Analysis by Angel Dimitrov – President of the Organization of Employers of Macedonia

LITTLE HISTORY

At the end of 2011, The Parliament of the Republic of Macedonia adopted the Law on Minimum Wage in the Republic of Macedonia, which started to apply with the salary for the month of January 2012. The Law was published in the “Official Gazette of the Republic of Macedonia” no. 11/12 and considered some to be “a historical moment” because until then in Macedonia the minimum wage or “the lowest salary for certain degrees of complexity” was regulated by branch collective agreements.
The amount of the minimum wage amounted to 39.6% of the average gross salary in the Republic for the previous year, according to the data published by the State Statistical Office. The calculated minimum wage was 8,050 denars in net amount.

For the departments that in July 2011, had paid an average salary below the level of 15,600 MKD in gross amount, an adjustment period of 3 years was envisaged, so that for 2012, had a minimum wage lower by 22.2% for 2013. by 14.8% and for 2014. by 7.4%. These were the divisions 13-Textile Manufacturing, 14-Apparel Manufacturing and 15-Manufacture of Leather and Related Products.

The first problem appeared in 2013. when in February 2013, The statistical office published the average gross salary for 2012. In accordance with the Law on Minimum Wage, the Economic and Social Council of the Republic of Macedonia was to determine the amount of the minimum wage for 2013 and to submit it to the Ministry of Labor and Social Policy. But the figures showed that the average salary for 2012 not only was not increased, but there was a slight decline compared to 2011. Therefore, the ESS proposed to the MLSP the minimum wage to remain at the level of 2012. in the amount of 8.050 denars, and an increase should be made only on the divisions 13, 14 and 15 from 6,263 denars to 6,859 denars in accordance with the previously established reconciliation.

Already in 2014, The government decides to change the concept of minimum wage and instead of a percentage of the salary realized in the last year decided to determine a fixed amount of 13,140 denars in gross or 8,800 denars in the net amount for 2014, 9,590 denars for 2015. and a final 10,080 for 2016. For sections 13.14 and 15 it for 2014. amounted to 7,700 denars with a gradual increase in 2018. to reach the minimum wage of 10.080 denars (“Official Gazette of the Republic of Macedonia” No. 30/14 from February 10, 2014, in force on February 18, 2014).

This higher increase did not cause some major negative repercussions in terms of leaving the workers, and statistical data show that in the period February 2014, until March 2017. the average net salary in the Republic increased by 7.2% and in the section 14-production of clothing by 22.9%. This suggests that the pressure from the minimum wage was felt only in the wards with the lowest salaries until it caused a higher increase in the wage that had higher wages.

CHANGES AND SUPPLEMENTS FROM 2017

The current ruling party has promised in its pre-election program that if it comes to power, it will adopt a Minimum Wage Act, which will raise the minimum wage in the amount of 12,000 MKD as early as 2017. and it will apply to textiles and leather. In order not to induce the abandonment of workers, they envisaged financial assistance for those who had lower wages before passing the law.
Therefore, as early as the first days of governing, the new Government was affected by amendments to the Law on Minimum Wage.
The Law is published in the “Official Gazette of the Republic of Macedonia” no. 132/17, and entered into force on September 20, 2017. In Article 10 of the amendments, it was stipulated that the amount of the minimum wage in the gross amount starting from September 2017 and ending June 2018 is 17,130 denars or 12,000 denars in net.

The amendments did not change the definition of the minimum wage and remained as “the lowest monthly amount of the basic salary that the employer is obliged to pay to the worker for a full-time job and a fulfilled normalized performance”. At the same time, in Article 2, three new paragraphs were added that should prevent employers from misusing the normal performance.
(2) The normalized performance shall be determined by the employer each year in February on the basis of the production process efficiency criteria established by the employer in cooperation with the workers and which criteria must be the same for each technical – technological integrity with the employer,
(3) The normalized performance referred to in paragraph (2) of this Article should be attainable by at least 80% of the number of employees for each technical and technological unit, separately and
 (4) The employer shall be obliged, at the end of each month, to issue to the worker a certificate for the achieved normalized performance, together with the written calculation of the salary.
These changes caused certain ambiguities and dilemmas among some employers, and therefore the MLSP, together with the Organization of Employers and the State Labor Inspectorate, brought “
These changes caused certain ambiguities and dilemmas among some employers, and therefore the MLSP, together with the Organization of Employers and the State Labor Inspectorate, adopted “Guidelines for the Application of the Minimum Wage Law in the Republic of Macedonia”. In the guidelines it is especially emphasized that:
– Paragraphs 2,3 and 4 of Article 2 and paragraph 1 of Article 7-b apply only to employers who pay salaries in the amount of the minimum wage in accordance with the Law. This means that employers for non-standard jobs are not subject to the provisions of the Minimum Wage Act for the standardized performance.
It also indicates that employers who pay wages higher than the minimum, have no obligation to determine a normal performance according to the Law, nor an obligation to issue certificates for the achieved normalized performance.
Furthermore, employers who have introduced a normal performance and those who want to introduce it in their work are directed to bring an internal act, which should in particular contain:
– title of the workplace for which the standardization is performed;
– the standardization method can be performed on the basis of application of previous experience, independent measurements, independent estimates, etc.
– Measurement of the result, ie the normalized performance should be measurable in quantities, time, value, etc.
It is also indicated that the standardization can be introduced only for the work tasks for which the scope of work can be accurately measured.
Regarding the confirmation of the achieved performance, it is indicated that when the percentage of the achieved normalized performance is stated in the monthly calculation of salary, the employer has no obligation to issue a separate certificate.
The amendments also changed the manner of harmonization of the minimum wage. Thus, unlike before, when the basis for alignment was taken only with the rise of
average paid salary of all employees in the Republic of Macedonia for the previous one
year, now it aligns with:
– one third of the increase in the average paid salary in the Republic of Macedonia;
– one-third of the rise in the life cycle index and
– one third of the real GDP growth for the previous year.

