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Minimum salary: this is proposed by the Ministry of Labor to regulate future increases

Minimum salary: this is proposed by the Ministry of Labor to regulate future increases

Last July 13, the Ministry of Labor and Employment Promotion (MTPE) announced the reactivation of the National Labor Council (CNT), a space for tripartite dialogue between employers, workers and the Government, in which the problems of the country’s employment situation will be discussed and analyzed, as well as the increase in the minimum vital remuneration (RMV).

Thus, one of the issues that will seek to be prioritized in this tripartite space is the technical mechanism for determining the minimum wage, that is, establishing the criteria that must be taken into account when analyzing an increase in the RMV. In that sense, The Republic could know that he PETM already had a preliminary proposal, which was to be discussed in the CNT’s Special Commission on Productivity and Minimum Wages (CEPSM).

As detailed in the document, the preliminary proposal for a mechanism for the institutionalization of minimum remuneration in Peru, has been prepared with technical assistance from the International Labor Organization (ILO). In addition, this initiative seeks to grant greater predictability to economic agents, since it will regulate how much, when and how the adjustments to the basic salary will be made.

What would be the formula to update the RMV?

According to the MTPE, the technical mechanism proposed for the determination of the minimum remuneration is respecting the essence of what was agreed in a session of the CNT in 2007, specifies the aspects that remained pending and introduces some adjustments to facilitate its operation in Peru.

In this sense, it is argued that the percentage increases in basic salary will be equivalent to the sum of total effective inflation —percentage variation of the Consumer Price Index (CPI) or average costs of goods and services in the economy— and the percentage variation of average labor productivity (average contribution of workers to production) in the previous year.

Formula proposed by the MTPE.  Photo: document capture

Formula proposed by the MTPE. Photo: document capture

“It should be specified that, in the event that the sum of the inflation total effective and the percentage variation of average labor productivity registers a negative or null value, it will not be appropriate to increase the minimum remuneration, maintaining its nominal value. While if any of the two variables used registers a negative value, it must be discounted from the one that obtains a positive value to calculate the possible increase in the minimum remuneration; if the resulting value is positive, an increase in the minimum remuneration in the aforementioned percentage would correspond, while if it is negative or zero, it would not correspond to increase the minimum remuneration, maintaining its nominal value,” the preliminary document details.

How often could the RMV be raised?

The proposal of PETM It proposes that it be evaluated annually, which is the most used in the main economies of the region for the application of the basic salary update formula. Also, this time is given with the objective that the purchasing power of workers who receive the minimum is not affected by inflation for very long periods.

In addition, it is sought that the increase in the RMV does not accumulate and become too high, and thus can be assumed without difficulties by companies, especially those of smaller size, such as micro-enterprises.

Within the criteria to be considered, it is also stated that there will not be an adequate context for the application of the percentage increase in the RMV if, at the time of calculating said increase, any of the following situations occurs: recession; strong elevation of the unemployment rate open in the urban environment and the labor informality rate in the urban private sector; or an excessive rise in the relationship minimum remuneration on the average salary of the national formal private sector.

Minimum salary is S/1,025.  Photo: The Republic

Minimum salary is S/1,025. Photo: The Republic

The path to raise the RMV

If this preliminary proposal is approved, the MTPE must present, no later than March 31 of each year, a technical report applying the basic salary determination mechanism, which will be evaluated by the CEPSM of the CNTPE within a period of no more than one month.

Any variation in the amount proposed to increase the minimum remuneration must have tripartite consensus for its application. In addition, if an increase in the RMV, a report must be submitted.

If there is unanimous agreement in the CEPSM, it must be ratified by the Plenary of the CNTPE, a process that must not exceed the week after receipt of the proposal of the Special Commission on Productivity and Minimum Wages, for the corresponding approval of the increase in basic salary via supreme decree of the MTPE.

“If there is no consensus, a report with the respective technical positions will be submitted to the Plenary of the CNTPE. In such a situation, the Executive Power, through the MTPE, will increase the minimum remuneration, if applicable, within the framework of what is established in its update formula and the criteria that determine if there is an adequate context to increase said remuneration,” the preliminary proposal details.

Finally, it is required that the increase in the RMV must be approved, if applicable, in the first fortnight of May of each year at the latest, in order to take effect as of June 1 of the same yearin compliance with the established annual periodicity.

Source: Larepublica

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