A postcard from... The Baltics

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Our 'postcard from' series keeps you updated on key HR areas in different countries

Economic briefing

The countries that make up the Baltic States – Estonia, Latvia and Lithuania – underwent rapid expansion in the early 2000s. They were hit hard by the financial crisis but are still considered ‘high income’ economies by the World Bank. The states joined the EU in 2004 and are all members of the Eurozone.

Geopolitical tension with Russia is the major risk to economic growth for the states, which are also adversely affected by any contraction in the Russian economy.

With more than 150 shared services centres the Baltics are major players in the outsourcing industry.

Demographics

The population of the Baltics has declined by about 10% over the last decade and is projected to decline by another 3% to 12% in the next 10 years. The countries suffer from brain drain, with many young people choosing to emigrate. To combat this the Baltics are working together to promote the countries’ universities to foreign students.

A haven for start-ups

“The Baltics may be seen as a non-productive environment, but the Estonians were fundamental in giving us Skype,” says Catherine Rush, head of talent at 4Finance, which has its HQ in Latvia. “The Baltics are recognised as the new hotbed for technology start-ups,” she adds. Part of the reason for this is access to fast internet – Latvian broadband speeds are among the fastest in the world.

Legal lowdown

Employment law tends to be employee-friendly and labour markets are not particularly flexible. Zero-hours contracts are banned in Estonia, and the use of fixed-term contracts is limited in all three countries, say lawyers from Baltic firm COBALT.

However, changes are afoot with recent legislation passed in Estonia to allow IT companies to make their working hours more flexible. And in Lithuania a new version of the labour code is being discussed that “is aimed at liberalising labour relations and reducing the administrative burden for employers,” says head of COBALT Lithuania’s employment law and immigration practice Dalia Foigt.

While the countries are not heavily unionised, trade unions have considerable power under Latvian labour law, says Toms Sulmanis, a COBALT partner in Latvia.

From the HR frontline

“Baltic states are proud nations,” says Rush. “The people are hardworking, reserved and eager to learn new skills. Younger generations speak at least three languages: their mother tongue, Russian and English.”

She adds that probation periods are carefully monitored and maternity leave is good.

“While salaries are lower compared to the UK, there are some key technology positions that can earn comparable amounts,” she explains.

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