Labour minister presents ‘improved’ proposals on pension contributions of self-employed
Labour, Social Insurance and Social Solidarity Minister George Katrougalos presented a new and improved set of proposals for the social insurance contributions of freelance professional associations, who had declined to attend a meeting arranged late last week, in a press conference on Monday.
Presenting the changes, the minister noted that the draft law had included very favourable measures for the more vulnerable categories from the outset.
“For example, all workers employed on a freelance basis will pay 6.5 pct of the contributions, with their employers paying the rest,” he said. The prime minister had also announced additional measures for young scientists and professionals, following a meeting with their respective associations, in order to stop the ‘brain drain’ and the loss of highly skilled young people abroad, he added.
Katrougalos said that those now embarking on their career will enter a special insurance category for the first five years of their professional life, which will be the same as that for farmers. They would pay 786 euros a year in main pension contributions for the first two years and 954 euros a year for the next three. Those who suspended the exercise of their profession would be able to apply to be exempted from paying contributions.
For other freelance professionals, the ministry proposed a three-year transitional period, during which the new contributions will be significantly reduced. The reduction will start at 50 pct for those with an income up to 10,000 euros and will be adjusted downward by 1 pct for every 1000 euros in additional income.
The rates will then be reviewed and their performance assessed at the end of this transitional period, the minister added, noting that 66 pct of freelance workers will see their available income rise as a result of the changes.
Katrougalos said that the new system starting on January 1, 2017 will require all freelance professionals to pay social insurance contributions amounting to 20 pct of their average income in the previous tax year, regardless of how long they had been professionally active. Under the current system, the amount paid in contributions rises according to the number of years of professional activity, regardless of the amount of income declared. The minimum amount paid each month will be equivalent to 20 pct of the basic wage for an unskilled labourer, he said.
Another major change is that the social insurance rates for the self-employed will be the same as those for employees “as must be the case in a unified social insurance agency.” If the rates were different, Katrougalos added, there would be transfers from the sector with the higher rates to that with smaller rates, which would mean that employees would be “subsidising” the pensions of the self-employed.
Where there was no other social insurance payment – either in contributions for a supplementary pension or for a lump sum – the new system would lead to smaller contributions for those earning less than 12,000 euros a year, who made up the majority, he said. “Only 11 pct of freelance professionals declared an income higher than 40,000 euros,” Katrougalos added.
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