Bulgaria: Social partners’ involvement in unemployment benefit regimes

  • Observatory: EurWORK
  • Topic:
  • Social protection,
  • Published on: 12 augustus 2014



About
Country:
Bulgaria
Author:
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

By 2001, unemployment insurance is derived from a fund that was separate from the state budget and managed by a Supervisory Board to the National Employment Service.On the Board were an equal number of representatives from the trade unions, employers and public administration. The fund was constituted through contributions of 4% of average monthly gross salary of the insured. In 2002, a new unemployment fund was created and passed to the National Social Security Institute. The fund is implemented by the Supervisory Board in which the number of social partners was reduced from two thirds to half of the votes. Despite opposition from trade unions, the contributions were cut from 4% to 1% of contributory income.

1. Characteristics of the UB system in Bulgaria

Table 1: Types of Unemployment Benefit and Social Assistance programmes
 

Benefits

Main qualifying conditions

Funding

Unemployment Insurance (UI)

earnings-related

involuntary unemployment - employment record - actively looking for work

contributions from employer and, sometimes, also employees, often topped by government payments

Unemployment Assistance (UA)

social minimum, partly means-tested

unemployment insurance expired or not eligible for it - (often) a short employment record - actively looking for work

contributions from employer and employee and/or government payments

Social Assistance (SA)

social minimum, comprehensively means-tested

unemployment insurance expired or not eligible for it - (for most categories of claimants) actively looking for work

taxes

Keeping in mind the categorization provided by the already cited EIRO comparative study (TN0509103S), and which is synthesized in Table 1 above, please provide the following information on the country’s UB system, bearing in mind the distinction between Unemployment Insurance and Unemployment Assistance.

1.1. Recent changes/transformations of the UB system in your country:

1.1.1. In the last 10 years, has the country’s UB regime been modified? Have new forms of interventions been introduced?

If yes, please specify what has been changed / which innovations have been introduced, focusing more on the most recent/ most relevant transformations of the UB system:

a) Regarding the UI:

  • Up to 2001, the unemployment insurance, promotion and support of employment and vocational training and retraining were made by the fund "Vocational training and unemploymen t".
  • “Vocational Training and Unemployment Fund" was independent with a budget constituted through contributions of 4% of average monthly gross salary of the insured persons.The fund was managed by the Supervisory Board at the National Employment Service. Equal number of representatives of trade unions, employers and public administration were in the Board. This meant the social partners had two thirds of the votes.
  • In 2002, was established the "Unemployment" fund, which passed to the National Social Security Institute (NSSI) with the Act for amending the Compulsory Social Security Code (CSSC) (State Gazette Nº 1 of 01.04.2002). The insurance in this Fund became mandatory for those persons insured for all social risks under CSSC.The fund is managed by the Supervisory Board of the NSSI. There, the social partners have only half rather than two thirds of the votes. The other half of the votes pertains to the state administration.Meanwhile, the National Employment Service was renamed as the National Employment Agency, which main function is to register the unemployed and implemented activation policies.
  • By the end of 2001 the benefit was 60% of the average monthly gross salary for full-time work. This required the person to be ensured for nine months in the past 15 months. The minimum benefit is 80% and maximum 150% of minimum wage that was BGN 87 (approx. 170€). In 2002, the benefit was 60% of average income. The requirement was for nine months to be ensured in the last 15 months remained. The social insurance income also includes wages and any additional bonus and payments.The minimum and maximum amount of the compensation shall be determined as a fixed amount annually by the State Social Security Budget Act (SSSBA). See Table 3.
  • In 2004, paid contributions complied with the mandatory minimum social insurance income allocated to different economic activities and professions (Art. 54b, Paragraph 1 CSS).
  • In 2007, for determining the compensation paid not only the social security contributions had to be taken into account submitted but also the contributions payable by employers who do not pay salaries.
  • In 2007, was introduced compensation for men aged 60 years and 6 months and women aged 57 years and 6 months in unemployment for over 12 months after having previously received the benefit. The benefit is paid for 30 months and is determined each year by SSSBA.
  • Since 2009, the unemployment benefit has been determined by daily unemployment benefits, which is 60 per cent of the average daily wage or the average daily income on which social security contributions paid or payable for the "Unemployment" fund for the past 24 months. The minimum benefit payment is BGN 7.20 (approx. 14.1€), and the maximum BGN 12 (approx. 23.5€)(Art. 54b, Paragraph 1 CSS).
  • From 1st of January of 2010 to 2012, inclusive, the maximum fixed amount is repealed and the upper limit of compensation is 60% of the average daily insurable earnings. The minimum benefit remains at BGN 7.20.
  • From 2001 to 2012, the social security contributions were reduced from 4% to 1% of the insurable income. The amendment of the amount of the contribution and distribution between employer - employee is given in Table 2.
Table 2 – Composition of contributions to the unemployment fund

