Methodology
How do we calculate the Bureaucratic Index?
A transparent methodology from identifying obligations to calculating hours — every step is documented by a specific law.
A transparent methodology from identifying obligations to calculating hours — every step is documented by a specific law.
Bureaucracy Index is a simple and transparent way to quantify the proverbial "red tape" — discussed daily in the media, yet rarely measured in concrete terms.
It was introduced in 2016 in Slovakia by the Institute of Economic and Social Studies (INESS), with the goal of comprehensively mapping the bureaucratic burden facing SMEs and its real cost in time and money.
→ Our ultimate goal is to turn the Bureaucracy Index into an international tool for think tanks and advocacy groups focused on economic competitiveness.
Bureaucracy Index identifies bureaucratic duties of two fictional model SMEs — a manufacturing company and a hotel — in two situations: starting a business and conducting business activities for one year.
These duties are split into categories and each assigned a time cost. The sum of these partial time costs is the resulting index value.
Distils red tape into a single number that's easy to communicate to media, policymakers, and the public.
Builds a database of bureaucratic duties for SMEs — useful for tracking regulatory change.
Enables direct comparison across countries using an identical methodology.
→ Want to bring the Bureaucratic Index to your country? Become a local partner — learn about the process and download the partner brochure.
The Index is derived from two model SME companies. These models are identical across all international partners, ensuring fully comparable results.
| Parameter | Value |
|---|---|
| Type of legal form | Most common type of domestic limited liability company |
| Start of operations | 2 years |
| Ownership | 100% domestically and privately owned; no foreign or state ownership. 2 owners. |
| Number of employees | 10 (without employees from abroad). Five aged 20, five aged 50. Five males, five females. |
| Employees hired every year | 1 (legal probation time applied where possible) |
| Employees fired every year | 1 |
| Sick leave | 5 working days per employee per year |
| Legal holiday leaves | Each of 10 employees uses all legal holiday leaves. |
| VAT payer | Yes |
| Annual turnover | €500,000 |
| Annual profit | €25,000 |
| Cash handling | The company accepts cash, card and wire payments. |
| B2B / B2C | Yes / Yes |
| Own building | Yes |
| Location | Capital city |
| Accounting | Standard accounting software; accounting is not outsourced. |
| Communication with public authorities | Electronic, when such option is possible. |
| Law | The company strictly follows the law and fully complies with all requirements. |
| Externally provided service | If required by law, the company searches for a new provider once every four years. |
| Parameter | Value |
|---|---|
| Sector | Manufacturing of metal products |
| Occupancy risk factor | High – use of electric tools, fire, chemicals, noise |
| Vehicle | 1 truck (>3.5t, 200kW) |
| Company driver | 1 |
| Export outside EU | Export USA – 2 deliveries: HS Code 73083000 – Iron/steel doors and windows (value of 1 delivery: €3,000) |
| Import outside EU | Import China – 2 deliveries: HS Code 26011100 – Non-agglomerated Iron Ores and Concentrates (value of 1 delivery: €3,000) |
| Waste production | Complex: 10 kg electronics, 20 kg oils/colors/chemicals (hazardous), 20 kg mixed glass, 100 kg metal, 50 kg mixed plastics, 50 kg mixed paper, 50 kg unsorted per month. |
| Overtimes / Weekend work | No |
| Parameter | Value |
|---|---|
| Sector | Hotel with restaurant (production of ready meals) |
| Occupancy risk factor | Low |
| Vehicle | 1 personal car (<3.5t, 100kW) |
| Company driver | 1 |
| Export/import outside EU | No (accommodates foreign guests) |
| Waste production | Basic (kitchen waste, office waste) |
| Overtimes / Weekend work | Yes |
| Sale of cigarettes | Yes (for personal consumption) |
| Sale of alcohol | Yes (for personal consumption) |
| Water supply | Public water supply |
To calculate the index, we identify all the relevant bureaucratic duties of the model company. "Relevant" means they fulfil two conditions:
Wages, taxes and contributions: Everything related to tax and obligatory insurance administration on behalf of the existing employee — only where the law requires the employer to provide these.
Hiring and firing: The model company hires one and fires one employee during the year. May include obligatory introductory H&S training, entry medical examination, registration of the new employee with the tax office and social insurance agency.
Worktime reporting: Some countries require detailed and recorded management of worktime, holidays, etc.
Taxes administration: Administration of any taxes except contributions on behalf of the employee. Typically corporate income tax, VAT, real estate tax, etc.