FINANCIAL ASSISTANCE

The amendments also provide financial assistance to companies that in the months January, February and March 2017. they had paid salaries lower than 11,500 denars. The financial assistance is MKD 2.000 for salaries of up to MKD 10,000, MKD 1,500 for salaries of up to MKD 10,500, MKD 1,000 for salaries of up to MKD 11,000 and MKD 500 for salaries of up to MKD 11,500. The financial mix for the months March 2018 to August 2018 is reduced by 50%.
 Financial assistance is provided by employers who meet the following conditions:
– the employer is not exempt from the payment of contributions from compulsory social security
insurance or personal income tax for the employed person referred to in Article 4-a paragraph (1)
of this Law;
– the employer has the status of an active taxpayer, that is, he is not in a bankruptcy procedure
or liquidation or delisting procedure in accordance with Articles 477, 477-a, 552-a and
552-b of the Law on Trade Companies;
– the employer in 2016 to realize a loss or net profit after tax in
an amount less than 10% of the total expenditures,
– the employer has settled the obligations on the basis of salary, contributions from
compulsory social security and taxes, as of the last day of the month
for which the financial assistance is provided.

The Minister of Labor and Social Policy, in agreement with the Minister of Finance, adopted a Rulebook on the manner of providing financial assistance for the payment of a minimum wage. The Rulebook stipulates that when submitting the Monthly calculation for integrated collection to the Public Revenue Office (MPIN), for the period from September 2017 to August 2018, the employer shall identify the employees for whom the provision of financial assistance for payment of the minimum wage, code 401 in field 3.23 of the client software. In this way, the employers’ treatment was facilitated because they were not forced to submit special requests in paper form and provide evidence that they meet the criteria of Article 4-c of the Law.
Unfortunately, some issues have arisen, such as:
-In the calculation of the average amount of paid monthly net salary for the months January-March 2017. the overtime allowance can not be refused (35%), although according to paragraph (2) of Article 4-b of the Law it is stated that in the average amount of the net salary, the overtime allowance is not calculated;
-In the calculation of the average amount of paid net salary, it is also not possible to set aside the allowance of 0.5% per annum on the basis of years of service, although in the law in Article 2, the minimum wage is defined as the basic salary, which does not include the allowances. This is because for the simple reason that in the monthly calculation of the payroll MPIN, there is no data for these additions, and the PRO had to calculate with the total monthly net salary, which includes all salary supplements (overtime, work on a holiday, night work and for work experience).
In this way, for a large number of workers, employers received notification that they do not receive financial assistance, although they are in accordance with the law.
-The PRO software also excludes workers who are employed in February and March 2017. or workers who in any of these three months used sick leave at the Health Insurance Fund and who in one of these months did not have at least one working day worked with the employers.
– When drafting the Law, it is also not taken into account that there will be cases when in 2016, some companies had a profit higher than 10% of the total expenditures, but that profit was generated from the sale of real estate or some other income that does not originate from the core business of the company, and the core business has a loss or very small gains.
Having in mind these inconsistencies and the fact that the financial assistance is far less than the increased costs of companies, a large number of companies have not made a request for financial aid at all, and the total submitted requests are significantly lower than expected.

HOW TO GO FURTHER

It is a fact that the recent amendments to the Law on Minimum Wage brought a significant increase in the Law. Thus, if the 2012 law. the amount of the minimum wage was set at 39.6% of the average net salary earned in the last year, today it is about 53% of the average net salary in the previous year. This increase in sections 13.14 and 15 is even greater. Now they have a minimum salary of over 80% of the average salary in these departments.
Companies are aware that raising wages for workers who have paid less than 12,000 denars without raising higher wages will lead to “flattening” and a drop in the motivation of workers, which in turn will cause a drop in production and services. This increase in total wages will cause more financial difficulties especially in labor-intensive activities.
If we want to prevent the closure of certain production plants and leaving the workers, the Government should seriously consider introducing a system of linear payment of contributions for salaries from 12,000 denars to 18,000 or 20,000 denars. In that case, the contributions would remain fixed -5.130 denars for all these employees, who receive a salary of 12.000 to 20.000 denars, thus providing sufficient funds for increasing the total wages, which was the idea of ​​the Government itself. This is especially because the planned financial assistance, and therefore the secured financial resources with the budget rebalance, will not be able to be used, and they were set aside in order to prevent the negative effects of the amendments to the law.