Gov't flags bigger payroll tax cut to compensate for higher min wage
The government is prepared to reduce employers' social security contribution by four percentage points from January 1, 2022 to compensate for raising the minimum wage to a monthly HUF 200,000, state secretary for employment policy Sándor Bodó said after talks with unions and employers on Wednesday, according to a report by state news wire MTI.
The reduction in the payroll tax from 15.5% to 11.5% would save businesses some HUF 500 billion, Bodó said.
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.
The government earlier announced its intention to raise the minimum wage for unskilled workers 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.
A 0.5 percentage point reduction in the payroll tax together with the elimination of the 1.5pc training contribution had been planned for next year.
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