This is a topic on which I haven’t written so far, but lately has started exciting me, after I decided to start my own company(that hasn’t happened yet, but the drive is still there). Also note, that this article is related to the economic situation in Bulgaria.
I guess everyone that has worked in the private sector(I don’t know what’s the situation in the state sector, but I really hope that things are correct there) is aware of part of the schemes that employers use in order to pay higher salaries to their employees and keep more profits for themselves. The most common method is to declare that the employee is being paid less than what they actually are and the rest is handed in cash.
This way the employer has to pay less for social security, healthcare and taxes. Since the employee currently pays 40% of the taxes and social security, they also “take advantage” of that opportunity and “lose” less of their actual net profit.
On the other hand, the negative consequences for both the individual and the whole country are significantly higher. To name a few:
Negative consequences for the employee:
- Smaller salary during paid leave.
- Smaller benefits during maternity leave and temporary disability.
- Smaller benefits during unemployment.
- Lesser chance and smaller size of credits.
Negative consequences for the whole country:
A smaller amount of money goes into the country’s treasure. That makes paying out pensions and benefits for pensioners and the people in need more difficult(not to say impossible). Which leads to the fact that some of the money in the budget have to be shuffled around and instead of them being used for other means like education, healthcare, etc. they are used to cover pensions and benefits.
Now, if this was occurring on a rather small scale, the consequences wouldn’t have been so big. The problem is that this is not the case.
Here comes the time to admit, that I totally understand why employees and workers come to breaking the low when we talk about industries where the actual salary is already low enough.
On the other hand, I can’t understand and I don’t justify this behavior in industries where the companies make profits that are big enough to allow them to pay for the actual amount of social security that they should be paying for. An example of such a branch is the IT sector for instance. I’m guessing that most of the IT companies in Bulgaria seek and find clients across the globe, including some wealthier countries(like the US, Great Britain, etc.), which allows them to offer competitive prices compared to the local market all while getting a considerably high income for Bulgaria. Even if some companies don’t work mainly with clients from abroad, some companies offer a pretty costly(for Bulgaria) prices for services like building a website for example. Under any circumstances if the company is managed good and it has well-trained personnel, realization is almost guaranteed.
I don’t have the exact numbers and I can’t certainly state that if most of the sectors with high incomes start reporting the actual income of their employees there will be a tangible change, but I’m very confident about it. Unfortunately most of the people in Bulgaria(and not only) strive aim at improvement on the personal level, instead of towards a global one – and for as long as that is the case, the chances of the situation improving here will be smaller and smaller.
While I know that one swallow does not a summer make, my personal intention is to pay the real social securities and taxes to anyone(including myself) that works for me(in that sense, I’m a terrible capitalist I know ). This way I’ll rest assured that I’ve fulfilled my part of my duties towards the people that have worked their share and the people that will start working tomorrow.