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Last updated on 14 November 2021.
Last week the new minimum wages were announced. This affects not only employees earning minimum wage or receiving benefits that are calculated based on that, but also the employers who have to adjust their budget, and indirectly, prices of various goods and services.
On 14 November, we have updated the information following an announcement by Mihály Varga.
Minimum wage and minimum guaranteed salary
In Hungary, there are two types of minimum wage: “minimum wage”, and “guaranteed minimum salary”. Which applies to your employee depends on the requirements of the position they fill: if the position requires at least a high school diploma, the guaranteed minimum salary will apply; if the position does not require a high school diploma (or anything higher), the minimum wage will apply – even if the employee has higher qualifications.
Starting from 1 January 2022, the gross sum of minimum wages will increase with about 20% to the following:
|Minimum wage (gross)||Guaranteed minimum salary (gross)|
|Monthly||HUF 200,000||HUF 260,000|
|Weekly||HUF 60,000||HUF 78,000|
|Daily||HUF 6,667||HUF 8,667|
Payroll costs at your Hungarian company
Changes to the minimum wages compared to 2021 will affect not only how much an employee can take home as their net salary, but also how much they cost your company. While the minimum wages increase, payroll taxes decrease to reduce the burden on companies. Social contribution tax will become 13% instead of the current 15.5%, while the 1.5% vocational training levy will be abolished not only starting from 1 July 2022, but already from 1 January 2022.
|Minimum wage||Guaranteed minimum salary|
|Gross salary||HUF 200,000||HUF 260,000|
|Cost borne by employee|
|Income tax (15%)||HUF 30,000||HUF 39,000|
|Social security contribution (18.5%)||HUF 37,000||HUF 48,100|
|Net salary||HUF 133,000||HUF 172,900|
|Cost borne by employer|
|Social contribution tax or “szocho” (13%)||HUF 26,000||HUF 33,800|
|Total payroll cost||HUF 226,000||HUF 293,800|
How does the change affect taxes and benefits?
The upper limit of social contribution tax, the amount of social contribution tax deduction, and the base of income tax relief are tied to the minimum wage effective on 1 January, and they are calculated for the year. With the latest update, they will increase too in 2022.
While other payroll taxes are calculated for the month and are tied to the minimum wage effective on the first day of the given month, they will obviously also increase starting from January 2022. These are: the lower limit of social security contribution (both for employees and agents), and the social contribution tax.
The minimum wage also affects the contribution benefit for the employment of people with disabilities. Social contribution tax paid after such people may be waived up to the double of the minimum wage per month, meaning HUF 400,000 from January.
Other benefits affected are child care allowances (paid to parents, parents with higher education, or grandparents), and the unemployment benefit, but these are paid by the Treasury, so they do not affect payroll costs.
How the minimum wage affects margins and the inflation
While raising the minimum wage is intended to increase living standards while providing employees with more purchase power, it also means that companies must recalculate their budgets and adjust their margins to make sure they can pay their employees the right wages. In turn, this will result in an increase of prices, which will again decrease the purchase power of salaries, resulting in a new wave of inflation. To avoid that, business owners should plan their budgets and margins carefully to maintain profitability without fueling inflation too much.
Precise accounting can help you plan for the changes
Starting from 1 January 2021, the monthly minimum wage and the guaranteed minimum salary increases to HUF 200,000 and HUF 260,000, respectively. At the same time, payroll taxes are decreased to balance the burden on companies.
Precise accounting can help you plan your revenue and your costs, and adjust your margins for the increase in minimum wages. Helpers Hungary offers accounting and bookkeeping services to small and medium sized companies in Hungary, with a special focus on foreign-owned businesses. If you want to learn more, feel free to contact us through our form, write an email, or call our office on +36 1 215 0712.
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