site.btaOrganization Proposes 51 Measures against Undeclared Employment

November 29 (BTA) - At a discussion on Monday, the Bulgarian Industrial Capital Association (BICA) unveiled a package of measures to curb undeclared employment by using new and adjusted human resources management instruments at enterprises. The package suggests two types of strategies which have been tested and verified at 60 companies and have been streamlined, so they are easy to put to practice.

Each of the 51 proposed measures to prevent and curb undeclared employment is accompanied by a particular institutionalization proposal addressed to competent institutions and organizations.

The proposals, set out by BICA Executive Director Dobrin Ivanov, include abolishing the setting of the minimum wage at the national level by administrative means and introducing a procedure for annual negotiations among the social partners to set different minimum wages for different economic activities and qualification levels, as well as abolishing contributory thresholds.

The BICA suggests concluding a national agreement on a mechanism for negotiating the minimum wage. After minimum wages are set for economic branches, the lowest negotiated wage should be valid also for economic activities not governed by sectoral and trade union organizations and not regulated by collective agreements. This is intended to encourage collective bargaining.

BICA Governing Board Chairman Vassil Velev said at the discussion that the share of the informal economy in Bulgaria is 21.5 per cent. Because of that, and also considering that 40 per cent of the country's GDP is redistributed via the state budget, the public purse loses 10 billion leva in revenues annually. State budget revenues can increase by 2.5 billion leva if the informal economy is reduced by just 5 per cent, which is an attainable goal, Velev argued.

Undeclared employment is the most widespread shadow practice related to the informal economy, he noted. This is so because the "labour tax" is the highest tax in Bulgaria: for every 100 leva in net income earned by an employee, the enterprise has to pay 53.25 leva in taxes and social and health insurance contributions.

Latest legislation has created a situation where pensions are not linked to the social security contribution rate, which is why more than half of pensioners will receive the same pension. The BICA called for scrapping the minimum pension and making pension size dependent solely on the social security contribution. This is expected to bring the informal economy to light. For pensions below the poverty line, social assistance should make up for the money up to the poverty line.

The BICA also made other proposals about how to curb undeclared employment - for instance, by introducing employment for less than eight hours a day; sharing the same worker between different employers; and using a voucher pay system (primarily in construction, landscaping, timber harvesting, entertainment and advertising). The BICA urged the establishment of a public register of non-compliant employers.

The discussion on the fight against undeclared employment was also attended by Labour and Social Policy Minister Galab Donev, General Labour Inspectorate Executive Director Rumyana Mihailova and trade union representatives.

"I have always resented envelope wages because of the high social price we all pay for that practice," Donev said. "This objectionable form of employment deprives workers of their rights, affects labour productivity and labour quality, and has an adverse impact on the state budget and the pension system."

According to the Minister, the share of the formal economy has increased from 64 per cent to over 80 per cent in less than 10 years. He noted that the Labour Code has been amended to minimize undeclared labour. The Code now sets penalties for continuing non-compliance in this field.

Donev went on to say that the COVID-19 pandemic and the acute need for security and predictability have changed the way many people view the labour and income declaration requirements. "Quality jobs are the surest way to deal with undeclared employment," he said.

The trade unions spoke against abolishing contributory thresholds. They said the minimum wage should be growing during the COVID-19 pandemic. DD/VE