Hungarian government agrees to raise minimum wage

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The Hungarian government is reported to have reached an agreement with employers and unions today on planned increases to minimum wages, according to reports. The increases will be paired with a combined seven percentage-point reduction in the 27% payroll tax, according to Hungarian news agency MTI.

Under the agreement, the minimum wage for unskilled workers will be raised by 15%, and the wage for skilled workers will climb 25% from next year, while at the same time payroll tax will fall by five percentage points, MTI reported. 

The minimum wage for unskilled workers will rise a further 8% as of 2018, and the wage for skilled workers by 12%, in parallel with a two percentage-point reduction in the payroll tax. The payroll tax could be reduced by a further half a percentage point in 2018 if gross wage growth exceeds 11% in January-September of next year, MTI reported.

The government is planning to submit a bill to put the agreement into law tomorrow, and Parliament could approve the bill in an accelerated procedure, according to MTI.

Along with the minimum wage increases, the corporate tax rate will be cut to a flat 9% next year from the current 10% on a tax base up to HUF 500 million, and 19% over that, Minister for National Economy Mihály Varga said today after meeting representatives and reaching an agreement, according to reports. The minister added that the measures the government is planning to take are seen as laying the foundation for achieving stronger economic growth, over the 2-3% rate at present, according to MTI.

The agreement on Tuesday would raise the minimum wage to the subsistence level by 2018, said László Kordas, the head of trade unions federation MaSzSz. Unions also want to see wage growth for pay categories over the minimum wage in the double digits, he added, according to MTI.

The minimum wage increases would be a big burden for businesses, said Péter Futó, chairman of employersʼ association MGyOSz, while conceding that they would also contribute to improving the countryʼs competitiveness and preserving the pool of skilled labor.

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