He said that there is a parliamentary majority for the proposal, since the two far-left parties that voted to revoke a previous plan had expressed their support for it.
The reduction in the Special Payment on Account (PEC), as the up-front payment is known, was agreed with employer organisations after parliament revoked the minority Socialist government’s initial plan to offset the wage hike, which involved a cut in employers’ social security contribution, known as the TSU, on employees earning the minimum wage.
Prime Minister Costa announced the new plan at a news conference after the regular weekly cabinet meeting, at which it was approved.
The measure, he said, would have a financial impact on companies “equivalent to the measure that the government had previously negotiated of a reduction in the TSU” - that is, totalling €40 million.
The new system will benefit around 122,000 companies, he said - more than were covered until the end of last year by an existing reduction in the TSU instituted by the previous government.
It is to stay in effect until the end of 2018.
From 1 January 2019, the prime minister explained, another simplified system is to take effect, extended to other companies that are not at present liable for the PEC, and which he said would reduce red tape and the tax burden.
In the case of social welfare institutions (IPSS) and other non-profit entities, which do not pay corporate tax and will thus not benefit from the PEC cut, the minister for employment, José Vieira da Silva, is to negotiate other support measures.
This comes after MPs from the opposition Social Democratic Party, together with members of two far-left parties that normally form part of the government’s parliamentary support base, voted to revoke a government decree that foresaw a temporary 1.25-point cut in the TSU to offset the cost to employers of increasing the minimum wage to €557 a month from 1 January 2017 - part of a plan to increase this minimum step by step to €600 by 2019.
Shortly after the vote in parliament, Costa held a meeting with employer groups and the country’s two largest trade union confederations - one of which did not sign the original agreement - to hammer out an alternative measure.
Confirmation from the left parties that the new plan would be approved by parliament came when Communist deputy Paulo Sá said that the new proposal was “in line with” what the party has been arguing for, namely a reduction in the tax burden on small businesses.
Meanwhile, the parliamentary leader of the governing Socialist Party, Carlos César, said that the country’s economy is in a position to support the gradual increase in the minimum wage between now and the end of the current parliament, to €600 a month by 2019, and that employer organisations have “implicitly” agreed with this argument.
He was responding to comments from Social Democrat officials to the effect that the current government had just proved that the economy did not have the capacity to support such an increase.