EMCC European Monitoring Centre on Change

Tackling the recession: Bulgaria

  • Observatory: EMCC
  • Topic:
  • Published on: 12 July 2009



About
Country:
Bulgaria
Author:
Ivan Neykov
Institution:

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

Retention of jobs in times of crisis is the main problem of the Bulgarian labour market and subject to ever more violent disputes among the government, the employers and the trade unions. In January, the government adopted a new National Employment Action Plan - 2009, which was developed as a main tool to mitigate the effects of the economic crisis on the employment and the labour market.

Introduction

Apart from the traditional measures the National Plan includes new programmes to support employers’ actions for retention of jobs. It is early yet to analyse the effect of the measures taken by the government.The pressure between the trade unions and employers on measures to retain jobs is growing. The social dialogue is mainly taking place at national level (within the National Tripartite Cooperation Council) and at company level – between the employers and the local trade unions, mainly with regard to measures taken to restrict redundancies. There are no common actions by sectors either among the employers' organisations or the trade union structures.

1. Measures taken by government to assist businesses and protect jobs

Support to businesses

What formal or legal arrangements (such as job subsidies, bank guarantees, loans or special credit facilities) are in place in your country for supporting firms which are at risk of having to reduce employment? (Please include only measures which are aimed principally at maintaining employment as opposed to those which are aimed, for example, at increasing competitiveness or supporting investment.)

The Ministry of Labour and Social Policy and the Employment Agency finance and implement a number a measures and programmes intended to support the employers in their efforts to preserve the jobs. The major ones among them are the following:

  • Promoting employers to hire unemployed persons as part-time workers
  • Promoting employers to ensure daily organized transport for workers for travelling to and from the workplace for a distance of up to 100 kilometres on the territory of the country.
  • The National Programme “From social assistance to employment”;
  • The National Programme “Recovery and preservation of the Bulgarian forest”;
  • The National Programme “Assistants to people with disabilities”;
  • The National Programme “Assistance at retirement”;
  • The National Programme “Activation of not active persons”;
  • The National Programme for employment and training of people with permanent disabilities;
  • The Programme “Start of career”;
  • The National Programme “Support to maternity”;

Another measure to support the business includes amendments to the tax-insurance burden enforced in the beginning of 2009. The most substantial amendment is the direct participation of the state as an insurer. Up to 2009 the pension insurance contributions were paid by the worker and the employer in a ratio 40:60. From the beginning of 2009 the state started to pay part of the contributions. The worker will pay 26.7% of the insurance contribution, the company – 33.3%, and the state - 40%.

As a result of these amendments the tax-insurance burden for nominal wages of up to BGN 2000 decreases from 36.2% to 30.3%.

Are the arrangements or measures concerned permanent features of the system in your country or have they been introduced in the recent past specifically to combat the effects of the present recession? Please give an indication of the number of firms receiving support of this kind and the number of jobs protected as well as the source of funding.

The measures and programmes mentioned up to here are of a permanent nature.

A completely new measure related to the crisis was adopted by the government in February 2009. The measure will be financed by the state budget 2009, so presently it will only be applied in 2009. It regulates the rules and procedure for payment of compensations to workers and employees whose income is reduced as a result from the transition from full to part time working hours. The compensations shall be paid:

a) when the duration of the part time working hours is half of the legally established duration;b) the persons are entitled to one-time compensation within one calendar year and for a period of not more than 3 consecutive months.

The compensation for one worker or employee amounts to BGN 120 per month at most. It is paid depending on the number of hours reduced.

Another new tool is the National programme “New Employment Opportunity”, foreseeing services to the redundant workers for new employment on the primary market - consultations, orientation, retraining, and subsidised employment in the private sector.

Do the measures apply generally across the economy or are they specific to particular sectors or regions? Please indicate the sectors and/or regions concerned.

The new measure for payment of compensations to workers and employees that moved to part time working hours concerns the economic sectors of “Industry” and “Services” only. It covers the extraction industry, processing industry, production and distribution of electric and heating energy and gaseous fuels, water supply, sewerage, waste management and recovery, construction, trade and repair of cars and motorcycles, transport, storage and posts, hotels and catering, creation and distribution of information and creative products, and telecommunications.

Is there government support available for companies which introduce short-time working arrangements, give a temporary period of leave to workers or implement similar measures to enable workers to retain their jobs where there is insufficient work for them to do? If so, please give an indication of the extent of the support concerned and the number of companies, and the workers they employ, receiving support.

The compensation is for a period of not more than 3 consecutive months, one-time, within one calendar year. For its payment at a national scale, the National Employment Action Plan in 2009 envisages BGN 6,753,081 provided by the republican budget. These resources will support 18,759 persons that moved to part time working hours.

Are there are plans or proposals to introduce measures of the various kinds indicated above in order to assist businesses and protect jobs? If so, please describe them briefly.

