Transferring Employees Between Companies to Obtain Employment Incentives from the Employment Bureau

From the beginning of 2021 until the end of 2023, the company “Mraz” Ltd. from Pale has collected 456,000 KM from the employment support program provided by the Employment Bureau of Republika Srpska. This wouldn’t be controversial if the employees of this company, which besides Pale also has business units in Foča and Nevesinje, were not employed on fixed-term contracts for one month, only to be re-employed for the same positions after this period expired, while the company collected new incentives for employing “new workers” during that time.

Besides receiving financial injections from the Employment Bureau, this company also received funding from the RS Government and local communities. Just from the municipality of Nevesinje, “Mraz” collected 450,000 KM as economic support. The utilization of these funds is currently being investigated by a special commission formed by the municipality’s mayor for this purpose.

Meanwhile, the employees of “Mraz”, a company that claims to have collaborated with “major global brands”, were receiving minimal wages, which amounted to approximately 700 KM until the end of last year.

Two Companies, One Job Position

Despite everything, these employees were formally employed multiple times, even though they spent all their time in the same job position, and there were situations where they changed companies. Again, only formally. From the contracts we possess, it is evident that after their contracts with “Mraz” expired, they signed new contracts with the company “Harmatex” from Rogatica. In this way, and under the guise of employment incentives, this company received funds from the Employment Bureau of Republika Srpska. In just two years, Harmatex received 408,000 KM from the Employment Bureau.

It is important to note that both mentioned companies are owned by Mladen Kovačević and members of his immediate family.

In the fixed-term employment contracts that the workers in Nevesinje signed with “Harmatex” in early December last year, it is stated “establishing an employment relationship for a fixed term” for the purpose of supplying goods to the contractual partner “Mraz” Ltd. from Pale.

When asked why the employees whose contracts expired at “Mraz” signed contracts with “Harmatex” to produce goods for “Mraz” at the same job positions for the same pay, owner Mladen Kovačević was unwilling to respond. He was firm: “Everything is in accordance with the law”. He also refused to comment on the relationship between the two companies, stating that they were private relations within his family.

“I have some private matters, the founder of the company was my late father, I don’t want to disclose how the division between me, my brother, and my mother happened, but everything is within the legal framework, and I don’t need to provide you with that information”, says Kovačević for SPIN Info.

The official owner of “Harmatex” Ltd. Rogatica is Miloš Kovačević. Since March last year, the director has been Srđan Granić. The authority to represent the company, as announced in the Official Gazette of Republika Srpska (March 21, 2023), has been transferred to Granić by Mladen Kovačević. At the same time, the headquarters of “Harmatex” was transferred from Pale to Rogatica.

In December last year, the employees of “Mraz”, after their previous contracts expired, signed new contracts with “Harmatex”.

The business units of these two companies in Nevesinje are registered at the same address – Kilavci bb.

Promises Abound, Guarantees Are Absent

Kovačević denies any connection with the former director of the Employment Bureau, Miroslav Vujičić from Istočno Sarajevo, stating that it’s merely baseless speculation. Instead of focusing on “gossip”, as he puts it, the discussion should revolve around the contributions his company has made to society.

“Throughout my business tenure, let’s say 15 years, I have made a significant contribution. Don’t immediately view everything negatively… My company has been around for 40 years; I am the second generation… I have employees who have been working for me for 34 years, which speaks volumes about me”, says Kovačević.

Ironically, Vujičić attended a meeting between the owners of “Mraz” and the municipal leadership in Nevesinje in early June 2021, where the signing of a memorandum of business cooperation between the local community and the Pale-based company was agreed upon.

The opening of the “Mraz” facility in Nevesinje was presented as a promising economic move, particularly as a lifeline for the employees of the defunct company “Klaudija” Ltd., which operated in the same facility and engaged in the same activities that “Mraz” plans to continue.

Based on this agreement, just a few days later, a Cooperation Agreement was signed, following which the Municipality soon provided funds to its new business partner.