Waste administration: Keeping records about waste creation and disposal.
Vehicle administration: Bureaucratic duties related to the purchase (once every 4 years), sale, operation and driving of the company vehicle.
Obligatory certification and external services: Activities regarding obligatory certification, including safety and technical checks imposed by law.
An entrepreneur must stay up to date with certain laws. Rapid changes in crucial laws require time to study. Three bodies of law are considered: the labour code, the corporate tax code, and the commercial code.
→ If there is a novelisation during the considered year to any of these three laws, add 1 hour per law per novelisation to the final time cost. Example: one novelisation to the labour code, three to the corporate tax code, zero to the commercial code = 4 hours (1+3+0).
Each bureaucratic duty is assigned one of four "time cost" values:
| Category | Time | Description |
|---|---|---|
| Short | 0.25 hr | Automated, repetitive actions assisted by software — e.g. auto-generated reports requiring no manual elaboration. |
| Medium | 1 hr | Forms and declarations requiring manual inputs, calculations, or communication with authorities. |
| Long (half) | 4 hrs | Intensive duties with large manual input or mandatory attendance — e.g. medical exams. |
| Long (full) | 8 hrs | Full-day intensive duties requiring extensive data collection or all-day attendance — e.g. H&S training. |
Additional time modifiers apply: Payment (+0.25 hr if manual), Submission (+0.25 hr if paper), Travel (+2 hrs if in-person visit required), Market Search (+1 hr/year if commercial provider needed).
All costs are calculated on an annual basis. Monthly duties are multiplied by 12; duties occurring every two years are halved; irregular events (e.g. vehicle purchase) are assumed to occur every four years.
Example 1 — Monthly Insurance Report
Routine duty, inputs auto-generated by accounting software → Short (0.25 hr) × 12 months, submitted electronically.
Total: 3 hours/year.
Example 2 — H&S Training (every 2 years)
All 10 employees attend a half-day training at an external provider → 4 hrs × 10 employees + 2 hrs travel = 42 hrs ÷ 2 years + 1 hr market search.
Total: 22 hours/year.
Example 3 — Vehicle Registration (every 4 years)
Medium process (1 hr) + in-person visit (2 hrs travel) + cash payment (0.25 hr) = 3.25 hrs ÷ 4 years.
Total: 0.81 hours/year.
Communicating the results and methodology is the key part of the project. Your organization is responsible for national communication; INESS will coordinate the international campaign around International Bureaucracy Day.
INESS communication activities in Slovakia have included:
The table below illustrates how duties are catalogued and time costs are assigned in practice.
| ID | Duty Name | Cat. | Time | Freq. | Travel | Pay | Sub | Mkt | TOTAL |
|---|---|---|---|---|---|---|---|---|---|
| B.1.1. | Monthly insurance payment report to Social Insurance Agency | medium | 1 | 12 | 0 | 0.25 | 0 | 0 | 15 |
| B.1.2. | Statement of payments of public health insurance | medium | 1 | 12 | 0 | 0.25 | 0 | 0 | 15 |
| B.1.3. | Overview of tax income tax advance payments | medium | 1 | 12 | 0 | 0.25 | 0 | 0 | 15 |
| B.1.4. | Notification of personal income tax bill | medium | 1 | 1 | 0 | 0.25 | 0 | 0 | 1.25 |
| B.1.5. | Wage list | short | 0.25 | 10 | 0 | 0 | 0 | 0 | 2.5 |
| B.1.6. | Declaration on application of non-taxable part of taxable amount | medium | 1 | 1 | 0 | 0 | 0 | 0 | 1.0 |
| B.1.7. | Annual personal income tax clearing | medium | 1 | 10 | 0 | 0 | 0 | 0 | 10 |
| B.1.8. | Income tax paid — declaration | short | 0.25 | 10 | 0 | 0 | 0 | 0 | 2.5 |
| B.1.9. | Taxable income amount confirmation | short | 0.25 | 10 | 0 | 0 | 0 | 0 | 2.5 |
| Subgroup Total: | 64.8 | ||||||||
Institute of Economic and Social Studies (INESS) is an independent, non-governmental, apolitical economic think tank established in 2005. INESS monitors the functioning and financing of the public sector, evaluates the effects of legislative changes on the economy and society, conducts sector analyses and economic policy recommendations, and comments on current economic and social issues.
Contact: martin.vlachynsky@iness.sk
Web: bureaucracyindex.org
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