The stated measures and programmes were introduced with the Ninth National Employment Action Plan (NEAP) adopted in January 2009. It was developed as a main tool to mitigate the effects of the economic crisis on the employment and the labour market. The vision of the plan in 2009 is “Development of Labour Market Flexibility and Security to Prevent and Seizure the Effects of the Economic and Financial Crisis on the Employment”. The active employment policy in 2009 is financially secured by the state budget (Bulgarian lev 190 million in the MLSP budget), through funding of Operational Programme Human Resources Development, other operational programmes, PHARE programme, the Social Investment Fund, external donors and other sources.

Support to workers

What formal or legal measures (such as partial unemployment benefit or similar kinds of social transfer) are in place in your country to support workers who have been put on to short-time working by employers or who have been given temporary leave with reduced rates of pay (i.e. who still formally have jobs but who are either not working or working reduced hours)? Please describe the measures concerned and indicate the scale of support provided. Please also give any figures available for the number of workers receiving payments of this kind as well as the source of funding.

The target groups on the labour market to which the special efforts are directed in 2009 are:

  • Persons dismissed as a result of the drop in production and services;
  • Unemployed young people aged up to 29;
  • Unemployed persons above the age of 50;
  • Not active persons including discouraged not working people

Are the measures concerned permanent features of the system in your country or have they been introduced in the recent past specifically to combat the effects of the present recession?

The following are among the measures with permanent characteristics:

A new measure was introduced in February 2009. Within the framework of the new measure qualification and re-qualification will be provided, including for self-employment, and subsequent probation of unemployed persons aged over 50 and of long-term unemployed (having uninterrupted registration at the labour office for more than 12 months), including those dropping out of the social assistance system with the aim to enhance employability and creation of conditions for sustainable employment.

The objective is to enhance the competitiveness of these persons, focusing on the needs for improvement of the skills of the low qualified persons and the elderly workers, for prolonging their active labour activity and establishment of conditions for permanent employment.

The results expected from the realization of that scheme are: 18,000 persons trained to acquire or enhance their professional qualification; 5,400 persons employed after the training.

Has the coverage of the social benefit system which provides income support to workers who lose their jobs been widened in the present recession in order to ensure that those concerned are protected (such as, for example, through a relaxation of the rules and regulations governing the payment of unemployment benefits or other forms of social transfer or through an extension to workers not previously entitled to support)?

No data.

Are there any plans or proposals to provide income support for those working short-time or on temporary leave? If so, please describe them briefly.

The representative trade unions insist on extending the scope of the measure for compensating the workers in case of reduced working hours by raising the budget in order to cover more workers in danger of dismissal. At the same time they insist on: 

  • Freezing all the present initiatives for attracting foreign labour force to the Bulgarian labour market;
  • Restricting the outsourcing towards external companies and temporarily provide these activities for employment of own personnel;
  • Ratifying by the Parliament of the Convention of the International Labour Office for home workers and legal regulation of their rights;
  • Elaborating and adopting the legal regulation of the telework in compliance with the voluntary framework agreement signed by the social partners at the EU level.

2. Action taken by companies to maintain workers in employment

What action, if any, has been taken by companies during the present downturn to keep workers in jobs in situations where the work for them has declined? Please describe briefly cases where companies have introduced short-time working (such as fewer hours per days or fewer days per week), temporary periods of leave or other means of maintaining people in jobs.

The principal employers’ position stated by the Bulgarian Industrial Association at the end of 2008 is the following:

According to the employers the economic growth of the country will be additionally impeded and complicated if the tendency of anticipating increase of wages compared to the increase of productivity continues under the conditions of crisis.

This position was definitively rejected by the trade unions which consider that one of the most important steps that might help to overcome crisis is not to allow decrease of consumption.

Most often the employers undertake the following in their efforts to prevent dismissals:

How extensive has such action been in terms of the number of companies and workers concerned and the sectors in which it has occurred?

  • Introduction of 6-hours working day
  • Provision of paid or unpaid leave
  • Reduction of social benefits – reducing the money for food; suspending the additional payments for holidays
  • Dismissing workers at the age for retirement
  • Withdrawal from commitments already taken for future increase of wages

Most of the companies resort to dismissals when they have exhausted the other possibilities.

Have particular types of company (e.g. multinationals or domestically-owned firms) or firms in particular sectors been more prepared to take this kind of action than others?

In practice there is no difference in the behaviour of the companies related to the origin of their capital.

Has the action in question typically entailed a reduction in pay? If so, please give an indication of the typical extent of this.

So far there is no data about actions taken to reduce pay. In some cases employers make a transition to hourly payment which may affect the general income due to the new way of reporting the work. In other cases it is postponed the already negotiated raise of wages.

To what extent has this kind of action been accompanied by the provision of training or education to the workers concerned – i.e. how far have companies taken advantage of the lack of work to improve the skills of their work force?

