SOCIAL INSURANCE CONTRIBUTION RATES AND THE SPLIT BETWEEN EMPLOYER AND EMPLOYEE BULGARIAN EXPERIECE PhD J. Hristoskov

Occupational sickness Old age Work injuries Maternity Invalidity Survivals General sickness Unemployment Fund “General sickness and maternity” (3.5%) Fund “Work injuries and occupational sickness” (0.4% - 1.1%) Fund “Pensions” (30%, 5% of which in the II pillar) Fund “Unemployment” (1%) Employer – 2.1% Employee – 1.4% Employer – (0.4% - 1.1%) Employer – 10% Employee – 8% State budget -12% transfer Employer – 0.6% Employee – 0.4% NSSINSSI PUBLIC SOCIAL SECURITY IN BULGARIA

ARGUMENTS FOR SPLITING CONTRIBUTIONS BETWEEN EMPLOYER END EMPLOYEE (1999) To reinforce the autonomy of the social insurance and the tripartite governance To increase the employee’s responsibility and attitude to the social insurance To improve the compliance by involving the employees in the collection control To open additional room for the second pension pillar and the health insurance keeping the employer’s contribution rate almost at the same level

DISSCUSSIONS HOW TO SPLIT THE CONTRIBUTIONS To split the contributions in proportion 50:50 (or 60:40) at once – this option was suggested by the Government, but strongly opposed by the unions To apply step by step approach – this option was agreed between employers and employee’s organizations

INITIAL PLAN FOR INCREASING THE WORKER’S PARTICIPATION 2000 and 2001 – 20% of total contribution rate 2002 – 25% of total contribution rate 2003 – 30% of total contribution rate 2004 – 35% of total contribution rate 2005 – 40% of total contribution rate 2006 – 45% of total contribution rate 2007 – 50% of total contribution rate This plan was prescribed in the legislation.

FURDER DISSCUSSIONS AND THE POLITICAL IMPACT ON THE INITIAL PLAN 2000 – 2001 – 80 : – 2004 – 75 : – 70 : – : and in the future – 60 : – pension contribution are split among the Government, employers and employees in proportion 12 : 10 : 8

COMPENSATION POLICIES TO KEEP NET WAGES UNCHANGED The Government compensates all persons employed under labor contract in state and municipal sector Civil servants, military and police officers, prosecutors and judges do not pay personal contributions Collective agreements between employers and employees Decreasing of taxes – in the last few years personal income tax rate dropped from 29% to 10% flat rate Decreasing of the social insurance contributions rates

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