The upcoming overhaul of the social security system, which will usher in the state as a third insurer, looks like accounting gimmicks more than anything else. The proposed changes to the social security code, which will establish a ratio by which the social security contributions are paid by the employees, the employers and the state, using a ratio of 8:10:12, respectively, suggest no benefit for the employees, a cost reduction of two percentage points for the business and a transfer of funds by the state from one budget item to another.

The social security burden for the workers becomes 13 per cent, while that for the employers will fall from just over 20 per cent to 18.2 per cent. The state will continue to pump 3.5 per cent of the gross domestic product (GDP) into the National Social Security Institute, but as social security insurance and not as a budget subsidy.

All this against the backdrop of a budget surplus that has been on a record run since April and is projected to reach five billion leva by the end of 2008. There is enough room in the current situation for a steeper cut in social security rates, analysts and employer organisations concurred.

Georgi Angelov from Open Society has recommended slashing the overall social security burden from 34 per cent to 10 per cent, while Evgenii Ivanov, executive director of the Confederation of Employers and Industrialists in Bulgaria, is advocating a cut only in the pension insurance rate.

Representatives of the tripartite ruling coalition conceded that the upcoming policy changes will be beneficial only for the business community.

However, Petar Mrutskov, deputy chairperson of Parliament's social policy committee, argued that the employees would also benefit because it would freeze the current 60:40 ratio used to share the social security payments with their employers. The ratio was due to be reset to 55:45 in 2009 before becoming an even split a year later. This would now be offset by higher health insurance payments, with the health insurance rate planned to increase from six to eight per cent of gross salaries starting from 2009.

Mrutskov, Parliament social policy committee chairperson Hassan Ademov, and committee member Hristina Hristova agree that a stimulus package for the employers will ensure economic growth and cut into the share of the gray economy. A rate reduction would encourage employers to stop undocumented payments, something that would benefit employees in the long-term as it would ensure them higher pensions.

Labour unions put forth a counter-proposal, according to which employers would pay a slightly higher share of the contributions instead of their employees. The labour unions' proposal features employees, employers and the state splitting the costs using a ratio of 7:11:12, respectively.