The value of human resources for conducting business operations, the funds that a worker or an employee receives from the employer for the tasks completed, the services provided, or the results achieved, is called a wage. At a macro level, wages are defined as part of the gross domestic product obtained by employees as a result of their work. The amount and payment method of the wage are agreed between the employer and the employee in their respective working contract. Wages and salaries can be defined in a variety of ways, yet all of them include a minimum and a maximum threshold.
The minimum wage is the cheapest one possible, determined by a normative act. It is administratively defined by the state, not the market. It is the smallest price for the labor market, and it applies to the entire country. In Bulgaria, the minimum wage is determined and rearranged by a decree of the Council of Ministers. In recent years, there has been a progressive wage growth in Bulgaria, related to the sustainable increase of the gross domestic product and the stable economic development of the country. The local wage growth for the last year is 8.9%, and for the previous five years, wages had almost doubled – from BGN 360 in 2015 to BGN 610 or BGN 3.66 per hour in January 2020, on the legal basis of MPS №350 from December 19, 2019.
The sick pay, the 2-year paid maternity leave, the health insurance contribution, the amounts, and the distribution of social security contributions for the “Pensions,” OZM, and Unemployment Funds remain unchanged in 2020. The size of the minimum wage matters not merely to the employees and workers who earn it (in 2017, according to CITUB, these were over 400,000 Bulgarians), but also for a considerable part of the employees in the country since the minimum wage is essential for defining a number of different social payments, contributions, and benefits. In recent years, many social benefits, recently dependent on the minimum wage, have become independent from it and thus explicitly stated in the budget laws. Anyway, this does not diminish its importance as a whole.
Maximum social security threshold
When we speak of the maximum salary, we actually refer to the maximum social security threshold. In 2020 it is BGN 3,000 and thus remains unchanged compared to the previous year – 2019. The maximum social security threshold was increased a year earlier – in 2019 when it progressed from BGN 2600 (2018) to BGN 3000 (2019), which also increased the ceiling for pensions (40% of the maximum social security threshold), or raised the maximum pension from BGN 910 to BGN 1,200.
An increase in the social security threshold is not just about higher taxes. It also suggests an improvement in unemployment benefits and guarantees better pensions – that’s why reviewing it is undoubtedly beneficial to the finances of the general public.