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Employers break the law with approval from authorities

Employers devise ways to avoid paying high contributions for workers, while labor inspectors and responsible officials are ignoring obvious irregularities.
Nenad Jovanić, a waiter, admits he has worked many places as an unregistered worker but he won’t reveal the names of the companies.

Whether business is good or it’s off, Transkom, a Bijeljina company that makes concrete chimneys and other construction forms pays out 15,000 KM a month for salaries, health insurance, pension and other benefits for its 20 employees.

Foto: CIN

‘It isn’t easy to be an entrepreneur today’ said owner Milan Todorović, ‘especially a manufacturer.’

He and employers like him across Bosnia and Herzegovina (BiH) complain that all the burden of building an economy is on them and government and workers should do more. ‘Everybody’ said Damir Miljević, president of the governing board of the Employer Association in BiH, ‘thinks that the economy is a sheep that can be sheared forever.’

Everyone pays when over-taxed and under-capitalized businesses fail, employers say. They could do more to grow profitable businesses offering good and stable jobs if only the state reduced unreasonable taxes, made other concessions and if financial institutions made it easier for them to get reasonable loans.

Getting around the law

Employers argue that obeying existing labor laws is a recipe for business failure. In the Federation of BiH (FBiH) private companies are required to contribute about 69 percent of their workers salary to their pensions and benefits, among the highest rates in Europe. In the Republika Srpska (RS) the between 42 and 57 percent of salaries and in Brčko District 47 percent.

The World Bank and some union officials say the requirement should be cut by 10 percent.

Entity officials reject that suggestion.

>Boško Tomić, Minister of Labor, Soldiers and Disability Protection in the RS says it is the employees fault if they are working unregistered.

‘There are no options to reduce it’ said RS Labor Minister Boško Tomić, who listed pensions, disabled persons and education as some of the expenses the government is trying to cover. ‘We won’t increase them but only because growing companies still need incentives.’

His FBiH counterpart Radovan Vignjević said nearly the same thing, ‘There is no space to reduce them because we have all these obligations. Pensions would fall even lower.’

Few employers admit to putting unregistered workers on their payrolls, but they get relief from big contributions in other ways.

With the quiet acquiescence of the government, employers obey the law within limits.

They register workers, for example, but fill out paperwork showing that they are getting a minimum wage so that contributions are reduced. They set up probation periods and apprenticeships for workers to justify months of not paying benefit contributions.

In RS, employers artificially reduce salaries by deducting the costs of meals and transport for employees, in order to avoid taxes.

Šaban Kadirić, president of the BiH Construction Workers Union, said small firms with a handful of employees that end up winning bids for big projects hire temporary workers to get projects completed and pay them salaries, food and transport costs. They do not register or cover their health care and pension costs.

Inspectors look the other way
Radovan Vignjević, Minister of Labor and Social Policy in the FBiH, says that unregistered labor is ‘an outlet for people to secure a moderate existence.’

Employees, happy to have positions and cash, not only do not complain, they hide their situations from labor inspectors trying to enforce laws, according to frustrated union officials. By paying attention only to what they are getting now, workers condemn themselves to hard retirement years and getting by on inadequate pensions based on minimum wages.

Labor inspectors – who are supposed to enforce compliance with labor law – close their eyes to open violations like other authorities. Some even argue that workers are better off.

‘For workers, its better if their employer doesn’t register them, than to have them registered and then fail to pay contributions’ said Branislava Džuričić, a labor inspector in Middle Bosnia Canton. In that circumstance, she said, workers cannot get a new job and be registered until the full amount of the contributions debt is repaid, which is usually unlikely. Mladen Ivešić, the owner of Mahnjača, a wood company in Žepče that is behind in employee pension contributions, says he has gone bankrupt because of workers who didn’t want to work.

‘We had a plan for a company to conduct good business and to settle all obligations towards workers, but they didn’t want to work’ he said. ‘Workers think that these are still old times of self-management when they don’t have to work, and still receive salaries.’

Authorities need to offer incentives

Marija Knežević knows that government can help businessmen and workers at the same time. She owns the Dragana motel in Banja Luka and hires former residents of Rada Vranješević, a shelter for orphaned children, as part of a program arranged by the RS Employment Bureau and the Center for Social Services. The center pays her 300 KM a month, which subsidizes the cost of employment.

Marija Knežević, owner of motel Dragana in Banja Luka, says that all of her workers are registered but only because the state enables her to pay contributions based on minimal salaries.

Her 20 employees are all registered she said, but even with the government boost they are not registered for their full salary. ‘It is well known that workers are being registered for minimum wage’ she said, ‘We all have to do what we can to survive.’

Miljević of the Employers Association said authorities in the RS and FBiH do not understand that employers ‘don’t have to work and we don’t have to employ people.’ He warns that ‘a system must be found which will stimulate employers to employ workers.’

The government is moving the other way, however.

The RS Ministry of Health is calling for a significant increase in contributions for healthcare which will hurt employers.

And RS Employment Bureau’s program that offered a cash payment for every worker registered has been cancelled. Why? Tomić said the incentive program was outside the main mission of the bureau, which is to help people find work.

Employers want other aid from government

Una-Sana Canton labor inspector Amenar Muratagić said some employers resent making contributions because they already feel short-changed by the government.

‘They deliberately don’t want to register a worker, because they don’t want to give anything to state’ he said.

Damir Miljević, President of the Assembly of the Association of Entrepreneurs BiH, claims that the authorities are not hearing the voices of employers.

Eight RS businessmen who met with a reporter from the Center for Investigative Reporting in Sarajevo (CIN) in December to talk about employer and worker rights spelled out some things government ought to be doing which could help businesses – and workers too.

The state, they said, needs to make it easier and cheaper to get visas so that workers can get more experience abroad.

‘Education abroad is not only necessary for employer, but for the worker as well’ said Vinko Perić, owner of RTV Vikom from Gradiška.

The government needs to do more to protect employers from unfair competition. Chinese businessmen, pay less, don’t have to contend with VAT taxes and in general can under-price and beat any Bosnian businessmen especially those registering workers and contributing in full for them, said Slobodan Ličanin, an experienced trader. That means workers are paid less, he said.

Sanija Raković, the owner of only dairy plant in BiH that processes goat milk, is frustrated that official cannot see a connection between helping businesses and boosting legal employment.

‘If there is no business, there is no employment either’ she said. Two years ago, Bosanski Novi municipality promised an easy-term loan so the dairy could buy goats for local farmers. They would then supply milk to the plant and everyone would benefit. The plant has lined up buyers for as much milk as it can produce. But the loan never came.

‘Farmers have no goats. We have no material and nothing to work with, so there are no jobs’ said Raković.

Michele Altamura, from the Italian non-governmental organization Rinascita, that advises entrepreneurs, agrees that inflexible lending is hindering business development.

‘Banks have no special loans for entrepreneurs and they are forced to take general loans which have high interest rates, and then they have problems paying them back. Everywhere else in the world there are favorable loans for entrepreneurs, but here.’

Some 98 percent of small and medium companies in BiH borrow, he said, because they cannot do business without them.

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