Fees fill the budget: a heavy blow to citizens’ pocket
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From January 1, 2015 a new way of payment of pension and disability insurance and contributions for compulsory health insurance will apply for people who sign a temporary service contract, a copyright agreement or a physical and intellectual work contract, determining the fee for the work, which in net amount is higher than the minimum monthly salary of 8,600 denars, which will next year be 9,500 denars. This applies to those who are unemployed and get fees, but also to employees who except for the salary, have other higher incomes than the minimum wage. For such fees, instead of income tax of 10%, next year will be paid both 17.6% for pension insurance and 7.3% for health insurance.
The state will collect 68 million Euros of contributions
In the budget for 2015 it is projected the state on the basis of contributions to collect 68 million Euros more than 2014. According to data for 2013, in Macedonia there were over 100,000 freelancers and 27,000 people with copyright agreements.
With the amendments to the Law on Health, Pension and Disability Insurance, according to the Fund’s announcement, it excludes fees of professional athletes, officials’ fees, MPs, councilors and other elected and appointed officials, fees based on scholarship and public work contracts, which are signed by the municipality. It neither applies to judges, jurors, people dealing with legal expertise, trustees and pension beneficiaries. Physical persons who sign contracts that are particularly higher than the minimum wage, and collectively exceed the minimum wage, have an obligation to report the contracts to the Pension, Disability and Health Insurance Fund (PDF). The new changes will provide insurance for people who have no social security, are not employed or are self-employed.
How is the insurance base determined in certain cases?
The base for monthly insurance is gross contribution specified in the contract, divided by the duration of the contract. If there is no specific duration of the contract, the basis for the payment of contributions is the gross contribution of each month until the end of the contract. For example, if the contract of 6 months in the gross amount is 90,000 denars, the amount is divided by 6 months and gross monthly basis is 15,000 denars, which means higher than the minimum wage for employees over the next year, which means social security contributions will be paid. If the contract is reached for 6 months in the amount of 50.000 denars, it is divided into 6 months and gross monthly basis is 8,333 denars so no insurance contributions are paid, because the basis is below the minimum wage. Even if the contract starts on 10th of the month, and the gross fee is 9.000 denars, the insurance is paid, because the amount is higher than the minimum basis.
How do business entities react?
Despite the fact that freelancers will pay social security contributions, they will not enjoy the rights they are entitled to by the Law on Labor Relations, such as paid annual leave and sick leave. Business entities also react against the legislative changes regarding fees. According to the Organization of Employers of Macedonia (ORM), the new amendments will put pressure on employers, who instead of reporting full time employees, will pay them for contract work, although they work 8 hours a day.
“In this way, employees will realize all employment rights, but will also help to fill the two funds which are in a very difficult financial situation”, says Angel Dimitrov, president of ORM for Inbox7.
Economic Chamber of North-West Macedonia (ECNWM) says that this decision has reaffirmed the conclusion of this chamber that the state cannot cope with the current economic situation.
“Resources or rather country’s economy cannot endure the promises made by VMRO and in order to achieve them, with various instruments it is trying to raise funds which include various penalties and the Law on taxes for freelancers”, says for Inbox7 Menderez Kuci, president of ECNWM, adding that he is against selectivity of the law because it excludes various categories.
“Certainly, the business community does not justify and does not accept such a measure, but it remains a supporter of the fact the government not to stretch its legs more than the rug, a suggestion that is given to it in the last progress report of the EU”, said Kuci.
A heavy blow to NGOs
Organization of Employers of Macedonia (ORM) is against not including some occupations in this law.
“The biggest disadvantage of the new decision is inequality, as some occupations are not part of the law. It is about contributions of the members of administrative or supervisory boards that do not pay contributions and are not registered in the system of social security contributions, that is, are not employed. Payment of contributions also excludes judges, jurors, trustees etc. It puts citizens in a disadvantage before the law, says Angel Dimitrov, president of ORM.
Helsinki Committee (HC) has also reacted against this law, because the NGO sector is under attack by this law.
“The law is not very clear and legislator’s intention is vague, and it is well known that this law will mostly hit NGOs, which generally operate on payment of fees”.
“We expect many NGOs to feel this law, and perhaps some will close due to the inability to properly regulate this issue”, it is said in the Helsinki Committee reaction.
The opposition Social Democratic Union of Macedonia (SDSM) also reacted against the new law. This party requires payment of additional contributions to exclude employees who get fees.
SDSM requires the value of the fees, for which one needs to pay double contributions, to be 12.700 denars, not 9,500, while those getting higher fees should pay higher contributions .
Although it is an issue that affects a lot of citizens, Albanian parties have not given their opinion on this and DUI supported the legal amendments in the Assembly.
Editor: Selim Ibraimi