Bulgaria’s companies would have to increase their productivity, improve production and freeze salaries of those employees, who receive higher monthly wages or to take part of the profit to compensate employees, who would lose money from the introduction of the flat rate tax.

Bulgarian Industrial Capital Association head Vassil Velev made the announcement after employers and employees’ unions signed and agreement on the compensations, Dnevnik daily reported.

Employers union representative Teodor Dechev said that the compensation was not considered as such in the agreement, as the employer was not obliged to compensate the employee for loses caused by third parties. The agreement was a voluntarily gesture to protect damages from the introduction of the flat tax, he said.

According to union of employees, 1.3 million people would suffer financial loses because of the flat tax. Employers claim that this was true for about 400 000 employees.

With the agreement, the employers’ organisations called on their members to raise salaries of all their employees receiving up to 490 leva monthly in wages and to include the raise in collective labour agreements as of January 1 2008.