The main effect, consider entrepreneurs, is to slow down hiring and complicate business liquidity reserves.
Small and micro businesses They are concerned about the rise in the Unified Basic Salary (SBU) to $ 425 that was announced a few days ago by the Government, some businessmen say.
And they point out that, although in the Economic Development and Fiscal Sustainability Law both the Simplified Tax Regime (RISE) and the Tax Regime for Microenterprises (RIM, which established a payment of 2% of invoiced income) were repealed to give small businessmen some space, this would be insufficient for the subsistence of some businesses due to the increase in their labor costs.
In the new law, which entered into force on November 29, the Simplified Regime for Entrepreneurs and Popular Businesses (Rimpe) was created, which will apply to business and entrepreneurship with income from $ 0 to $ 300,000.
Javier Parrales, a member of the Arthurs Audit company, said that the small industry, the entrepreneur and the micro-entrepreneur have this kind of “grace”, but they will live a complex scenario next year.
“The simplification of the regime is intended to be a kind of compensation for not having a greater tax burden. However, it is now very improbable that can alleviate the cost that the increase in labor will generate, “he said.
New salary in Ecuador: What will workers and companies do with a salary increase of $ 25?
He cited, for example, that for each $ 1 that a micro-entrepreneur pays has almost 40% of additional salary burden due to employer obligations, which will now be more difficult to meet because the pandemic continues.
For Oswaldo Landázuri, manager of the metalworking industry Metaltronic, many small and medium-sized companies, mainly, will not be able to withstand the impact generated by the new salary.
“The small, exclusive group, which is in the formality, can become even more exclusive and reduced”Said the businessman. Until October, according to data from the National Institute of Statistics and Censuses (INEC), some 2.6 million people nationwide have adequate or full employment. In other words, workers earn the minimum wage or more and work about 40 hours a week or more.
The effect for subsistence-stage businesses
In addition to stopping hiring, as the employers consider, it is pointed out that there is also a specific risk for firms that are in the subsistence stage or that they have a slow recovery. That is, for those companies that the resources they receive according to their business line are distributed only for the payroll, without representing them a greater profit.
The government assures that it did use technical parameters to decide a salary increase to $ 425
Miguel Rossignoli, General manager of the services company Ecovitali, said that the companies that were hit hard by the pandemic cut staff to reduce costs and keep basic workforces.
According to the businessman, now, with this increase in the productive cost of labor, a multiplier effect is not generated, rather Firms’ spirits slow down to prop themselves up towards reactivation and increased hiring. “Firms that have little staff could reduce it even more because it would be unsustainable to pay a high salary if their liquidity does not allow it,” he said.
For example, a microenterprise that has two or three workers who earn the basic salary would cancel about $ 600 in salary, with thirteenth and fourteenth salaries, reserve funds, vacations and contributions to the Ecuadorian Social Security Institute (IESS) included , explains labor attorney Vanessa Velásquez.
The expert affirms that to alleviate the workload imposed a labor reform is required that grants flexibility of hours and hiring. Currently, the Government has announced that it is working on this standard, although specific details of the content have not been given.
Augusto de la Torre, director of the Center for Economic Research at the University of Las Américas, agrees on this, assuring that today, more than ever, it is urgent that the Government progress with substantive reforms, especially to modernize the workplace and improve the environment for private investment. “These reforms are necessary to facilitate the absorption of the new basic salary in the economy, improve the external competitiveness of national production and lower the risk of investing in Ecuador,” says the professor.
Promotion of consumption
One of the benefits of this increase that has been highlighted by workers’ unions, such as the Confederation of Workers of Ecuador, is that consumption will be promoted.
On this issue Entrepreneurs disagree as they argue that an increase in the workforce will make products more expensive for the final consumer. In fact, from the perspective of the owner of Metaltronic, a preference will be generated for the consumption of cheaper goods that are imported from Asian countries. like China or Peru.
An additional issue that employers point out is that having a high salary subtracts competitiveness to EcuadorThis is even more so when the current government plans to point towards a commercial opening. (I)
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