Parliament to Determine Minimum Salary by Law
“The introduction of a minimum salary will improve the condition of at least 229,000 employees”, Independent MP Beka Natsvlishvili noted. It is necessary that the legislation determine a minimum salary that will cover the cost of living, he added.
The bill will not touch small businesses with no more than 500,000 GEL turnover, he noted.
“Labor associations have worked on developing a bill to regulate the issue of minimum salaries, which must exceed the cost of living, which today is at 380 GEL.”
According to our bill, the minimum salary constitute 45% of the average salary, which today is at 500 GEL (before tax), and 400 GEL (net salary). It is inadmissible that people work full time for a salary under the cost of living. As for small businesses with no more than 500,000 GEL turnover, the law will not apply to them. The minimum salary would improve the condition of at least 229,000 people, because the bottom margin of the salary will be firmly set, and this decision will incentivize the growth in salaries of higher-paid employees, too. The law will increase motivation for employment”, Natsvlishvili noted.
The bill was proposed by Beka Natsvlishvili, Giorgi Lomia, Irma Inashvili, Emzar Kvitsiani, Gia Zhorzholiani, Mirian Tsiklaujri and David Chichinadze.
“It will be a positive sign to raise the minimum salary and set a definite bottom rate. Businesses also wish to pay more to its staff, but the desire and reality differ. The relation between employees and employers is regulated by market principles. The problem is that the relation between employee and employer may move to another level. Another problem is that many job places may disappear. When one person works a job for 200 GEL and another 120 GEL job, some employer may decide to employ only one person for both jobs to satisfy the minimum salary requirement. I understand that this is a well intentioned, and companies also want to pay more, but they cannot, because they will result in an unequal condition with their competitors”, Levan Silagava, head of the Association of Businessmen said regarding the minimum salary bill submitted to the Parliament.
The Georgian Business Association belive that the introduction of this margin will lower income tax payments to the state budget.
“First of all, this will burden the budget. It is not so simple as to say that a bloody business does not pay salaries to anybody. At smaller enterprises, they may be paying high salaries, but they register lower salaries to evade tax obligations. They issue 200 GEL net salaries and in this way they manage to not pay taxes to the state budget. 2% and 3% seems like serious money for them. If we set a minimum salary, the budget expenditures will grow. Another effect will appear in the private sector – if previously they used to laundry 10 GEL, they will not be able to do laundry at even 1 Tetri, and they will issue salary under the table to escape taxes, and the state budget will lose revenues from income taxes”, the Business Association chairman Levan Vepkhvadze said.
The Employers’ Association says that determining the same minimum salary in all sectors and regions is the wrong way to do it.
“I do not think we’re on the right path. The right path would be to determine the cost of living correctly. This bill chooses a certain figure and determines one third of this figure as the minimum salary. I think this is the wrong way, because this will be unjust for many employees, too. I do not think it is the right decision to apply the same figure for all sectors across the whole country. This research says nothing about the effect on employees and the private sector, and this decision may provoke a rise in unemployment. Therefore, it is necessary to do comprehensive research to answer all these questions”, the Employers Association chairman Shalva Tskhakaia said.
The ratio of 126,6654 employees is 14.7% of hired employees. Their incomes are lower than the cost of living, and this category remains under the poverty level, and they become vulnerable to the cost of living”, the bill reads.
“Poverty is one of the most acute of all social problems. According to 2018 official indicators; the poverty level in the country is 22.3%, while 11% remain under the poverty level, and make the cost of living. According to the indicators from 2019 August, 23,526 people used to receive salaries below 100 GEL, 63,356 persons - below 200 GEL, 114,000 people – below 300 GEL and 126,665 persons – below 320 GEL.
It is interesting to note that countries such as Nigeria, Armenia and Uzbekistan are ahead of Georgia in terms of minimum salary. The 20 GEL minimum salary determined in the 1990s has not changed since 1999. According to the statistics of trade unions, more than 23,000 people in Georgia receive only 100 GEL and 63,000 persons receive salaries under 200 GEL.