There have already been several tax related changes this year, and now here are the most relevant changes for employers and employees taking effect on 1 July 2020.
Reduced social contribution tax
The social contribution tax paid by employers on top of the gross salary is reduced from 17.5% to 15.5% as of 1 July 2020. The 1.5% vocational training contribution remains unchanged. With this reduction, the total of the employer’s payroll tax has been reduced from 19% to 17%.
Merged social security contributions
Up until now, 15% income tax, 10% pension contribution and 8.5% health contribution were deducted from Employees’ gross salaries. From 1 July, the pension and health contributions will be merged into one contribution, “social security contribution” at 18.5%. The 15% income tax remains unchanged.
As a result, there will be no actual changes to the net salary, but administration will become simpler. Monthly payslips will show new structure, and the company will have to transfer the new social security contribution to a new account number. Your accountant will update you on this.
Calculating salaries and payroll taxes
| Minimum wage | Guaranteed minimum salary | Other salary | |
| Gross salary (in the contract) | 161,000 | 210,600 | 375,940 |
| Employee’s payroll taxes | |||
| 15% Income tax | -24,150 | -31,590 | -56,391 |
| 18.5% Social Security Contribution | -29,785 | -38,961 | -69,549 |
| Net salary (to be paid out) | 107,065 | 140,049 | 250,000 |
| Employer’s tax (17%) | 27,370 | 35,802 | 63,910 |
| Company’s total payroll cost | 188,370 | 246,402 | 439,850 |
New minimum contribution limit introduced
This new regulation introduced in payroll calculation is relevant for employees working in very few hours. As of 1 July 2020, payroll taxes must be paid not simply based on the hours spent working, but they have a monthly minimum base, which is 30% of the minimum wage (currently HUF 48,300, ca. EUR 135).
Even if the employee works very few hours, the 18.5% social security contribution and the employer’s taxes must be paid to the Tax Authority after the minimum base defined above. (The change in regulation does not affect the calculation of the 15% income tax, which is done the same way as before.)
Because of this change, the company will have to pay more in contributions after the employees working for very few hours. You may want to treat this as an opportunity to review the working schedule of your employees and to consider raising individual working hours so that the gross monthly salary reaches the amount defined above.
Further changes to payroll calculation
As of 1 July 2020, other changes were introduced too, e.g. those relevant for people working while on pension. In any case, please make sure to consult your account to see how the changes may affect your Hungarian business.