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Gov't backs parallel rise in minimum wage for skilled workers

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The government supports a rise in the minimum wage for skilled workers next year on the same scale as the over 19% increase it backs for unskilled laborers, the Innovation and Technology Ministry said on Wednesday, according to a report by state news wire MTI.

"In another sign of esteem for workers, the government is proposing raising the minimum wage for skilled workers at a proportional rate to the increase in the minimum wage for unskilled laborers. Thus from January 1, 2022, [the minimum wage for skilled workers]...will rise to HUF 260,000 in a single step," state secretary for employment policy Sándor Bodó said in the statement issued by the ministry.

The government earlier announced its intention to raise the minimum wage for unskilled workers by over 19% to HUF 200,000 a month from the start of next year, but acknowledged a tax cut would be necessary to counter the negative impact on businesses. At talks with the government a week earlier, unions and employers were at odds over whether the minimum wage for skilled workers should be raised at the same clip.

Bodó reiterated on Wednesday the government's proposal to reduce employers' overall social security contributions by four percentage points from January 1, 2022 to compensate for raising the minimum wage.

The reduction in the payroll tax from 15.5% to 11.5% would save businesses some HUF 500 billion, Bodó said.

A 0.5 percentage point reduction in the payroll tax together with the elimination of the 1.5% training contribution had been initially been planned for next year.

A six-year agreement with employers and unions coupling minimum wage rises with payroll tax cuts is set to expire in 2022. Under that agreement, the minimum wage for unskilled workers rose from a gross monthly HUF 111,000 in 2016 to HUF 167,400 from February of this year. During the same period, the minimum wage for skilled laborers climbed from HUF 129,000 to HUF 219,000.

Meanwhile, the payroll tax rate was cut from 27% to 15.5%.

The minimum wage agreement has supported marked headline wage growth in Hungary.

Gov't weighs extending local business tax relief

Bodó said the government will consider an earlier proposal by the Hungarian Chamber of Commerce and Industry (MKIK) to extend local business tax relief for SMEs into 2022, "while taking into account the fiscal stability of local governments". The move would save businesses a further HUF 150 bln, he added.

As part of coronavirus crisis relief, the central government halved the local business tax in 2021 for companies with annual turnover of under HUF 4 bln and fewer than 250 people on payroll. The central government automatically compensated settlements with fewer than 25,000 residents for revenue loss because of the measure, while compensation for larger cities was weighed on a case-by-case basis.

MKIK chairman László Parragh told MTI on Wednesday that if businesses pay less in local business tax next year, that money will be plowed back into payroll and investments.

He added that the whole local business tax system should be reviewed "in a period of political calm".

Hungary will hold general elections in the spring of 2022.

Parragh said MKIK is proposing the government freeze local business taxes to prevent increases in taxes on property or tourism services, because "businesses' billfolds are thin enough already".

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