Economic Figures
Slovakia is located in the heart of Europe on the crossroads between Czech Republic, Hungary, Poland and Austria. Flat taxes, liberal labor code and developed logistics activities are attractive for foreign investors. In the past, two historically important routes – the Amber path and the Bohemian path – led through Slovakia. They were not only important commercial trading routes for such commodities as gold, amber and furs, they also served as communication links, which facilitated relations between various nationalities and countries.
Central Europe is developing faster than the rest of Europe since the end of the 90s. Slovakia had one of the highest GDP growth rates in the European Union in 2006. Expectations from the Slovak government are up to 10% for the year 2007.
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The greatest asset towards the GDP creation was in the field of industrial production, predominantly in the production of machines, electric devices and transport vehicles. In 2008 the automotive industry will create more than 50% of the Slovak industrial production and parts of the automotive industry will reach 60% in export with more than 100,000 people employed.
This economic growth causes increasing export and demand for personnel. The unemployment rate has reached 11.1% in 2006. It is still two times higher than EU average. The Slovak workforce consists of approx. 2.2 million people: 1.9 million employees and 300,000 entrepreneurs (68.7% without employees).
In 2005 the export of Slovakia is largely oriented towards OECD countries (90% of the total export) and EU countries (85%). Germany (26% of export), Czech Republic (14%) and Austria (7%) belong to the most important business partners of Slovakia.
Opportunities for Investors
Slovakia is an attractive location for investors due to several reasons: Since July 2003, Slovakia has a labor code, which provides greater flexibility in working time, variable job contracts and the use of temporary workers.
Moreover a flat tax was introduced in 2004. It is only 19% and this has a substantial impact on foreign investors. However, it is not only the low rate but also the simplification of the tax system, which is very encouraging for companies. Every business activity is taxed on the same rate of 19%, so firms do not need to spend their energy on optimizing their financial statements. Therefore corporations can enhance their core businesses more effectively, resulting in improved performance and a substantial boost to local productivity. To avoid double taxation (or taxing income, which was already taxed) dividend tax and inheritance tax rates are set to 0%.
Relatively low available capital allows banks to provide their services with higher margins and lower risks than in the neighboring countries. A strengthening Slovak Crown, the local currency, reinforces investment opportunities in the country.
The main reason for FDI is still the abundance of skilled and inexpensive labor that helps foreign investors to flourish. Only in Latvia, Lithuania and Estonia labor costs are lower than in Slovakia, but none of the three has the geographical and cultural proximity to Western markets which Slovakia provides. Thus in today’s economies in which speed to market and efficient sourcing provide enormous advantages, the three mentioned countries mainly service Scandinavian countries.
Slovakia is strategically positioned: it connects the former Soviet Union (Ukraine) with the West (Austria). Its capital, Bratislava, split by the Danube River is the only capital in Europe which is adjacent to two other countries (Austria and Hungary). Bratislava has its own international airport, train and bus stations, and a port on the Danube River linking Vienna and Budapest, which makes it perfectly suited for a logistics and distribution hub connecting the countries Austria, Czech Republic, Slovakia, and Hungary.
Bratislava’s strategic location and relatively small size make the city very attractive for the establishment of corporate headquarters or regional offices. For example, lower rent for luxurious offices makes Bratislava interesting. Johnson Controls already created the CEE headquarters in Bratislava and several other companies plan to do that soon. Traffic jams are almost nonexistent compared to those in larger Western cities. This allows higher quality of life and greater productivity. Bratislava’s location will become even more attractive after Slovakia joins Schengen zone in 2008. Then travelers will no longer need to stop and show their IDs or passports when crossing the border.
Slovakia is the 6th largest car producing country (per 1,000 people) worldwide. At present, we have three automotive manufacturers: Volkswagen, Hyundai/KIA and PSA and a fourth is planned to build its own factory in East of Slovakia. Until end of 2007 Slovakia will be top car producer in the world with 180 cars/1000 people.