However, it couldn’t proceed without serious oversights, which were also noted by auditors.

In the financial audit report of the Municipality of Nevesinje for the year 2021, the Main Service for the Audit of the Public Sector of Republika Srpska identified flaws in the allocation of funds to the company “Mraz”.

The municipality twice in 2021 disbursed funds totalling 450,000 KM to the company “Mraz” Ltd. from Pale. The first portion of funds amounting to 230,000 KM was disbursed based on the decision of the Municipal Assembly, intended for financing salaries and other costs of training, requalification, and additional training for 60 workers over a period of three months. The municipality also approved 220,000 KM through a public call procedure for allocating funds for the development of manufacturing activities in the municipality.

The municipality, as noted in this audit report, signed an Agreement on the Settlement of Mutual Rights and Obligations with “Mraz” on June 24, 2021, relating to the allocation of funds according to the Decision of the Municipal Assembly.

In addition to the obligation to employ new workers and operate regularly in the area of Nevesinje for a minimum of five years, Mraz also committed to providing the municipality with an “unconditional bank guarantee as a security measure valid for one year, with the guarantee being renewed for the next four years one month before the expiry of the current guarantee”.

However, by an Annex to this agreement signed on November 12 of the same year, a portion of the text requiring “Mraz” to renew the bank guarantee was removed from the agreement.

It took nearly two and a half years for this issue to be discussed at the session of the Municipal Assembly of Nevesinje held earlier this month. It probably wouldn’t have happened if “Mraz” hadn’t announced in the meantime that they were laying off more than half of their employees. They cited the increase in the minimum wage in RS from 700 to 950 marks as the reason.

Responding to the criticism from councillors that the annexe exempting “Mraz” from bank guarantees had caused serious harm to the interests of the municipality and its employees, the mayor of Nevesinje, Milenko Avdalović, provided a very interesting explanation:

“We reduced the guarantee from four to one year, of course, because he [the owner] didn’t want to give it for four years. People, this is private capital, what’s the matter with you!?”

However, in accordance with the Agreement signed in 2021 with the owner of the Pale-based company, the mayor formed a Commission tasked with overseeing the expenditure of funds allocated by the municipality to this company.

But the Commission was also somewhat forgotten. At the insistence of opposition councillors at the last session of the municipal parliament, it was decided that the Commission would prepare a report for the next session.

However, the owner of “Mraz” claims that there is no reason to worry about the report because, as he says, it can only confirm the contribution that his company has brought to this municipality. The funds, he says, were spent for their intended purposes.

“You have a situation where retraining was carried out for 60 people, then you have a situation where I took on 80 workers who had never entered the textile industry and provided training for them, giving them the minimum wage. It’s true they had the minimum wage, the average wage was 900 marks, they had the minimum wage, but I taught them which side of the machine to sit on and how to start the machine, and I gave them the minimum wage, I gave them a trade. That was my expense for six months”, he emphasized, noting that the investment in “Mraz” totalled around nine million KM.

Diagnoses of Workers on the Notice Board

Several employees of “Mraz” in Nevesinje (names known to the editorial staff) claim that they worked under unprecedented pressure in this company. They say they worked on holidays and outside of working hours without any legally prescribed compensation for overtime. What affected them the most was that a list of employees on sick leave, along with their personal data and medical diagnoses, was posted on the company’s notice board.

In an interview with Spin Info, Mladen Kovačević did not deny these claims. Moreover, he sees nothing wrong with publicly disclosing such information. He did it, he says, “to raise their awareness. With 6,000 absences due to sick leave in three years, I have to change people’s awareness, I’m neither petty nor malicious”.

Clearly, no one asked the female workers for their opinion, not even when “Mraz” was awarded municipal recognition on May 25 last year for “contribution to economic development in the municipality of Nevesinje and the creation of new jobs”.

Although “Mraz”, as the mayor says, “did not provide” a bank guarantee for four years, the municipality awarded this company municipal recognition “for contribution to economic development in the municipality of Nevesinje and the creation of new jobs” last year.