Unfortunately the provision of training or education to the workers concerned is still a seldom approach. What is more, the analyses show that the expenses for training and qualification of the staff are among the first to be cut by the firms. The expectations of the employers in that direction are towards the state, which is expected to ensure resources for re-qualification of endangered workers.

3. Joint action taken by companies and trade unions to maintain jobs

How far has the kind of action described in Section 2 above been the subject of collective agreements between companies and trade unions? Please give summary details of the content of some of the most important collective agreements.

For the time being, there is no data for a new round of the collective negotiations related to the crisis. Most often, there are negotiations conducted between the particular employer and the trade union in the company concerning the rates of the dismissals and the possible compensations for the dismissed workers. For example, the negotiations between the management and the trade unions in the military factory TEREM – Targovishte continue for several months. The management insists on reaching an agreement for dismissing 5% of the staff, but the trade union insists to preliminary get the actual financial results and the business programme of the company. The trade unions insist that the newly employed workers shall leave first not those who have dozens of years of service.

Almost 400 workers have been dismissed from Sparky-Eltos within one day. It is only the first stage of the envisaged measures because of the crisis; the second wave will be in May-June. During the negotiations related to dismissals, when talking about family couples working in the enterprise, the trade unions insisted on dismissing only one person of the married couple.

To what extent has other action been taken under collective agreements to reduce business operating costs so as to avoid job losses? Has there been an increase in instances of trade unions, or worker representatives, agreeing to accept cuts in pay, or to work longer hours without additional pay, in order to maintain employment levels? If so, please give an indication of the extent of such agreements and describe briefly typical cases.

There is no data.

Are such agreements more prevalent in some sectors than others?

Information by sectors is not available.

What other forms of action have trade unions taken, apart from strikes and other action designed to put pressure on employers, in order to try to prevent job losses and maintain employment levels? How effective has such action been?

The common action that has been undertaken is the start of negotiations between the employer and the trade unions for postponing or minimizing the dismissals. In cases of companies owned by the state or the municipalities, the intervention of ministers, parliamentary representatives, mayors and municipal councils is required. There is a clear striving for attracting the media on the part of the workers.

4. Measures to provide income support

To what extent do collective agreements include provision for higher rates of compensation in the event of workers being made redundant than they are entitled to under national legislation? How far do collective agreements providing more generous compensation than the statutory amount vary between sectors?

During almost all collective negotiations the trade unions request higher compensations for the dismissed workers. The counter arguments of the employers (which often prevail) are that the higher compensations are a real threat for new dismissals.

Has there been an increase in the number of collective agreements which include such provision during the present downturn?

There is no data.

To what extent are redundancies being concentrated on older workers, i.e. taking the form of early retirement, in the present downturn? Is there any evidence that the use of early retirement as a means of effecting reductions in employment has increased in importance during the present downturn?

There is no data.

5. Lessons from research studies

Have any studies been undertaken in the past in your country on the effectiveness of attempts made in previous periods of recession to maintain employment levels similar to those covered here? If so, please outline the studies concerned and their main findings.

After the beginning of the transition Bulgaria suffered a much more serious crisis compared to the present one which led to:

  • Hyperinflation;
  • bankruptcy of dozens of banks;
  • unemployment levels of up to 25% as a result of the closure of many loss generating state owned enterprises;
  • emigration of about 800,000 Bulgarians;

The basic actions undertaken at that time were:

  • privatization of almost all state owned enterprises,
  • development of a package of measures and programmes for subsidized employment and re-qualification of the dismissed workers.

If partial unemployment benefit, short-time working or similar schemes which provide income support to those working short hours are a permanent part of the social security system in your country, please briefly describe any studies which been undertaken on their effects and the main conclusions to emerge from them.

One of the programmes, existing for almost 8 years and still one of the basic tools for resisting the crisis, is the National Programme “From social assistance to employment”.

Its basic objectives are:

  • The provision of employment and social integration of unemployed persons subject to social assistance;
  • The provision of training for raising their competitiveness.

The analysis of the Programme made by the Audit Chamber for the period up to 2006 displays the following serious weaknesses:

  • A big number of gaps, discrepancies and violations when recording the activities at all levels of implementation of the Programme
  • The legislation does not provide parameters for the implementation of the direct objectives and tasks of the National Programme “From social assistance to provision of employment” and for the expected results.
  • At national level there are no mechanisms envisaged and no parameters observed for the number of persons employed by the primary labour market as a result of which it is impossible to assess whether the participation of the persons in the programme has enhanced their chance for realization on the primary labour market. The number of persons with permanent employment after their participation in the programme for the audited period, by data from the Regional Employment Office Directorates is 801, which is 0.27 per cent of the total number of participants in it (300 669).

Тhis definitely means that the effect on the permanent employment is very low. The Programme did not lead to employment on the primary labour market for the persons who had participated in it.

Ivan Neykov, Balkan Institute for Labour and Social Policy

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