Period

From employer - %

From employee - %

Contribution total - %

From 2001 to 2004

3

1

4

2005

2,45

1,05

3,5

2006

1,95

1,05

3

From 2007 to 2012

0,6

0,4

1

b) Regarding the UA:

Not applicable.

c) Regarding the SA (if relevant):

Not applicable.

1.1.2. For each of these changes/innovations indicate:

  • date of introduction:

Change 1 - 1993

Change 2 - 04.01.2002

Change 3 - 04.01.2002

Change 4 - 01.01.2004

Change 5 - 01.01.2007

Change 6 - 01.01.2007

Change 7 -.01.01.2009

Change 8 - 01.01.2010

Change 9 – 01.10.2007

  • who took the initiative (government, unions, employers’ associations, other organisations):

Change 1. Consensus between social partners and the administration.Change 2. Consensus between social partners and the administration.Change 3. Trade Unions.Change 4. Consensus between social partners and the administration.Change 5.Trade Unions.Change 6. Trade Unions.Change 7. Administration.Change 8. TradeUnions.Change 9. Employers.

  • the content of the change / of the new programme:

Change 1. Providing for the first time social security insurance for workers in unemployment occurring on the labour market.Change 2. Inclusion of the insurance risk "unemployment" to the state social security system. Change 3. Increase the amount of social security contributions and benefits.Change 4. Contraction of the shadow economy in which the workers are insured in the amount which is smaller than their pay.Change 5. Increase the number of insured and the revenue to fund "Unemployment".Change 6. Supporting unemployed before retirement age.Change 7. Reduction of average insurable earnings due the crisis, frozen wages and inflation.Change 8. Implementation of the legal standard for determining the amount of unemployment benefit without administrative imposing limit.Change 9. Reduction of the revenues in the budget of "Unemployment" fund.

  • the aim pursued:

Change 1. Establish an institution for unemployment benefits and retraining of the labour market.Change 2. Create an insurance fund only for unemployment and its inclusion in the state social insurance system.Change 3. Adequate compensation for the entire income of the unemployed.Change 4. Insurance for not insured in the informal economy.Change 5. Protection of workers by unscrupulous employers.Change 6. Supporting unemployed before retirement age.Change 7. Cutting costs from the fund on behalf of the insured.Change 8. Restoring the basic principle in the social security field for a direct link between contributions and rights to all insured persons.Change 9. Reducing the tax burden on a promise by businesses to increase employment and wages.

1.1.3. For each of these changes / innovations please indicate from the main SP who was in favour or supported and who was against or resisted to it, and why:

For item 1, 2, 3,4,5,6 changes are supported by organizations of trade unions, employers and the administration. They are in favour of the insurance system.

In item 7 supports from the administration to the detriment of the insured and against the balance of fund "Unemployment". The trade unions are against.

In item 8 changes are supported by organizations of trade unions. They are in favour of insured persons who maintain the level of lost income.In item 9 employers have benefited. Their tax burden is reduced. The trade unions are against because employment and wages did not increase as promised by employers after the reduction of their social insurance contributions.

1.2. The main characteristics of the UB system as it is now

Focusing now on the current situation, please specify the characteristics of the existing programmes:

1.2.1. Unemployment Insurance.

  • Coverage: (a general view of the groups that could potentially receive the UB) who is covered by the programme? Are all workers covered? Are there specific categories of workers (for instance, economically dependent and/or self-employed) who are not covered? Are there specific programmes dedicated to specific categories of workers?

