MINIMUM WAGE - THE ETERNAL BONE OF CONTENTION BETWEEN EMPLOYERS AND TRADE UNIONS

The issue of setting the minimum wage (MW) has been at the heart of discussions between employers' organisations and trade unions since the early 1990s, when Bulgaria changed the course of its socio-economic development and began a course from a planned economy to a market economy. The development of bilateral social dialogue - between employers, who are no longer represented by the state, and trade unions - and tripartite cooperation, through the establishment of the National Council for Tripartite Cooperation (NCTC), also began gradually.

As of today, the amount of the minimum wage is set by Decree of the Council of Ministers, after consultations with the social partners within the framework of the NCTC.

The path of legal regulation of the minimum wage over the last 30 years and more is extremely interesting.

According to the original wording of Article 244 of the Labour Code adopted in 1986, "the Council of Ministers and the central leadership of the trade unions shall regulate the amount, increase and ratio of wages of different categories of workers on a national scale," by determining:

• the amount of the monthly minimum wage for the country - for the lowest qualified, the lightest work performed under normal conditions;
• the ratio between the growth of the average labor remuneration and the social productivity of labor in the case of preferential growth of the social productivity of labor;
• the types and amount of additional labor remuneration (ALR), payment of night work and benefits under the employment relationship, insofar as they are not defined by the Code;
• ALR for work in adverse and other specific working conditions, for prolonged work, as well as other types of ALR and benefits in addition to those provided for in the Code.

Moreover, the Council of Ministers and the central leadership of the trade unions "shall determine the basic wages, the titles of the positions, the conditions for their occupation, the qualification degrees and the procedure for their acquisition, as well as other matters related to the evaluation of the professional qualities of workers and the results of work." It is likely that such normative decisions in the past, and even today, have provided the impetus for trade unions to try to resolve these issues directly with the executive and often the legislature.

The change in the way of determining the minimum wage is rooted in the distant 1991, when, on the basis of the Agreement for the preservation of social peace, signed by the government, CITUB, CL “Podkrepa” and 6 employers' organizations, including the Bulgarian Industrial Association, the Minister of Labor Emilia Maslarova, with her report, submits to the Council of Ministers a draft Decree on the transition to wage bargaining. The report describes in detail the need to change the entire pay system, adoption of new principles, approaches, rules and requirements for determining the level and dynamics of wage. Then, on the basis of consultations with experts of the International Labor Organization (ILO), the International Monetary Fund and the World Bank, the Ordinance on collective bargaining was adopted (which has not been formally repealed to this day). The proposal rests on the principle that collective bargaining is based on the social partnership between the government, representative organizations of workers and employees, and employers to determine the amount of collective bargaining and the mechanisms for its amendment and find expression in the conclusion of relevant agreements and collective agreements for that. The main purpose of the negotiation is "to harmonize the interests of the parties". It is proposed that the collective bargaining of wages be conducted on two main levels:

1. National - between the Government and representative national organizations of trade unions and employers. At this level, it is proposed to discuss and agree on the most general issues of wages, such as: The ways, principles and procedures for determining the minimum wage for the country, as well as the grounds, order and conditions for its amendment; The amount of the minimum hourly (daily or monthly) wage for the country; The types and minimum amounts of ALR and benefits, etc. The specific amount of the minimum wage is determined and adopted by the Council of Ministers after negotiation between the Government, trade unions and employers for a period of not less than 1 year. The minimum wage is amended by the Council of Ministers after agreement between the social partners in case of significant changes in the criteria for determining its amount or at the request of one of the parties.

2. At company or organization level - between the respective employer and the representative trade union organizations, and at the request of the parties collective bargaining of the wage may be carried out by industries or branches and by municipalities and regions.

This approach, unfortunately, was abandoned with the adoption of amendments to the Labour Code in 1992. The new Article 244 of the Labour Code states that "the Council of Ministers shall determine the minimum wage for the country". Subsequently, the figure of the NCTC was strengthened by legislation, where the level of the minimum wage was only consulted with the social partners, but not negotiated between them. This approach goes some way to explaining the level and lack of a developed tradition of private sector wage bargaining.

Employers have been demanding clear criteria for setting the minimum wage for years. Over the last few years, the social partners have attempted to negotiate tripartite criteria for setting the minimum wage, but these attempts have unfortunately failed to achieve any real result. To some extent, the EC's legislative initiative for a directive on the minimum wage has played a role in this direction.

