the Tax Administration, DIRH, and the Ministry of Labor are the five factors that can solve this together if there is cooperation. So let them close the construction site for those who do not have or do not respect the KU. It should also be stipulated that if a subcontractor cannot pay workers according to the KU, the main contractor takes over that obligation, and if he cannot either, then the investor. Then it will be in the investor’s interest to check who the public procurement bidders are. This is all done in Germany.

You often mention Germany. But how much truth is there in the stories that EU companies are increasingly competing in our tenders due to stagnation in construction there?

– I do not have such information. Perhaps in high technology jobs, but in constructions in Croatia, we can do everything, from tunnels, bridges, arches… We have no competition. We should not be afraid for Germany. It has so much technology and resources that if it falters, it can allocate one hundred billion euros. Moreover, construction in Germany is slowly growing again. There, both the left and the right have agreed to lead the government together. And it would be best for us to have a strong coalition government that could build a quality public administration, which would be very beneficial for the economy.

Why is Radnik investing in water management companies?

– We have turned them into construction companies. They previously lived only from contracts with Hrvatske vode. Today, they generate 10 to 15 percent of revenue from water. This means we have developed them to be able to work in high-rise and low-rise construction, sewage systems, agglomerations, and more. We did not seek a return on investment, but we enriched them with professional staff and logistics. This process of recovery for the company is not going smoothly, but it is yielding results. In addition, these companies had about a hundred people, and they also help Radnik when needed. So, the benefit is mutual. We may create one administration for all of them; we are currently considering that.

You wanted to take over Vodoprivreda Karlovac and Karašicu – Vučicu from Donji Miholjac, but there was resistance there.

– We have never conducted a hostile takeover. All the companies we have taken over were on the verge of collapse, and now they have a perspective. Resistance is provided by those who are satisfied with the current state and do not look at the perspective. They cannot live only from contracts with Hrvatske vode. They fear us, and there is no reason for that. An example is the companies in our ownership. Their directors have free hands, but we do not allow manipulation with oil, business with contractors… And we have noticed that there has been some of that; we saw it in the papers. They are actually afraid of our help, which would establish order.