Minimum salary increase and adjustment of socialist food tickets for Venezuelan workers

On May 1, 2017, the President of the Republic passed: (i) Decree Nº 2,832 through which a 60% increase in the national minimum salary was granted to all public and private sector workers and a special bonus for pensioners was created (Decree for the Increase of the Minimum Salary), and (ii) Decree N° 2,833 through which payments for the socialist food ticket for workers was increased and the payment system modified (Decree for the Adjustment of the Socialist Food Ticket). Both decrees were published in the Extraordinary Official Gazette N° 6,296 dated May 2, 2017. Hereinafter we point out the most significant aspects of both decrees.

Minimum salary

National Minimum Salary

The decree increased the national minimum salary for the workers by 60%, effective from May 1, 2017:

According to the provisions of article 172 of the Organic Labour Law for the Workers (OLL) and Article 7 of the Decree for the Increase of the Minimum Salary, the minimum salary of part-time workers may be paid prorated to the agreed shift.

Retirees and Pensioners

The decree adjusted the pensions of retirees and pensioners in the National Public Sector to the same amount fixed as minimum salary, that is Bs.65,021.04 per month from May 1, 2017, on.

The decree sets the minimum amount for pensions granted by the Venezuelan Institute of Social Security (VISS) to Bs.65,021.04 per month from May 1, 2017, on.

Also the Decree for the Increase of theMinimum Salary establishes an “Economic War Special Bonus” for IVSS pensioners that usually receive a pension of one minimum salary, analogous to 30% of a minimum salary, equivalent to Bs.19,506.31 per month. If a pensioner receives more than one pension, the benefit will only be received for one of the pensions.

Method of Payment

According to the Decree for the Increase of the Minimum Salary, the minimum salary must be paid in cash and no salary in kind shall make up such minimum salary.

Penalty

Article 8 of the Decree for the Increase in the Minimum Salary sets out that if the employer pays a salary lower than the one fixed as the minimum national salary, the employer will be obliged to pay the difference that exists with the employment benefits according with article 130 of the OLL, and will also be penalized in accordance with article 533 of the OLL, with a fine not lower than 120 tax units^[i] (TU), and not higher than 360 TU.

Effect of Salary Increase in Labour Laws

Many labour benefits and obligations are based on the minimum salary. Below we show how the increase in the minimum salary shall affect the most important labour benefits and obligations set forth in Venezuelan labour laws:

Comprehensive care for workers’ children

According to articles 343 and 344 of the OLL and articles 101 and 102 of the regulations of the abrogated Organic Labour Law^[ii]  (ROLL) still in force, any employer who employs more than 20 workers must offer a childcare or initial education service during the working shift for workers with children from three months to six years of age and whose salary is lower than five minimum salaries, which from May 1, 2017, amounts to Bs.325,105.20. If the employer elects to comply with this obligation by paying a monthly amount to an institution duly authorized by the Ministry of People’s Power for the Family, such monthly payment must be equal to 40% of the minimum salary, which from May 1, 2017, on shall be Bs.26,008.41 for registration fees and monthly fees.

Para-fiscal Contributions

Social Security (Health and Pensions):

• Employer’s Rate: 9 to 11%.

• Employee’s Rate: 4%.

• Maximum Amount of Minimum Salaries: Bs.325,105.20 from May 1, 2017.

• Calculation Basis of Minimum Salaries: Five minimum salaries.

• Base Salary: Normal Salary.

Employment Benefits Regime^[iii]:

• Employer’s Rate: 2%

• Employee’s Rate: 0,5%

• Maximum Amount of Minimum Salaries: Bs.650,210.40 from May 1, 2017.

• Calculation Basis of Minimum Salaries: Ten minimum salaries.

• Base Salary: Normal Salary.

Effective Date

The Decree for the Increase of theMinimum Salary became effective on May 1, 2017.

Socialist food tickets

Value of the Meal Allowance

The Decree for the Adjustment of the Socialist Food Ticket adjusted the basis for calculating the food ticket benefit for public and private sector workers to 15 TU per day, for 30 days per month, up to a monthly maximum of 450 TU (currently Bs.4,500.00 daily and Bs.135,000.00 per month).

Article 3 of the Decree for the Adjustment of the Socialist Food Ticket modifies the payment system, specifying that the employer must pay the employees in cash or with a transfer to the employee’s payroll account, the amount the employee is entitled to under the socialist food ticket benefit. As a result, the employer should send separate receipts to its workers, which must show the amount paid, the number of days, and information that this amount should not have any effect on salary. This amount cannot handle any deduction, unless the employee agrees with it.

Likewise, pursuant to Article 4 of the Decree for the Adjustment of the Socialist Food Ticket, public and private employers that give the benefit through a provision of food in accordance with Article 4, numbers 1 through 4 of the Decree with Force of Law of Socialist Food Ticket for Male and Female Workers, must pay, in addition to the provision of food, the benefit in cash or with a transfer to the employee’s payroll account a value of 15 TU per day, 30 days per month, up to a maximum of 450 TU per month (currently Bs.4,500.00 daily and Bs.135,000.00 per month), while the economic emergency is in force.

Employers will have a 30-day period from May 2, 2017, to modify the socialist food ticket payment system, and to start to pay it in cash or transfer to the employee’s payroll account. In the case of coupons, food tickets or electronic meal cards already issued, the mentioned systems will have force until December 31, 2017, to be used in the administration and management in social benefits specialized establishments.

Effective Date

The Decree Adjusting the Socialist Food Ticket became effective on May 1, 2017.

Footnotes

[i] A Tax Unit is currently equal to Bs. 300, Administrative Provision No. SNAT/2017/0003 , Official Gazette Nº 6.287 Extraordinary dated February 24, 2017.

[ii] Regulations of the Organic Labour Law, Official Gazette N° 38,426 dated April 28, 2006.

[iii] Law on Employment Benefits Regime,  Official Gazette N° 38,281, dated September 27,  2005.