The Hungarian minimum wage has just been increased with ca. 15% for 2023, which will affect not only payroll costs, but also various other tax items tied to the minimum wage. Read on to find out which of these will matter for your Hungarian business.
Minimum wage and guaranteed minimum salary
In Hungary, there are in fact two types of minimum wage, depending on the qualifications required for the job. One is in fact called minimum wage, and it refers to the positions that do not require a high school diploma. The other is called guaranteed minimum salary, and it refers to positions that require at least a high school diploma. Since both types of minimum wages are tied to the position, not the person, you can do a minimum wage job even if you have a college degree.
Starting from 1 January 2023, the gross sum of the minimum wages will increase with ca. 15% as follows:
|2023||Minimum wage (gross)|
|Guaranteed minimum salary (gross)|
|Monthly||HUF 232,000||HUF 296,400|
|Weekly||HUF 53,340||HUF 68,140|
|Daily||HUF 10,670||HUF 13,630|
|Hourly||HUF 1,134||HUF 1,704|
This increase is directly relevant to ca. 1 million people in Hungary, meaning the ca. 200,000 people receiving minimum wage and ca. 730,000 people receiving the guaranteed minimum salary. If you have any employees affected, make sure to update their labor contracts as well as their salaries as soon as possible.
While other salaries are officially not affected, you should also consider giving a raise to non-minimum wage employees to mitigate the effects of inflation on their salaries too.
Effects on payroll costs
The increase to the previous minimum wage affects not only the net salary of employees but also the company’s costs. Since taxes stay the same as last year (when the social contribution tax was drastically reduced), payroll costs for your minimum wage employees increase in proportion.
|2023||Minimum wage||Guaranteed minimum salary|
|Gross salary||HUF 232,000||HUF 296,400|
|Cost borne by employee|
|Income tax (15%)||HUF 34,800||HUF 43,860|
|Social security contribution (18.5%)||HUF 42,920||HUF 54,094|
|Net salary||HUF 154,280||HUF 194,446|
|Cost borne by employer|
|Social contribution tax or “szocho” (13%)||HUF 30,160||HUF 38,012|
|Total payroll cost||HUF 262,160||HUF 330,412|
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 2023.
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 2023. 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 464,000 from January 2023.
Other benefits affected are childcare 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.
Minimum wage and self-employment
The minimum wage also affects the taxes to be paid by those who are self-employed. If you are not paying taxes under KATA (which was made impossible for many since September 2022), consider the following:
- If you are self-employed as your full-time job, the monthly minimum contributions equal the contributions to be paid after the minimum wage or the guaranteed minimum salary, depending on your activity.
- If you pay taxes under flat-rate taxation, your yearly limit for tax exempt income has also increased, since it is defined as half the yearly minimum wage. The new limit is HUF 1.392 million for income, which means HUF 2.32 million in revenues for the majority (who apply the 40% expense rate).
Plan your budget with precise accounting
With the introduction of the new minimum wages, you must adjust your budget for the new year. Precise financial data and up-to-date knowledge of relevant regulations can help you make informed decisions that will benefit both your employees and your business. Click here to learn about other 2023 changes to taxes in Hungary.
Helpers Finance offers accounting services to small and medium-sized companies operating in Hungary, with a special focus on working with foreign owners. We provide not only accounting, but also payroll assistance, which includes support with updating labor contracts when need be – such as when including the new minimum wage. With our assistance, you can rest assured that your business is in good hands, and you can focus on growing it.
Can we help you? Contact us now!
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