Bill to amend and supplement the Social Security Code

MR HASSAN ADEMOV
CHAIRMAN OF
LABOR COMMISSION,
SOCIAL AND DEMOGRAPHIC POLICY
TO THE NATIONAL ASSEMBLY

MR IVAILLO CALFIN
DEPUTY MINISTER-PRESIDENT
ON DEMOGRAPHIC AND SOCIAL POLICY,
MINISTER OF LABOR AND SOCIAL POLICY I
CHAIRMAN OF THE NATIONAL COUNCIL
FOR TRIPARITE COOPERATION

COPY:

MRS DANIELA DARITKOVA
CHAIRMAN OF
THE COMMISSION ON HEALTH
TO THE NATIONAL ASSEMBLY

REGARDING: Draft law amending and supplementing the Social Security Code, No. 654-01-3, introduced by Petar Slavov and a group of people's representatives

DEAR MR ADEMOV,

DEAR MR CALFIN,

The proposed bill changes, in addition to the Social Security Code, the Health Insurance Act, as well as two tax laws: the Personal Income Tax Act and the Corporate Income Tax Act.

Under the existing rules, the insurances due for each person hired under an employment contract are distributed in the ratio: 60% for the employer's account and 40% for the employee's account.

The bill proposes that, if the employer wishes, for an individual worker he can pay all the insurances at his own expense. Thus, the net income that the employee receives from the labor remuneration increases. Accordingly, this part, which the employer pays additionally for his own account, will be recognized as an expense for the purposes of profit tax under ZKPO, and the net increase in the employee's income will be subject to income tax under the Income Tax Act.

This approach is proposed on the grounds that in the conditions of a shortage of quality and qualified staff, it creates an opportunity for employers to attract them by offering them better pay. It is argued that this will create competition between employers in the same sector of the economy looking for qualified personnel, and that this will increase socially responsible behavior among employers.

We draw your attention to the fact that in certain sectors of the economy, where there is strong competition between employers specifically with regard to the recruitment of qualified personnel, the proposed texts may create conditions for unfair practices.

Also, in large companies with an established corporate structure, such an approach would be a prerequisite for unequal treatment of employees working in the same sector, which deviates from the standards of the required responsible and ethical behavior of the employer.

We believe that the bill thus proposed will not make a special contribution to the improvement of relations between employer and worker, since even at present, if an employer is satisfied with a particular worker or wants to attract such a worker, he can always do so by offering him higher remuneration compared to others in the sector, accordingly to increase his labor remuneration according to the established order.

Let us recall that only a few months ago, employers and trade unions with common efforts and compromises stood behind the accepted changes in the pension system. A general agreement in principle was reached on the part of the state and on the part of the workers' and employees' and employers' organizations in order to fulfill the main objective of the adopted package of changes in the Bulgarian pension system, namely - sustainability, adequacy, tolerability and predictability.

One of the main goals of the model is to increase people's motivation to pay insurance contributions and reach a replacement insurance income of the order of 70-80%, as it is in the EU member states.

The proposed bill violates the basic principles of the model by providing an alternative in which the personal contribution of the insured person is missing.

The proposed option contradicts the KRIB's position of achieving a 50/50 ratio between the insurance contributions paid by the insurer and the insured person.

In the context of the above, the Confederation of Employers and Industrialists in Bulgaria does not support the proposed bill.

With respect,
Eugene Ivanov
Ex. director