Salaries ‘in envelopes’ represent a problem of social insurance system

The Republic of Moldova reached the 22nd year of independence. The IPN Agency decided to present the accomplishments and failures in the country’s development in a number of articles. Representatives of the current government, experts, former and current politicians stated their views on the steps taken by Moldova after August 27, 1991.

Article No. 14 of the IPN series “Moldova-22. Steps forward and steps backward”, on the occasion of the Independence Day

The policies on labor and social protection pursued during the last two decades were aimed at overcoming the crisis that appeared as a result of the switchover from the planned Soviet economy to market economy. During the 22 years of independence, the state institutions implemented legal mechanisms to ensure the functioning of the social insurance system, but the practice of paying salaries ‘in envelopes’ affects the people’s future as they will be unable to receive the social insurance they deserve, say officials from the field.

Workplaces for over 400,000 unemployed persons   

Minister of Labor, Social Protection and Family Valentina Buliga said the implemented employment policies, strategies and programs were aimed at providing services of a high quality to persons looking for a job and at supporting the persons out of work. Thus, in the 22 years, more than a million of unemployed persons were registered at local employment agencies so that they are able to benefit from social protection. In the first year of work of the Employment Service, only 79 persons were registered as unemployed. Upward trends were seen on the labor market over years, depending on the fluctuations: in 1998 – 63,300 unemployed persons, in 2010 – 81,500, while in 2012 – 51,300. With the support of the local employment agencies, about 409 people out of work were placed in different areas of the national economy during several years.

Common pay grade  

Valentina Buliga said that essential changes took place in the labor sector after Moldova in 1995 joined the International Labor Organization (ILO), which is the UN agency working out international labor standards. As an ILO member, Moldova so far has ratified 40 conventions of the given organization, including the eight fundamental conventions – on forced or obligatory labor, on the freedom of association and protection of the right to organization, on the equal remuneration for men and women workers for work of equal value remuneration. The important accomplishments in the labor sector include the creation of the State Employment Service in 1991 and the launch of the labor market forecast in 2009, which includes the Barometer of Professions.

The labor minister added that the remuneration of labor in Moldova in 1991-1992 was based on the Soviet legislation. In 1993, there was laid the basis of the Moldovan legislation in the field by the Law on Pay Grades. “This law instituted a common pay grade system. Relative autonomy in remuneration organization was envisioned for the units of the real sector of the economy. However, there was an obligatory pay grades system and the minimum salary was used as a norm for calculating the salaries,” stated the minister.

Five development stages  

Valentina Buliga said the remuneration sector went through five development stages during the 22 years of independence. The first stage in 1993 – 1999 was characterized by the strict regulation of retribution, based on the common tariff salary system and the setting of the remuneration conditions and size of salaries by Government decisions.

In 2000 – 2002, for the first time there was introduced the tariff salary for the first qualification category, whose size is different from the size of the minimum salary per country and which is reviewed every year.

The tariff salary for the first qualification category was legalized in 2002 – 2006. There was adopted a clear mechanism for setting this salary by negotiation in the collective conventions at national and field levels and in the collective work contracts.

In 2007 – 2008, the companies were allowed to set own tariff salary systems, taking into account the real financial possibilities.

The period of 2009 – 2013 witnessed the ‘unchaining’ of the economic entities in organizing remuneration. They got the right to choose the most efficient salary system, in accordance with the specific features of the activity and to set clear criteria and norms for assessing the professional activity of every employee.

First steps in creating social insurance system

The minister said that an important year  for the social insurance sector was 1998, when there was adopted the law on the public social insurance system and the law on the state social insurance pensions that came into force on January 1, 1999. These laws laid the foundation of the new state social insurance system, with a separate budget that remained yet a component of the national public budget. The creation of the National Social Insurance House, as a public body managing the social insurance system, was essential for developing Moldova as a state. “As a result of the pension reform, the social insurance benefits started to be set in accordance with the social insurance contribution of every participant to this system and the length (in years) for making these contributions,” stated Valentina Buliga.

National Social Insurance House head Maria Borta said the 12 years of activity in the social protection sector were covered with many difficulties, but also with nice accomplishments that contributed to the bundling of a powerful and stable institution. “We first of all aimed to increase the revenues in the state social insurance budget, which resulted in higher social benefits. Today we have a budget of about 11 billion lei. A number of 135,000 economic units contribute to the social insurance system. We have about 1 million socially insured people among employees working based on individual work contracts,” stated Maria Borta.

New prospects  

Maria Borta underlined that the period between 2004 and 2008 was very important as there was created the state individual monitoring register in the public social insurance system. It contains data about the insured persons and their contribution, starting with 1999. This mechanism represents a basic instrument in comporting the size of the social benefits and the volume of contributions transferred by every economic entity and insured person.

A large-scale activity in the social insurance sector was the implementation of the informational system Social Protection, with financial support from the World Bank. The system includes in one database information that was earlier processed in about 20 separate modules. There was worked out and implemented the information system ACCES CPAS, which enables the insured persons to have access to their persons accounts online. “This way, a method was found for information the insured persons about their personal social insurance contributions calculated by the employer,” said Maria Borta. Another important accomplishment was the reorganization of the local subdivisions according to the FRONT and BACK office principle, which allowed satisfying the demands of about 800,000 recipients of social benefits.

Maria Borta noted that from 2009 until present, Moldova signed social insurance agreements with Bulgaria, Portugal, Romania, Luxemburg, Austria, Estonia and the Czech Republic. Each country that signed the agreement pays the part of the pension calculated for the length of service on its territory, during which social insurance contributions were paid.

Maria Borta said that in 2010, the National Social Insurance House, in partnership with the USAID/BIZTAR project, implemented a system enabling the persons insured in the public social insurance subsystem to have access to the current personal accent. In this context, there was worked out the information system for ensuring access to the current account of the taxpayers and the insured persons (SI ACCES CPAS), which enables to provide information from the state individual monitoring register through the Internet, on the official website of the CNAS: The process of transmitting the statements of the insured persons through the portal was launched on January 1, 2012. In 2013, there was initiated the quarterly presentation of 4-BASS and REV-5 statements.

Impact of demographic development

Maria Borta said the reform of the social insurance system determined the main functions of the public social insurance system that strengthened the income collection system and the pension system. The unfavorable demographic development had a direct impact on the public social insurance system. Thus, pressure is now exerted on the economically active population and on the state social insurance budget given the rise in the unemployment rate.

According to Maria Borta, the pension system reform initiated in 1999 included a number of measures whose implementation would have attenuated the current demographic factors, but the reform was suspended for an indefinite period of time. The payment of salaries ‘in envelopes’ affects the state social insurance budget and will also have an impact on the future pensions and other social benefits. The penalties for the non-payment of social insurance contributions by economic entities do not manage to discipline them. Thus, the given category of salary earners remained socially unprotected.

Alina Marin, IPN
August 2013

Вы используете модуль ADS Blocker .
IPN поддерживается от рекламы.
Поддержи свободную прессу!
Некоторые функции могут быть заблокированы, отключите модуль ADS Blocker .
Спасибо за понимание!
Команда IPN.