Potential beneficiaries are all workers who make contributions to the "Unemployment" fund.Compulsorily insured persons are:- Employees employed for more than five working days or 40 hours during a calendar month, regardless of the nature of the work by way of pay and the source of funds;- Civil servants;- Judicial officers;- Servicemen;- Members of cooperatives;- Graduate nurses;- Persons who work second or additional contract;- People receiving income of elected officials;- Employees with a spiritual title of the Bulgarian Orthodox Church and other denominations registered under the Denominations Act;Sailors can voluntarily be insured on their own account.Do not provide the risk of unemployment: - Employees hired to work with one employer for more than 5 working days (40 hours) per calendar month or employed in more employers - in each of them for no more than 5 working days (40 hours) per calendar month; - Persons registered as freelancers and / or craft; - Persons working as sole proprietors, owners or partners in commercial companies; - Persons working without an employment relationship.

  • Eligibility: (turning to the individual level) indicate the criteria which have to be met by the potential beneficiaries in order to receive support (monetary or other).

Individuals have right to unemployment benefits if they have made social insurance contributions to the "Unemployment" fund at least nine months in the last 15 months before the termination of the employment and who: • are registered as unemployed in the Employment Agency; • did not become eligible for retirement pension in Bulgaria, or old age pension in another country;• did not engage in employment activities which are subject to compulsory insurance (art. 54a par. A Code of Social Security).

Wives (husbands) of servicemen (servicewomen) in the armed forces have the right to unemployment benefits when they had to move to another location or for international operations and missions (Art. 230 and art. 231 of Republic of Bulgaria Defence and Armed Forces Act (RBDAFA).

  • Duration: indicate the minimum and the maximum duration of time during which workers can avail of the unemployment insurance.

Unemployment benefit is paid monthly according to length of service:

Table 2 – Periods of benefits payment

Length of service (years)

Period of benefit paid (months)

up 3

4

3 to 5

6

5 to 10

8

10 to 15

9

15 to 20

10

20 to 25

11

over 25

12

  • Replacement rates: indicate the benefits’ amount in proportion with previous work-related earnings (minimum and maximum).

Compensation is determined by daily unemployment benefits, which is 60 per cent of the average daily wage or the average daily income on which contributions paid or payable for "Unemployment" fund for the past 24 months. It is equal to the daily rate multiplied by the number of working days per month. The minimum benefit amount is BGN 7.20 (Art. 54b, Paragraph 1 CSS).

Table 3 – Evolution of the benefit minimum and maximum limits, in BGN

Years

Minimum benefit

Maximum benefit

Average monthly income

2001

67

131

231

2002

70

130

259

2003

70

140

280

2004

80

140

308

2005

80

140

331

2006

90

160

354

2007

90

180

398

2008

100

200

500

Unemployed persons whose labour relationships have been terminated at their request or with their consent or due to fault behaviour receive the minimum daily amount of unemployment benefit for a period of 4 months (in Article 54b Para. 3 and Para. 4 CSS).

  • Financing: indicate the source of funds, describing, if that is the case, the structure of the funds according to their origin (i.e. X% from the state, Y% from employees, W% from the employers’ organisation, Z% from other, etc).

During the period 2007-2012 "Unemployment" Fund is financed by contributions, which amount is 1% of insurable income. Employer paid 0.6% and employee 0.4%.

  • SP involvement: Yes/No. If Yes, specify briefly:

Yes.

  1. who are the organisations involved and at which level do they operate? (e.g. trade unions, sectoral or national confederations, etc)
  2. national representative organizations of employers and employees are involved: two confederations of trade unions and six nationally representative organizations of employers.Their participation is at national level in the following bodies set up on tripartite principle: - Supervisory Board of the National Social Security Institute; - National Council for Tripartite Cooperation (NCTC); - Committees, working groups.
  1. why are these organisations involved (legitimacy)? Is it because they are representative?

Because these organisations are nationally representative.

1.2.2. Unemployment Assistance. Are forms of UA present? If yes, please indicate their general characteristics with specific attention to:

Not applicable.

