Govt must prepare wage compensation subsidy tender by January 31

The government must come up with a tender for additional subsidies available to employers who raise wages to compensate lower earners for tax changes by January 31, under a decree published in official gazette Magyar Kozlony dated January 26 and published on Thursday.

The National Economy Ministry has the same deadline for submitting amendments to legislation necessary for implementing the additional subsidy scheme, and specifying its funding within the scope of the 2012 central budget.

National Economy Ministry State Secretary Sandor Czomba said last week that the additional compensation would cost the government about HUF 21bn.

The government said earlier it aims to prevent anybody’s net wages from falling because of tax changes. To achieve this, workers who earn less than gross HUF 218,000 a month must be compensated as a result of the elimination of tax preferences.

Under a compensation scheme in effect since the start of the year, employers cover up to a 5% wage increase as compensation, while the government was to pay for any rise over that if the employer in question raises the wages of all affected employees to the required extent. Employers meeting the conditions can deduct the portion over the stipulated 5% of the necessary wage rise from payroll tax obligations.

A modification to the plan cleared by the government a week ago would grant employers support for wage increases of 2-3% to help them reach the 5% threshold.

The additional compensation will be granted through tenders.

The additional compensation will focus on companies employing a high number of low-wage earners. Applicants must also undertake to raise the wage of every affected employee, and the rise must be retroactive to January 1 of this year. In a further condition, the businesses must undertake not to reduce the number of people they employ in 2012.