07.02.2024

THE MINIMUM WAGE AS A BASIS FOR DETERMINING SOCIAL BENEFITS

How can the minimum wage serve as a basis for determining the initial basic wages in the enterprise, additional wages and social benefits?

Similar rules for determining the initial basic wages in the enterprise, additional labor remuneration and social benefits are often contained in collective labor agreements and in internal rules for the wage.

Also, the rules are also used for the purposes of insurance law and social assistance. For example, according to the Social Insurance Code, persons who work without an employment relationship and receive a monthly salary equal to or above the minimum wage, after reducing it by the costs of the activity, are subject to mandatory insurance for certain risks, if they are not insured on another basis in the respective month.

The amounts of some State Social Security benefits may also be linked to the minimum wage. For example, according to the law, the daily cash compensation for temporary incapacity due to a general illness is generally calculated at the rate of 80 percent of the average daily gross remuneration or the average daily insurance income, on which insurance contributions have been paid or are due for a period of 18 calendar months preceding the month of onset of incapacity. However, if during this period the person was not insured for general illness and maternity or used unpaid leave, which is considered as work or service experience, the average daily minimum wage for the country for the relevant days is taken as a basis.

It is also good to pay attention to the relationship between the concepts of "minimum wage" and "minimum insurance income/threshold", since there is often confusion between them.

The minimum insurance thresholds represent legally established minimum amounts of insurance income, on which insurance contributions are made, depending on the main economic activity of the employer and the qualification group in which the profession practiced by the insured person is classified.

The amounts of the minimum insurance income for basic economic activities and qualification groups of professions are determined by the Law on the State Public Insurance Budget for the relevant year.

Example:

If we consider the economic activity "Forestry", according to Appendix No. 1A of the Law on the State Public Insurance Budget for 2022, the minimum insurance income for persons in managerial positions from 01.04. until 31.12.2022 it is BGN 935, and for specialists and all other positions (such as administrative support staff, etc.) - BGN 710.

A person occupying the relevant position cannot be insured on an income lower than that determined. This actually results in a "substitution" effect of the minimum wage by the minimum insurance income for persons for whom the latter is higher. Besides, there is nothing surprising in this, if it is based on the logic that the minimum wage is determined for the lowest skilled labor.

Reference:

Art. 4, para. 3, item 5 of the Social Security Code

Art. 41 of the Social Security Code