Contribution cut in Hungary to be back on the menu in 2018

Contribution cut be back on the menu in 2018

János Lázár told journalists on Thursday that 1.2 million people will earn more as a result of the minimum wage hike.

Hungary’s competitiveness with respect to labour taxes and contributions is not good, that is what the government aims to improve now.Taxation conditions have improved for medium-sized companies in Hungary, this is one of the key messages of the 11th edition of Paying Taxes, a joint study by PwC and the World Bank. Hungary stepped forward in the rankings as a result of a major reduction in its Total Tax Rate achieved last year.The social security contribution of employers will be reduced by 5 percentage points to 22% from 27% next year. It is planned to be lowered by another 2 percentage points in 2018. If the wage increase exceeds 11% in the first nine months of 2017, the government would lower the contribution by additional 0.5 percentage point in 2018, Economy Minister Mihály Varga announced on Tuesday.

Lázár said the agreement signed earlier this week aims for a 2ppt annual reduction in the 2019-2022 period if certain conditions are met, i.e. the plan is to lower the current 28.5% burden of employers to 13-14% by 2022.

The significant minimum wage hike (15% raise in 2017 and 25% raise to skilled workers) makes it a realistic goal to reach a 40% real wage increase over the next six years, Lázár added.
He stressed, though, that there is no chance of a bigger contribution cut beyond 2018 than what has been agreed on.

Wages will rise without wage agreement too

Regardless of the deal signed on the raise to the minimum wage, earnings will rise in Hungary, although not in ever sector but in many because there is labour shortage. Consequently, businesses will need to hike salaries regardless of the wage agreement if they want to retain their qualified employees, Lázár said.
The biggest assistance may be required by smaller companies. Raising the minimum wage could be a problem in agriculture, for instance.

• Tags:
• economy,
• tax,
• companies,
• mihaly varga,
• minimum wage,
• jános lázár,
• contribution