Minimal social insurance contributions should be paid as a percentage of the minimum wage even by employees who make less than that, says Mindaugas Sinkevičius, director of Lithuania's Social Insurance Fund (Sodra). This would disincentivize employers to pay part of their employee's wages illegally.
© DELFI / Šarūnas Mažeika

Sinkevičius says that this would help raise income of some 280,000 employees in the country and that the measure has already been successfully tested in Estonia.

"The results in Estonia [5 years ago] where that virtually everyone had their salaries raised to the level of the minimum wage," he tells DELFI.

Over 280,000 employees in Lithuania make bellow-minimum wage, according to Sodra.

"We can presume that when social insurance contributions had to be paid as a percentage of the minimum wage, employers lost incentives to pay salaries illegally. I think it would work similarly in Lithuania," Sinkevičius said.

Mindaugas Sinkevičius
Mindaugas Sinkevičius
© DELFI / Šarūnas Mažeika

Social Democratic MP Algirdas Sysas suggested a a similar measure last year, setting the floor for social insurance contributions as a share of the minimum wage. However, the bill has yet to reach parliament. Sysas says it was blocked by the Ministry of Welfare and Labour.

He says the measure would help people who work full-time, but pay smaller contributions than minimum wage earners, because part of their pay goes unaccounted. This means smaller unemployment and sick leave benefits as well as smaller pensions when they retire, Sysas says.

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