In 2018, Bulgaria ratified ILO Convention 131 on the Minimum Wage, 1970. The Convention provides for two main sets of elements to be taken into account in determining the minimum wage, as far as possible and appropriate in relation to national practices and conditions. These are (1) the needs of the workers and their families, taking into account the general level of the wages in the country, the cost of living, social security benefits and the relative living standards of other social groups, and (2) economic factors, including the requirements of economic development, productivity levels and the desire to achieve and maintain a high level of employment.

The Convention obliges each state that has ratified it to undertake to create and/or maintain mechanisms adapted to national conditions and requirements, according to which the minimum wage is defined and revised periodically. For the creation, operation and modification of these mechanisms, extensive consultation with representative organizations of employers and workers is envisaged. Moreover, where appropriate in relation to the nature of the mechanisms for determining the minimum wage, a procedure should be developed for the direct participation in the functioning of the system of representatives of interested organizations of employers and workers. To date, the state remains indebted to the social partners in this direction, insofar as such a mechanism does not exist. The assessment of compliance with the criteria for determining the minimum wage is prepared and presented in the partial impact assessment accompanying the draft Decree of the Council of Ministers on determining the amount of minimum wage for the relevant year, which is submitted for discussion in the NCTC. This approach is perceived as unsatisfactory by employers' organizations, which have consistently over the years not supported proposals for changes in the amount of the minimum wage, to the extent that it is not clear how the specific amount was determined (there is no formal mechanism).

On October 19, 2022, Directive 2022/2041 of the EP and of the Council on adequate minimum wages in the European Union (the Directive) was adopted. The process of adopting the act was accompanied by heated discussions about the competence of the Union to "legislate" on the payment of labor, insofar as Art. 153 of the Treaty on the Functioning of the EU expressly excludes payment. In the end, including and after consultation with the Council's Legal Service, the Directive is limited to creating a "framework for the adequacy of the statutory minimum wages". The Member States in which there is such a framework must adopt a procedure for defining and updating the minimum wage. The procedure must be in accordance with clearly defined criteria contributing to the adequacy of the framework. Member States must define these criteria in accordance with their national practices, either through a change in the relevant legislation, or through a decision of the competent authority, or through tripartite agreements.

The national criteria cover the following elements:

• the purchasing power of statutory minimum wages, taking into account the cost of living;
• the general level of wages and their distribution;
• the growth rate of wages;
• long-term national productivity levels and developments.

Member States use indicative reference values to guide their assessment of adequacy of statutory minimum wages. To that end, they may use indicative reference values commonly used at international level such as 60 % of the gross median wage and 50 % of the gross average wage, and/or indicative reference values used at national level.

Member States shall take the necessary measures to involve the social partners in the setting and updating of statutory minimum wages in a timely and effective manner that provides for their voluntary participation in the discussions throughout the decision-making process, including through participation in the consultative bodies in particular as concerns:

• the selection and application of criteria for the determination of the level of the statutory minimum wage, and the establishment of an automatic indexation formula and its modification where such formula exists;
• the selection and application of indicative reference values for the assessment of the adequacy of statutory minimum wages;
• the updates of statutory minimum wages.

The adoption of the Directive was used by individual MPs who submitted a bill to the National Assembly (NA) proposing the introduction of automaticity in the determination of the minimum wage, referring to one of the indicative reference values mentioned in the Directive, namely 50% of the gross average wage. The explanatory memorandum to the draft law sets out reasons for bringing Bulgarian legislation into line with the requirements of the Directive. This draft law has predictably led to sharp controversy between employers and trade unions. In a statement to the National Assembly, the Bulgarian Industrial Association expressed its position that the proposed bill:

1. Contradicts the requirements of the Directive because:

• excludes the social partners form the procedure for selecting and applying criteria for setting the level of the minimum wage;
• excludes the social partners from the procedure for selecting and applying the indicative reference values for assessing the adequacy of the statutory minimum wages.

1. It erodes the role of the social partners on a key issue.
2. Completely eliminates all other national criteria to be defined within the meaning of Article 5 of the Directive as well as ILO Convention 131.

In the meantime, the MLSP launched the formation of an inter-ministerial working group to work on the implementation of the Directive - not least after the BIA's insistence during the NCTC's last meeting for 2022.

After years of discussions and attempts to converge positions, the end of the "long run" - the mechanism for setting the minimum wage - seems to be near.