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Gov't to reallocate budget resources to fund new tenders for wage compensation

The government will soon discuss and initiate legislative amendments necessary to launch tenders making additional support available for employers who are unable to fund a minimally required 5% wage rise to compensate lower-wage earners for tax changes, the National Economy Ministry told MTI on Friday.

The government will among others initiate an amendment to the 2012 Budget Act to secure the HUF 21 billion funding necessary through a re-allocation of resources within the budget, the ministry said without elaborating.

The scheme, approved by the government on January 26, is in addition to already adopted measures to help employers prevent a fall in net wages that the elimination of employee tax write-offs and a one-percentage-point rise in the health insurance payroll tax would cause for Hungarians who earn less than gross monthly HUF 216,806 from the start of 2012.

From the start of 2012, if employers increase wages by more than 5% to keep net wages unchanged in the income bracket of under HUF 216,000, they will be fully refunded the cost in excess of the 5% rise from the social contribution tax. 

Under the additional scheme worth HUF 21 billion , employers who cannot carry out the minimally required 5% wage rise may apply for greater compensation, allowing them to finance only a 2% wage rise from their own resources.

Online news portal Index reported earlier on Friday that the additional wage compensation would be funded from rechanneling a HUF 21 billion budget appropriation from which employees could apply directly for compensation for a decline of net wages as a result of this year's tax changes under a proposal prepared for the government. 

The government undertook to ensure that affected public-sector employees will not see their net wages fall, and asked business sector employers to carry out the necessary wage increases. Employers must raise the wages of at least two-thirds of their affected employees by 5% to prevent their exclusion from public procurements and government support for a period of two years. 

National Economy Minister György Matolcsy said earlier in February the government projects to spend a total of HUF 130 billion from the central budget on wage compensation.