ANALYSIS
Macedonia’s New/Old Obligatory
Employee Vacation Bonus
In December 2013, Macedonia’s Federation of Trade
Unions (authorized to represent all private sector
employees in the country) and the Organization of
Employers (the legally recognized representative of
all private sector employers) agreed to reintroduce
the requirement for all private sector companies to
begin paying a sort of vacation bonus, called “K-15”.
The bonus amounts to a one-time payment of 40% of
the average gross salary paid in the country (~€500)
to all private sector employees starting in July this
year. Personal income tax will be collected on all K-15
bonuses.
The K-15 is a bit of a throwback to Macedonia’s
socialist past, where the bonus ensured that all workers would be able to afford a decent summer vacation (something that was generally considered to be
out of reach given the level of salaries generally paid
during socialism). However, it seems out of place in
a market economy, where bonuses should serve to
incentivize and reward high performance, especially
since it is being reintroduced 22 years into Macedonia’s official shift away from socialist Yugoslavia.
The fact that the bonus is now required by all
employers – and for all salary levels – removes any
incentivizing power the bonus might have had.
Instead, it effectively raises all salaries in the country simultaneously with no economic justification
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(e.g., a corresponding increase in productivity). Further, given that the 2014 bonus was introduced at
the very end of 2013, means that it was not properly
accounted for in most companies’ 2014 budgets – an
unpleasant surprise, indeed.
There \