The government will soon be able to propose a gradual increase in the minimum wage of social partners, trade unions and the Union of employers, in order to reach half of the average salary in three or four years, along with partial tax benefits for employers, Vijesti reports.
This analysis is in the final phase and it was done in parallel with the analysis of the proposals of the trade unions and SDP that the minimum wage is immediately increased to the amount of half of the average salary, which has been negotiated for two years. The Employers Union increases the minimum wage by introducing a non-taxable portion of earnings or decreasing taxes on earnings.
The Ministry of Finance is finalizing the analysis and the final proposal could be known in about ten days. The current minimum wage of 193 euros has not changed for six years and is the lowest in the region. Also, Montenegro has the highest tax burden on earnings.
The proposed model could be similar to that agreed in Croatia in 2017 when all social partners decided that the amount of minimum wage will gradually increase to an amount of 50 percent of the average by the end of 2020. At that time, the minimum wage in Croatia was 40 percent of the average, and with the increase from December last year, now it is 46 percent of the average. At the same time, tax incentives and subsidies are introduced to employers, such as the possibility that the state subsidizes a portion of taxes and contributions if the employer cannot pay salaries higher than the minimum due to unforeseen circumstances or market disturbances, as was the case in the textile industry in Croatia at the time.
According to the working version, which is still being analyzed, the minimum wage could be increased to 42 or 43 percent from the previous year by the end of this year, and then it would grow by two or three percentage points each year until it reaches 50 percent of the average with which, later on, it would be regularly adjusted on a regular basis. At the same time, employers would be exempted from an additional two percent tax on gross earnings above average and tax on reinvested profits, also some form of tax-free profit sharing would be introduced, but with some restrictions, so no misuse would occur.
Now in the Montenegrin law, it says that the minimum wage cannot be less than 30 percent of the average, but in 2013, the social partners agreed that at that time it would still be 40 percent of the then average, so it received the amount of 193 euros. Since there was no annual harmonization since then, the minimum wage now stands at 38 percent of the average.
Now, for every euro of net earnings, employers pay 67 cents of taxes and contributions, and if the salary is above average, the fees can amount to 75 cents for each euro net earnings.
The average net salary in 2018 was 511 euros. If, according to these analyzes, the new amount of minimum wage would be set at 42 percent of the average, this would be a growth from 193 to 214 euros. On this growth of 21 euros, the state would receive 14 euros of taxes and contributions.
For every increase in the minimum wage to affect average growth, it should be expected that in the four years the average salary will be around 550 euros and a minimum of 275 euros. This would also affect the state's higher costs of social benefits and pensions that are partially aligned with the increase in average earnings, as well as subsidies to employers that would be agreed to their consent to increase the minimum wage.
Analyzes, for now, show that the state budget would be at zero or a slight deficit with such a rise in the minimum wage, the increase in the costs of salaries and social benefits and tax incentives for employers. The government expects that in two or three years the results of economic growth and large investments in tourism and infrastructure will be visible, that there will be a significantly higher number of employees and therefore higher revenues for the state cash register and the possibility for the growth of standards.
The campaign for increasing the minimum wage has lasted for three years, and trade unions and SDP requested it. A year ago, SDP launched a petition to raise the minimum wage that was signed by 11,000 citizens. SDP ‘s delegate Rasko Konjevic has proposed several times amendments to the laws that would increase the minimum wage to 50 percent of the average, but the parliamentary majority rejected it.
Prime Minister Dusko Markovic said two days ago that he believes that there will be an increase in the minimum wage and that a step will be made in this direction, and that certain benefits will be provided to employers.
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Text by Goran Kapor, on March 6th 2019, read more at Vijesti