1.2.3. Social Assistance. Are SA programmes with a direct relationship with the UB system and/or SP involvement present? If yes, please highlight the factors underlying such a relationship.

Not applicable.

2. SP involvement in the UB regime

This section focuses on SP involvement in the UB regimes with particular attention to UI and UA programmes. Information on SA programmes will be highly appreciated in case they are relevant in relation to the functioning of the UB and /or in terms of SP involvement.

SP can be involved in the functioning of UB systems in various and different ways, and not necessarily in the same way in all the phases in which the process of UB provision is articulated – that is development, implementation, management and monitoring of the programmes. However, the characteristics of such involvement, with respect to the structure and nature it may assume and the functions it may perform, have not yet been sufficiently considered, namely in a comparative study covering the European Union member states. Therefore, existing SP involvement in the country’s UB regime needs to be carefully and distinctly analysed for each of the four different phases it may occur. Even if SP involvement in UB systems is not that prominent in some countries, correspondents are encouraged to report on the exact level of participation, no matter how limited it may be.

2.1. The development phase

The inception or alteration of the UB regime generally begins by a development phase. In this question, the correspondents should take into consideration and report situations of substantial changes in the main features of the existing UB programme(s) as well as the introduction of a ‘new regime’ or ‘regimes’ which replace, partly or totally, a previous one in terms of rationale/logic and/or main features.

2.1.1. In your country, did SP participate in the development phase of UB programmes over the last decade?

Yes.

2.1.2. If yes, please provide detailed information on the SP involvement in the development phase of UB regimes with respect to the following dimensions, distinguishing between UI and UA and reporting any important changes during the decade.

  • Who did take the initiative of involving SP in the design process? Did they ask themselves?

The State did. Social Security relations, including unemployment insurance are regulated by the State after consultation with national representative organizations of employees and employers at national, sectoral, sectoral and local level (Article 2 of the Labour Code, Article 3 paragraph 4 of the CSS).

  • Which are the forms of such kind of SP involvement? Are/were they informed, consulted by the relevant institutions? Does/did some kind of negotiation or concentration between the SP and the institutions take place?

Social partners are periodically informed concerning to changes in legislation and their opinion is asked in the National Council for Tripartite Cooperation, the Supervisory Board of the NSSI, Committee on Labour and Social Policy at the National Assembly, workshops, etc.

  • In which way is/was their involvement in the policy design process legitimated/accepted? Through their participation in formalised and stable organisms (like tripartite or bipartite bodies)? Through their participation in lightly formalised ad-hoc commissions, or in occasional interaction? In other ways?

Through participation in these bodies, bilateral arrangements between the social partners are possible. The arrangements can then be submitted to the State for approval and adoption in the legislation.

  • How frequ ent is/was such involvement? Regular and predictable, or episodic, ad-hoc?

Periodically, when legislative or regulatory changes in unemployment insurance take place.

  • At what levels does/did such involvement occur? (e.g. national, regional, local, cross-sectoral, sectoral, company, other level(s))

At national level in the National Council for Tripartite Cooperation, as well as in sector, branch, regional and municipal councils for tripartite cooperation.

  • Which are/were the effects of such involvement (with regard to both a more efficient/effective functioning of the programmes, and the strengthening and legitimating of the SP themselves)?

The effects are mostly in favour of the insured, but often the opinions of trade unions are not taken into account by the lawmakers and restrictive decisions are often adopted.

2.2. The implementation phase

SP involvement in the implementation phase reflects their influence on the practical mechanisms underlying the provision of UB. Here the focus is on the procedures underlying a UB system and, the tasks performed by SP in this context.

2.2.1. Distinguishing between UI and UA programmes, please describe the SP' role in accomplishing specific functions related to UB schemes (such as selecting the officials in charge of UB’ services, collecting contributions, etc).

Social partners have no a role in selection of employees in the system for unemployment insurance, collection of contributions, etc., as this is a function of the National Revenue Agency and the Institute.

