Social partners agree pay rise in private sector

On 3 July 2007, the leadership of the representative trade union and employer organisations agreed on an average wage increase of 12.9% in the private sector for 2007. In the public sector, wages have already increased by 10% since 1 July. This agreement marks the first time that the social partners have reached a consensus on pay policy in the private sector without government participation.

Background

The ‘Pact on economic and social development’ signed in September 2006 (BG0609029I) provides for a bipartite national agreement on a recommended pay increase index in the private sector. The social partners’ negotiations on this issue were due to start in March 2007 but were postponed. Finally, on 20 June 2007, at the invitation of Prime Minister Sergei Stanishev, the first tripartite talks began on a national pay increase index in the private sector.

The government was represented by Prime Minister Stanishev, Minister of Labour and Social Policy Emilia Maslarova, Minister of Finance Plamen Oresharski, and the chair of the National Council for Tripartite Cooperation. They outlined the current situation and listened to the proposals of the social partners. Despite some contradictory views on income and social security policy issues (BG0701019I), both government and social partner representatives expressed their commitment to the development of social dialogue, especially at bipartite level.

Concluding the meeting, Prime Minister Stanishev stated that future pay increases were up to the social partner organisations to decide, based on a wage growth index. He also emphasised the need to follow, in the negotiations, the four criteria laid down in the pact:

• inflation rate, both the actual rate of 7.3% in 2006 and that forecast in the budget for 2007, estimated at 4.4%;

• productivity increase – that reported by the National Statistical Institute (Национален Статистически Институт, NSI) for 2006 (at 4.7%) and the estimate for 2007 (5.1%);

• competitiveness;

• changes in tax and social security legislation in 2007.

Differences in initial positions of social partners

The start of negotiations was marked by significant differences in the social partners’ positions. Against the background of a strained situation of escalating protests and demands for a substantial pay increase in a number of sectors and companies, the Confederation of Labour Podkrepa (Страница на КТ Подкрепа**,** CL Podkrepa) initially proposed a 25.4% wage increase. Meanwhile, the Confederation of Independent Trade Unions in Bulgaria (Конфедерация на независимите синдикати в България, CITUB) proposed an increase of 15%, based on the reported data for inflation and productivity in 2006.

By contrast, the Bulgarian Industrial Association (Българска стопанска камара, BIA) proposed a pay increase of only 9.6%, while the Union of Private Entrepreneurs ‘Vuzrazdane’ (Българският съюз на частните предприемачи ‘Възраждане’, Vuzrazdane) proposed an even lower increase of 6.5%–7%. This proposal was based on the fact that private sector wages had already increased by 11% in the first quarter of 2007, compared with the first quarter of 2006. If higher pay increases were agreed upon, the employers warned, a number of small and medium-sized enterprises (SMEs) would not be able to sustain the pressure of the pay increase.

Outcome of negotiations

After negotiations at a ‘Consultative Council’ on 2 July 2007, the leadership of the two representative trade unions CITUB and CL Podkrepa harmonized their positions, proposing a pay increase of 18%. In their joint declaration, the two confederations also called for national negotiations with the government and the employer organisations on income and tax policy in 2008. The confederations warned that, in the event of failure of national, sectoral and company negotiations on a wage increase in the private sector, they would withdraw from the pact and organise national protests.

On 3 July, after difficult negotiations, CITUB, CL Podkrepa and the six representative employer organisations recommended a pay increase of 12.9% in the private sector for 2007. The employer groups involved in the negotiations were:

• the Confederation of Employers and Industrialists in Bulgaria (Kонфедерация На Работодателите и Индустриалците в България, CEIBG);

• the Bulgarian Chamber of Commerce and Industry (Българска Търговско-Промишлена Палата, BCCI);

• BIA;

• Vuzrazdane;

• the Union for Private Economic Enterprise (Съюзът за стопанска инициатива, UPEE);

• the Bulgarian Industrial Capital Association (Асоциацията на индустриалния капитал в България, BICA).

Further negotiations on pay rises will be held at sectoral and company level.

The employer organisations agreed on a higher pay increase in order to gain trade union support for a government promise to cut the social security contribution rate by three percentage points from October 2007. In the event that this deal should be successful, the employers have agreed to raise the recommended pay increase by a further two percentage points, to 14.9%.

Commentary

The agreement negotiated by the social partners is unprecedented in Bulgarian industrial relations as it represents the first time that social partners have reached an agreement on pay policy in the private sector without government participation. The key question now is whether the new agreement can help to maintain industrial peace in a context of increasing pay claims and expectations among workers.

Lyuben Tomev, Institute for Social and Trade Union Research