A new bomb shell is expected to explode in the heads and pockets of Greece’s business owners: they will be called to pay social security contributions not according to the number of employees but according to “deemed criteria” – in common English: according to employees they ought to have. Who can determine how much personnel a private company in a free market economy should have? Apparently, a left-wing government brought to its knees by greedy neo-liberal technocrats and inspired by old-soviet ideologists who insist that the state has to regulate the economy whether free or even capitalist. Free market, globalization, outsourcing, modern technology, free lancers? Never heard of…. Just numbers on the papers must add up.
The plan invented by some sick-minded and sadistic technocrat foresees also that employers but also freelancers and self-employed and farmers will have to pay their own and their employees’ contributions in advance and thus based in incomes they ha din older years.
Deemed Criteria for social contributions
Greece’s employers will not pay social contributions to social security fund for the private sector IKA only based on the number of employees and their wages only but also according to some “objective” criteria defining how many employees a company should have in order to have a turn over of XY euro. The objective criteria, “eight” in total would be subjectively defining by each acting Labor Minister.
- The type of business.
- The size of business.
- The number of operation hours.
- Any seasonal nature of the business.
- Business turnover.
- Necessary skilled personnel for the business operation
- The geographic location of the business.
- Any personal work performed by the employer or the employer’s business partners.
For example, if the Labor Ministry believes (!?) that according to the above mentioned criteria (especially “turnover” and “size”) , a particular company had to employ five workers and not just three as the company has registered to IKA, then the company will have to pay social contributions for five and not the three employees it really has.
If the three employees work with part-time contracts, the employer will have to pay contributions as if they three were in …full time contracts.
“This could lead to 70% increase in social contributions for the employers,” Capital.gr notes.
This measure allegedly imposed to combat “black labor” is not a new devious idea that just popped up like a firework to mark the end of summer. The measure has been one of the chapters in the Pensions Reform voted by the parliament last June, a chapter that went rather unnoticed by the majority of the media and the society that was busy to calculate the losses for future pensioners.
State subsidized work places to combat unemployment
Now, it makes the headlines as the Labor Ministry is picking up the so-called “social dialogue” with employers bodies and seeks to introduce also other measures in order to shoot a flock of birds with a single gun shot: combat black labor AND unemployment.
One of the measures to combat unemployment is that the Labor ministry will not pay the unemployment allowance of €360 per month to the unemployed but to a company that will hire him. On his part, the employer will pay the difference to the salary he has agree with the new employee who is in fact an unemployed eligible to receive the unemployment allowance. I read in some media that the employer will add another €360 – which translates into €720 gross per month for the employed, that is a little higher than the minimum wage of €580 for the employee but some €680-€700 for the employer due to the social contributions.
The new scheme will secure work places for maximum 6 months and thus for a total of 23,000 jobless aged 29-64 years old. The program is scheduled to be launched end of September.
Greece’s unemployed are eligible to unemployment allowance for maximum 12 months in their entire working life.
The program will help unemployed to be tied in the labor market, combat black labor but also keep the unemployment data lower than in the reality. As it has been done in the last four years with the short-term job contracts subsidized by the state.
Black labor is estimated to be at 25% with the social security fund for the private sector (IKA) to have an annual loss of five to six billion euro.
The plan, as satanic as it looks, has another scandalous aspect: the IKA Fund will receive money for “fictitious” workers and it will never have to return the amount in form of pensions and/or health care services. IKA will be saved, very small, small and medium enterprises destroyed.
But small and medium enterprises will not need this deemed criteria scheme for social contributions to be destroyed.
Social contributions in advance paid according to old incomes
As of 1.1. 2017, the self-employed and free lancers (among them doctors, lawyers, farmers) will have to pay in advance social security contributions based on their income of …2015!
- Contributions to be paid for the first six months of 2017 will be calculated according to 50% of the declared income of 2015.
- Contributions to be paid for the second half of 2017 will be calculated according to 50% of the declared income of 2016.
- Differences will be paid out in the second half of 2017
For example, a self-employed with 2105 declared income of €20,000 should pay social contributions in 2017, totaling €5,380.
If his 2016 declared income is €25,000, the social contributions for 2017 should total €6,725.
With the new scheme, he will have to pay €2,690 in the first half of 2017, €3,362 in second half of 2017 and an additional €672 (difference for the payments in first and second half of 2017).
I read nowhere, that the social security funds will pay the self-employed money back if the 2016-income was half of the 2015 income….
What money will be left in the pockets of the self-employed after taxes and contributions?
Income 20,000 – 5,380 social contributions = 14,620 x 29% taxation (€4,239) from the first euro = €10,381 – 650 trade fee = €9,731
For free lancers things are worse as the tax office does not substract their social contributions.
I remember last July, a KTG reader, a freelancer sent me a copy of his tax declaration: income €10,000 – €3,400 tax – €2,700 social contribution = net €3,900 : 12 months = hm… €330 per month available income
Still wonder, why 65,000 – 70,000 business have reportedly applied to move their headquarters abroad? If taxes and social contributions swallow more than 50% of the income, and the state will determine how many employees your company has to have, what’s the purpose of running a business in Greece?
Furthermore, I am not sure if the constitution or whatever other law would allow the social security funds to receive contributions for fictitious workers existing only in the minds of some labor minister or a group of civil servants who have little or no idea of modern labor market tools.
I wonder whether this scheme of “fictitious employees & social contributions” exists in any other country.
PS I need to buy a new pair of sports shoes and start running. Away. ASAP.