The Hungarian government has announced the minimum wage and the guaranteed minimum salary for 2024. The gross minimum wage will increase by 15%, and the guaranteed minimum salary by 10%. The increase is implemented early, as of 1 December 2023.
Increase already from December 2023
While minimum wages are normally introduced at the start of the new year, this time around they are applied early, already starting from December 2023. The decision was made to better compensate for the stubbornly high inflation throughout 2023. Originally, there were plans for providing minimum wage employees a one-time bonus of HUF 100,000, but then these plans were scrapped.
As it is, the minimum wage will increase by ca. 15% and the guaranteed minimum salary by ca. 10% right now. This will impact not only employees earning minimum wage or receiving benefits calculated based on it, but also employers who must adjust their budgets for the rest of the year. As a result, the decision will influence the price of various goods and services.
Minimum wage and guaranteed minimum salary
It is essential to highlight the distinction between the two types of minimum wage in Hungary. This is based on the qualifications required for the job: The minimum wage applies when the position does not require a high school diploma or any higher qualification. The guaranteed minimum salary applies when the position requires at least a high school diploma. Both types of minimum wage are tied to the position and not the individual, so it is possible to receive minimum wage even if someone holds a college degree.
These wages are defined as gross wages for full-time jobs (40 hours a week), and apply proportionately to part-time jobs. In line with this, at least the following wages must be paid to any worker in Hungary.
|Minimum wage (gross)
|Guaranteed minimum salary (gross)
Currently, there are about 250,000 people working for the minimum wage and about 750,000 people receiving the guaranteed minimum salary. The measure will impact them directly, but it will also have a significant economic and wage-related influence. For one, relevant labor contracts must be updated as soon as possible. At the same time, salaries above the minimum wage should also be adjusted to counter the effects of the inflation for those employees too.
Effects on payroll costs
The increase to the minimum wage compared to last year impacts not only the take-home pay of workers but also the operational costs of the company. Beside the wages itself, relevant taxes payable by the employers will increase too. Payroll tax rates remain unchanged from 2023, including personal income tax, social security contribution, and social contribution tax,. The family tax benefit also stays the same as in 2023. Therefore, the payroll costs for minimum wage employees increase only proportionally.
|Guaranteed minimum salary
|Cost borne by employee
|Income tax (15%)
|Social security contribution (18.5%)
|Cost borne by employer
|Social contribution tax or “szocho” (13%)
|Total payroll cost
|HUF 301 484
How does the raise 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 most recent update, these will also experience an increase in 2024.
While other payroll taxes are calculated for the month and are tied to the minimum wage effective on the first day of the respective month, they will obviously also increase starting from 1 December. These include 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 533,600 from 1 December.
Additional benefits affected include childcare allowances (paid to parents, parents with higher education, or grandparents), and the unemployment benefit. As these are paid by the Treasury, they do not influence payroll costs.
Minimum wage and self-employment
Unless you are self-employed under the KATA tax regime, the change to the minimum wage will affect the minimum contributions you must pay.
- If you are self-employed as your full-time job, your monthly minimum contributions increase starting from December 2023. For minimum wage activities, it will be HUF 88,378, and for activities requiring at least a high-school diploma it will be HUF 107,988.
- If you pay taxes under flat-rate taxation, your yearly limit for tax exempt income will increase, but only for 2024, since it is defined as half the yearly minimum wage as calculated on 1 January. The new limit will be HUF 1,600,800 for income, which means HUF 2.688 million in revenues for the majority (who apply the 40% expense rate).
How does the early raise affect employers?
Changes taking effect sooner than expected will demand swift and effective response from business owners. You will need to update your budget for the end of the year as well as for next year, just like the labor contracts of minimum wage employees. An adjustment to the salaries of other employees is also recommended on this occasion.
Plan your budget with precise accounting!
Keeping up to date with the latest news and regulations and access to accurate financial data will enable you to make well-informed decisions benefiting both your employees and your business.
At Helpers Finance, we can give you just that. We offer accounting and bookkeeping services to small and medium-sized companies operating in Hungary, with a special emphasis on assisting foreign owners. Our services encompass not only accounting but also payroll assistance, including support for updating labor contracts, especially in response to changes like the new minimum wage. With our assistance, you can trust that your business is in capable hands, allowing you to focus on its growth.
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