Gov't seeks ways to keep minimum wage promise

Published 27.11.2015 22:45
Updated 27.11.2015 22:46
Gov't seeks ways to keep minimum wage promise

The newly formed Justice and Development Party (AK Party) government is set to realize its three-month action plan, which includes promises for minimum-wage workers, students, police officers, soldiers, farmers, tradesmen and youth.

The AK Party promised to increase minimum wage to TL 1,300 ($445.42) during its election campaign before Nov. 1, which aggregated the burden of minimum wage workers on small and medium-sized enterprises (SMEs). Now the government is gearing up to take major steps to ease the burden of the newly recalculated minimum wage on SMEs, as the business world argues that this salary hike will lead to an additional burden of TL 16 billion on the entire private sector. The Minimum Wage Determination Commission is scheduled to hold a meeting on Dec. 1 to discuss the private sector's demand for a 3-point reduction in minimum wage workers' social security premium payments from the government.

The Labor and Social Security Ministry initiated a study on related institutions to see what the state can do to help SMEs and similar enterprises pay for expenditures stemming from the new minimum wage. The move came after Prime Minister Ahmet Davutoğlu said the state cannot completely cover the burden but would strive to share it with the private sector.

The business community is requesting a three-point reduction in the existing social security premium of 15.5 percent that is paid for minimum-wage workers. However, the government is not leaning toward the reduction, arguing that it will lead to a large loss of income and that the existing practice already includes a five-point reduction. On the other hand, it is calculated that the tax reduction that will apply to minimum wage workers alone will cost around TL 2.5 billion. By taking this picture into account, the government is set to prepare a "conditional" support package that will apply to employees who earn minimum wage. Accordingly, the incentive package that stipulates a reduction on premiums will be updated and the incentive period will be extended.

With the objective of lessening the burden on SMEs, which pay taxes and social security premiums on a regular basis and employ a greater number of staff, the government will reduce the revenue stamp per worker to TL 12.5, the income tax to TL 210 and premiums to TL 337, which will be levied from the salaries paid to minimum-wage workers as of the new year.

The business community is requesting that revenue stamps be removed from contracts, value-added tax be ensured on a sector-by-sector basis, employers be supported for the payment of severances allowances and minimum wage be discussed by regions and sectors. Employers also demand that incentive packages be updated by taking a new minimum wage into consideration and that they be supported on topics such as taxes and social security premiums.

The government will introduce another new business regulation as well. Accordingly, university-educated employees working at public institutions will be officially considered civil servants. In this way, they will have right to transfers, promotions and titles. Currently, more than 10,000 university-educated employees work in public institutions.

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