The Cabinet and the International Monetary Fund (IMF) have been at odds lately after an announcement that Bulgaria would not immediately scrap seniority bonuses.

Bulgaria could not honour its commitment made to the IMF this January to address the issue of seniority bonuses on time, Labour and Social Policy Minister Emilia Maslarova said on March 1.

She was emerging from a meeting with Finance Minister Plamen Oresharski and the IMF's resident representative in Bulgaria, James Roaf.

Maslarova recalled that the social partners in Bulgaria (the Cabinet, the trade unions and employers) had until March 31 to find a formula to solve the seniority bonuses issue. The idea was to completely get rid of them as the IMF wanted. However, this could not happen immediately.

"We overrated our capabilities of reaching agreement at such a short notice," Maslarova said.

In her view, the problem cannot be solved as long as there is no comprehensive system on the formation of wages.

Maslarova said that by January 1 2007 there should be a modern system of wage formation so that neither workers' nor employers' interests would be harmed. She noted that negotiations with the trade unions and the employers would continue.

Roaf expressed dissatisfaction with the failure of the social partners to reach agreement so far. He attributed this to a lack of understanding on the part of the public of what exactly was at hand. As he put it, the Government and the IMF did not wish to deprive workers of their pay for experience but wanted to build a modern labour market, incorporating seniority bonuses into the wage.

The first step that should be taken is to scrap the transferability of seniority bonuses so as to eliminate discrimination among workers. Roaf said he was surprised by the opposition to such a measure in Bulgaria which, ultimately, was intended to achieve something useful for the workers, especially those that were unemployed.

Maslarova expressed the hope that the Government, the trade unions and the employers would reach agreement, thus boosting labour productivity, not eroding workers' income, and building a modern labour market to a maximum extent.

And while trade unions may be satisfied with the current development, it appears that employers are meeting it with serious concern.

"The Bulgarian Government creates confrontation between employers and trade unions, rather than trying to solve the problems of labour remuneration in line with the European Union experience," a declaration of the Association of the Organisations of Bulgarian Employers said.

The declaration was made public on March 2, prompted by Maslarova's statement that the revocation of the seniority bonuses was not on the agenda for 2006.

Addressing a national conference of the Confederation of Independent Trade Unions in Bulgaria on February 28, President Georgi Purvanov said there was no international document obliging Bulgaria to cancel the bonuses. In this way he expressed support for the Cabinet's shift in the seniority bonuses policy.

Employers said they were stunned by the fact that such statements had come in a moment when Maslarova had proposed legislative amendments related to seniority bonuses and wage negotiation. They include transforming bonuses into part of the wage for current employees and introducing factors for wage formation of new employees, depending on their length of service, qualification and others.

While earlier in February Maslarova proposed such amendments indeed, in the meantime the Government had found that the measures would be unpopular with the public, thus prompting the sudden change.

To prevent a further aggravation of the conflict, the employer organisations suggest revocation of the transferability of seniority bonuses when changing jobs but keeping them for current employees. This is required by both the IMF and the European Commission. The latter criticised the Government in its latest report for not having taken measures in this direction.