Education, Personnel and Labor Market
Volkswagen, U.S. Steel and Samsung were among Slovakia’s top six companies by revenue in 2004. They are all satisfied in Slovakia. Volkswagen and Samsung are among the top 20 companies with the largest investments into its Slovak branch and all three are in the top 20 in after tax profit for the same year. They all praise Slovakia’s highly qualified, inexpensive and readily available labor. In 2003 Slovakia clearly showed the highest education level for a workforce in Europe: 94.1% of young people aged 20-24 attained at least upper secondary education level.
The young people have the opportunity to study on Slovakia’s 18 Universities and six Universities of Technology. Most of them are public without scholarship. Government financially covers all educational costs of Universities as well as public basic and secondary school with 5% of GDP (0.71% on Universities). In 2006 6,826 students graduated in technology, in social sciences 8,906 students and in natural sciences 2,786 students.
Slovakia has a large pool of underutilized, talented individuals in the fields of science and technology. The country leads the CEE region in scientific and engineering talent, with 1,844 scientists and engineers in research & development per one million people. By comparison, the ratio in the Czech Republic is 1,349, in Hungary 1,445, in Poland 1,429, and in Romania only 913. Because of the small size of the country and locally small R&D budgets, many top Slovak science and technology professionals have to choose between inconvenient relocation to pursue better paying opportunities abroad or often unchallenging, local jobs with low salaries. Several foreign high-tech companies have already recognized these opportunities. World-leading IT firms such as Oracle, HP, IBM, SAP, SUN, Microsoft and Siemens are already well established and growing in Slovakia.
The level of knowledge of foreign languages is still increasing. Every third person in Slovakia communicates in German, 25% of the population communicates in English or Russian. 14% of the population communicates in Hungarian. One third of Slovak society speaks two foreign languages. The situation is better with people under 30 years: 75% people speak English and 47% German.
In 2006 average wage was 18,761 SKK per month (approximately 570 EUR). Since 1st of October 2007 minimal wage is 8,100 SKK per month. Income tax for personnel is flat at 19%. The social security contribution is 13.4% of wage, also employer together with employee contributes to pension system with 28.75% (employee 7% and employer 21.75%). It means if an employee has a gross salary of 20,000 SKK per month, the costs for the employer (together with social security and pension system) are 27,000 SKK per month (app. 35% of the gross salary of the employee). This belongs to regular fulltime labor contracts. The labor contract has to contain working activities (tasks), place of work, date of starting, salary conditions, pay day, working time, paid leave days and term of notice. The usual trial period is three months.
Usual working time in Slovakia is eight hours per day and 40 hours per week. According to labor code employees can work overtime, but only 400 hours per year. Workers, technicians and other employees in manufacturing, who do shift work, change shifts at 6 am, 2 pm and 10 pm. Other employees, who are working flexible time, usually work from 9 am to 5 pm.
In Slovakia there are 15 days of bank holiday. The employees have four weeks of paid leave per year according to labor code, after 15 years of work experience it is five weeks per year.
Competent On-site Personnel Consulting
HILL International Slovakia has been already on Slovak market more than 10 years. Services offered are based on expertise, trust and person-centered approach. All our clients and candidates are treaded with respect, which is a difference that is experienced from the beginning. Many domestic and international clients have already benefited from the knowledge, experiences and advices of the team.
HILL Slovakia is a full service provider for all human resources issues. For years now, the Slovakian team has searched for high potential applicants in Slovakia, assisted them in personnel development and career planning. Moreover they create the most suitable personnel strategies for their clients and support the optimization of organizational structures. HILL Slovakia aim is to make its clients even more successful through their problem-solving skills and solutions. |
Renáta Otottová |
HILL Slovakia is assisted in this process by the experience and know-how of the HILL Group. Over 30 years of personnel and management consultancy, scientific methodology, and an extensive network in Europe and Central Asia enables HILL to provide successful consultancy in the areas of personnel and management for numerous firms in diverse branches.
Please contact us, if you have any questions or requirements:
HILL International Slovakia, spol. s r.o.
Renáta Otottová, Senior Consultant
Laurinská 3 B, 811 01 Bratislava
Slovakia
Phone: +42 1254131013
Fax: +42 1254131015
renata.otottova@hill.sk
http://www.hill.sk/