2.2.2. Furthermore, please analyze such SP involvement in terms of:

  • degree and institutional relevance of their involvement (mandatory, advisory or voluntary presence):

By law, Government must consult the social partners in changes to legislation relating to unemployment insurance, but it is not required to comply with their opinions and positions.

  • incidence of their involvement in the implementation process (at the beginning, throughout and/or at the end of the process):

Social partners have a right to participate fully in the process - from the opinions and proposals on bills related to unemployment benefit up to the discussions in the committee of the National Assembly and their adoption.

  • the strategic positions possibly held by SP:

Social partners have strong strategic positions. They defend vital interests such as employment and insurance in case of unemployment for huge masses of people.Through their experts they argued and proved the correctness of their strategic positions and defend them through legal means.

2.3. The management phase

SP are involved in the management phase as long as they are totally or partially responsible for the organisational asset behind the provision of UB.

2.3.1. In this case, distinguishing between UI and UA programmes, please describe SP’ role in terms of:

  • organisational commitment: are their specific sections of their organisations dedicated to the UB programmes?

In the Confederation of Independent Trade Unions in Bulgaria (CITUB ) has established a specialized department responsible for social security policy, including for unemployment insurance. Their Advisory Committee on Social Protection at the Coordinating Council of Trade Unions is composed of experts from the Confederation and representatives of its members.There is no information about such specialized structures in other social partners, but they surely have experts in this field.

  • organisational coordination among possible different levels of SP dealing with UB:

Vertical and horizontal coordination.

  • dedicated staff (composition of SP’ personnel in charge of UB programs):

In CITUB, there is the Executive Secretary of the Department "Social protection, safety and health at work" and an expert lawyer.

d) operational autonomy (self-governing, conditioned by the state, other):

Social partners are independent of the state.

  • financial autonomy (self-sufficient, dependent by the state, other):

Financially independent from the state.

2.3.2. Distinguishing between UI and UA programmes, please describe the role of SP in case they are engaged in the financial management of the UB funds.

Note: Another crucial issue to be considered deals with possible integrations among UB provisions and other kinds of programmes, especially those related to active labour market policies.

Social partners are involved in managing the entire system of solidarity pillar of social security. In fulfilment of this role may affect on the funding, with proposals for determining the amount of contributions, to propose measures to improve their collection and sanctions against the shadow economy. The right and responsibility of the Government and Parliament is to meet part or all proposals of the social partners.

2.3.3. Distinguishing between UI and UA programmes, please answer to the following questions:

  • is the SP’ role in the organisation and provision of UB programmes linked to the organisation and provision of other programmes/services (for instance, related to education and training)? Please, specify:

Trade unions pertaining to CITUB are initiators of additional voluntary insurance for unemployment and / or professional qualifications and its settlement with the law. They are in the process of organizing such a scheme and a voluntary fund.

  • if there is some kind of organisational relationship/integration among different labour market policies and programmes, does it lead also to an administrative/operative relationship between the SP and the Public Employment Service, or with private employment agencies?

Social partners are actively involved in the National Council for Promotion of Employment, which is developed on a tripartite basis. It discusses and adopts active policies on the labour market, including specific programs and measures for employment and training of unemployed persons. The council is not tied to the monetary unemployment benefits and its programmes and measures are financed from the state budget and other sources.

  • if yes, did this lead to mergers, networks or coalitions building among the SP and public and/or private organizations (eventually at the local level)?

There is cooperation at national and local level.The social partners participate in a network of "Regional Employment Commissions" and "Tripartite Councils for cooperation to Labour offices" of Employment Agency, which cover the whole country.

2.4. The monitoring phase

Monitoring could be the final or even the only phases in the UB process in which SP are involved. To be effective, monitoring implies a clear definition of the targets, the possibility of a transparent evaluation of the results, as well as of potentials and resources (financial, technical, etc.). It also requires the existence of sanction mechanisms severe enough to discourage opportunistic and improper behaviours.

Such ‘evaluation’ and ‘monitoring’ may regard both the process and provision of UB, and the role played in it by the actors, and in particular the SPs.

2.4.1. SP involvement in monitoring/evaluating the UB performance

Are the SP involved in the monitoring and evaluation of the UB system?

