Minimum Wage increase and financial burden on businesses in 2026

The increase of the minimum wage from 40,000 to 50,000 lek, with an additional 10,000 lek per employee per month, and the government support for 9 months through covering the difference in contributions, creates a situation where businesses face a combination of additional costs and the need for adjustment. The employer contribution rate used to calculate the additional cost is 16.7 percent, which includes approximately 15 percent for social security and 1.7 percent for health insurance. This assumption has been used to calculate the financial cost for employers and is based on reference practices commonly published by international tax consulting firms.

Within this framework, different scenarios have been calculated combining monthly turnover sizes of 100,000; 200,000; 300,000; 500,000; and 1,000,000 lek, the number of minimum-wage employees ranging from 1 to 5, as well as gross profit margins ranging from 20% to 40%. For each scenario, three direct elements of financial burden were calculated: monthly additional wage cost, calculated with the formula

Monthly additional wage cost=ΔW × number of employees

where ΔW = 10,000 lek per employee per month, monthly additional insurance cost in case the government does not cover it, calculated as

Additional insurance cost=Additional wage cost × 16.7%

and the change in gross profit depending on turnover and gross margin, calculated as

Gross profit after change=(Turnover×Gross margin)−(Additional wage cost+Additional insurance cost)

During the 9-month subsidy period, the government fully covers the contributions for the wage differential, so businesses only bear the increased wage cost, which is 10,000 lek per employee per month. After the subsidy ends, the full burden is transferred to the employer, so the total increase becomes 11,670 lek per employee per month, including contributions.

The concrete scenarios clearly show the intensity of the impact. For example, for a business with 1 employee and monthly turnover of 200,000 lek, the additional wage cost is 10,000 lek per month while the additional insurance cost, if not covered by the government, is 1,670 lek. To cover insurance costs from turnover only, the formula used is

Required price increase = Additional insurance cost Turnover × 100 = 1,670/ 200,000 × 100 ≈ 0.835%

If the government covers the insurance, the business only has to cover 10,000 lek, which is 5% of monthly turnover. Another more complex case is 3 employees with 500,000 lek turnover. The additional wage cost reaches 30,000 lek per month and the additional insurance cost without subsidy is 5,010 lek.

To cover insurance only, the formula gives:

5,010/ 500,000 × 100 ≈ 1.002%

To cover wages + insurance (without subsidy), the formula gives

30,000 + 5,010/500,000 × 100 ≈ 7.002%

If the government covers the insurance, covering only the wage cost requires a 6% price increase.

The cases show that, contrary to common expectations, the business survival burden is very sensitive to the ratio between turnover, gross profit, and number of employees. For businesses with low turnover, e.g., 200,000 lek and two minimum-wage employees with a 25% gross margin, the gross profit before the change is 50,000 lek, the loss during the subsidy due to the additional 20,000 lek cost reduces profit by 40%, while after the subsidy, when the burden rises to 23,340 lek, the loss reaches approximately 46.7% of profit. In extreme scenarios, gross profit can become negative, placing the business in an operational loss.

The 9-month support period can be considered a transitional window allowing businesses to gradually increase prices, review their cost structure, and analyze productivity. However, for a significant portion of small businesses, especially those with low gross profit and fixed contracts, 9 months is not enough to absorb the additional burden, because the cost increase is monthly and permanent. In the absence of turnover or price growth, the cost directly reduces gross profit, and it is often substantial.

If turnover and prices do not change, the burden of 11,670 lek per employee per month after the subsidy hits gross profit directly, often reducing it by 20 to 40% for many typical businesses, while for businesses with low turnover or many minimum-wage employees, gross profit can turn negative.

To avoid undesirable effects, it is recommended that the support period be extended to at least 12 months with a gradual transfer of the burden from the state to the employer. In the absence of this, complementary measures should be taken such as investment financing relief, productivity improvement programs, targeted tax reliefs, and operational efficiency measures.

Small businesses should conduct 3, 6, and 12-month scenario analyses, review their product portfolio, gradually increase prices to avoid losing clients, negotiate better terms with suppliers, and strengthen liquidity discipline. The 9-month government support is useful in the short term, but often insufficient for many businesses with low profit margins and limited turnover. If turnover does not increase and prices remain unchanged, the impact on profit is direct and significant, causing gross profit reduction by 20 to 40% for many typical businesses and operational losses for those with very low turnover or many minimum-wage employees. This is why minimum wage policy requires careful transition management and accompanying measures to avoid undesirable economic effects.