The year ahead brings growth in a number of financial indicators in terms of personal income, whether it concerns salaries and pensions or certain forms of social benefits. From child allowance and income thresholds, as direct demographic measures, to a significant increase in funds for pensions, the Federation of Bosnia and Herzegovina (FBiH) is currently in a position to strengthen support for its most vulnerable categories, while the announced major reforms in the fiscal system will make it possible, by the end of the year, to significantly reduce the burden on labour, that is, to lower the overall contribution rate on salaries.
Aware that inflation has significantly eroded many household budgets and placed a large number of families in a situation where they find it much harder to balance their finances at the end of each month, the Government is determined for 2026 to be marked as a reform year in the system of social benefits as well as in economic policy. The proposal of the new Law on Pension and Disability Insurance represents one of the most important reforms and social solutions currently being prepared. It introduces a completely new formula for pension indexation, which implies a combination of growth in living costs and growth in the average salary, in a ratio more favourable for pensioners – 60% salary growth and 40% growth in consumer prices. In practice, this will allow pensions to increase by 11.7 percent in January and by 6 percent in July, meaning that the total increase in pensions in 2026 would amount to around 17 percent. In other words, in 2026, the minimum pension will rise from the current 599 to 700 BAM.
With the adoption of amendments to the Law on Pension and Disability Insurance, veterans in the FBiH will have higher pensions. The amendments to the Law on Pension and Disability Insurance in the FBiH do not reduce the rights of the veteran population nor exclude them from the protection of the minimum and guaranteed pension. On the contrary, the proposed legal solutions maintain and further strengthen the protection of veterans. At the same session at which it adopted the amendments to the Pension and Disability Insurance Law, the Government of the FBiH, at the initiative of the Federal Ministry of Labour and Social Policy and at the proposal of the competent veterans’ ministry, adopted amendments to three regulations on more favourable retirement for veterans. These amendments retain the existing minimum pension amount for the veteran population, which will, in accordance with the Pension and Disability Insurance Law, continue to be adjusted and increased, and in 2026, the minimum veteran’s pension should amount to around 700 BAM.
Labour market
The child allowance will also increase this year, as recently confirmed by Minister Adnan Delic, from 190 to 195 BAM, and the income threshold per household member will rise to around 410.80 BAM. Wage growth is lower than expected from the perspective of trade unions and a significant part of the public, and instead of 1.000 BAM, the minimum wage this year will be 1.027 BAM. However, the Government is preparing a solution that would allow employers, in the second half of the year, to significantly increase wages for their workers. The proposed Law on Fiscalisation of Transactions in the FBiH will result in increased fiscal discipline and, consequently, higher tax collection in the Federation, which would then open space for reducing contribution rates, thereby also creating the possibility for more visible wage growth.
Major reforms on the labour market should also be launched this year, aimed at strategically significant changes through which the FBiH will tackle challenges characterised by a mismatch with labour market needs. It is planned to adopt the proposal of the Law on Employment Mediation and Social Security of Unemployed Persons, as well as the proposal of the Law on Amendments and Supplements to the Law on Employment of Foreigners.
As explained by the proposer, these laws are part of a broader labour market reform in the FBiH, the goal of which is more precise definition of unemployment records and more efficient allocation of budget funds for active employment measures, as well as simplification and acceleration of administrative procedures, which will enable employers to more easily engage the necessary workforce, especially in deficit sectors.