If yes, distinguishing between UI and UA,

  • Which aspects of UI/UA functioning are put under evaluation (e.g. procedures, results, other)?

Trade Unions ensure that the rights of insured individuals in securing their unemployment risk, alert the competent authorities for breaches of security legislation.Social partners regularly produce analysis of the functioning of the existing system of unemployment insurance. They identify problems and concrete measures and initiatives to improve the scope, adequacy and funding of the system.

  • Who is in charge of such monitoring/evaluation (a commission, an external body, etc.)?

Governing bodies of the relevant organization and their specialized structures.

  • How and when the monitoring process take place (in which phase of the process, with which frequency,…)?

This is a comprehensive process and covers all phases of unemployment insurance.

  • Which is the output (a report, other) of such process and which the possible outcome (formal recommendations, rewards, sanctions, other)?

Preparation of submissions of proposals to the government, and regularly giving draft legislative solutions for legislative changes.

  • How extensive and relevant is the SP’ role in the assessment process?

The role of social partners is important, often crucial, for the adoption of balanced decisions in the field of social security.

2.4.2. monitoring the SP involvement in the UB system

Is the SP role within the UB system subject to evaluation and monitoring?

If yes, distinguishing between UI and UA,

  • Which aspects of their performance are evaluated/monitored? (e.g. compliance to established procedures, ability to reach established targets, other)

All aspects of their business and in all phases of unemployment insurance are evaluated: preserving the procedures, achievement of objectives, results, etc.

  • In which way (by whom, in which occasion, with which frequency) is the SP performance evaluated

The work of social partners is evaluated by the leadership of their organizations, but also by their members whose interests they represent. Valued by all society including by other partners in social dialogue.

  • Which are the consequences, if any, of positive/negative evaluations?

The consequences are reflected on the reputation of social partners in the Bulgarian society, membership and national representation.

3. Final observations

3.1. Public debates and policy discussion

Please report SP’ and governments’ opinions and views on perceived consequences and implications of this involvement, suggesting insights on its further transformations. In so doing, the stress needs to be put on contents directly linked with on-going policy debates. Direct references to actors' voice will be certainly appreciated.

The reduction of social contributions is presented by the government as an anti-crisis measure. However, there are a series of politically motivated incentives for businesses that do not fulfil their promises to stabilize employment and wages.There is a need of increasing of the amount of contributions for the "Unemployment" fund, which is currently 1%, in order to balance the revenues with increased expenses due to increased unemployment. Also, to eliminate the privilege of civil servants, military and police, who do not pay personal contributions.

3.2. Research

Please make a list of academic contributions treating SP involvement in the UB regime of your country. If this specific topic does not apply to your country, alternatively, present academic contributions and/or documents stating the official position of the SP regarding the existing UB, in terms of coverage, effectiveness, quality of the support, etc.

There is no academic research dealing with social partners involvement in the unemployment benefit regime in Bulgaria.

3.3. Other issues

Please indicate if there are any other issues of importance in your country which are related to SP involvement in the UB system and have not been covered above.

Trade Unions proposed to introduce a provision for insurance of seasonal workers in legislation.

4. Commentary

4.1. Assessments and comments

Please provide your own assessment and comments on SP involvement in the UB system of your country, including any further information that you consider important to illustrate current trends.

As a failure, because despite the resistance by the trade unions, the following took place: - Decrease of the amount of the social insurance contribution to "Unemployment" fund in a total of 3 percentage points; - Introducing of the daily calculation of the amount of compensation instead of the monthly and minimal compensation of BGN 7.2; - Increase the reference period from which the amount is calculate for unemployment benefit from 9 to 24.The main success of the trade unions was the removal of the maximum amount of unemployment benefit and calculation on 60% of income before the termination of the insurance.

4.2. Perceived strengths and weaknesses

Furthermore, please illustrate what you perceive as strengths and weaknesses of SP involvement in the UB regime, as well as possible most promising experiments and feasible initiatives.

The main weaknesses are the reduced quotas of the social partners in the Supervisory Board of the NSSI.

Bozhidar Arsov, ISTUR

Useful? Interesting? Tell us what you think. Hide comments

Reactie toevoegen