Payroll taxes in Hungary are an important aspect of the country’s taxation system, as they help fund social benefits and support various government programs. Payroll refers to the total amount of money that an employer pays to their employees, including their salary and any additional benefits or bonuses.
In Hungary, employees typically receive a monthly fixed salary that is defined in their work contract. Alongside this base salary, there are various additions that may be included in the payroll, such as overtime pay, night shift allowances, Sunday allowances, and more.
When calculating payroll taxes, employers are responsible for deducting and directly paying the personal income tax (PIT) and the social insurance contribution on behalf of their employees. The PIT in Hungary is a flat rate of 15%, while the social insurance contribution is set at 18.5%. These taxes are based on the employee’s gross salary, including all additional pay and benefits.
It’s worth noting that there are various PIT discounts available for specific groups of people, such as newlywed couples, families, employees below 25, mothers below 30, and individuals with disabilities. Employers can apply these discounts in the monthly payroll calculations if they receive the proper declarations, or employees can reclaim them in their annual tax return.
In addition to the deductions for PIT and social insurance contribution, there is also a mandatory social contribution tax that employers must pay. This tax is equivalent to 13% of the employee’s gross salary and all other elements of their payroll. The social contribution tax is specifically for pension purposes and does not require any further payment from the employee.
HOW IS THE MINIMUM SALARY CALCULATED AND WHAT TO KEEP IN MIND WITH OVERTIME HOURS?
When it comes to minimum salaries in Hungary, there are two categories to consider. The first is the minimum gross salary, which is the absolute minimum that must be paid in any kind of job. As of 2023, the minimum gross salary is set at HUF 232,000. However, if a job requires any qualification, even if only a driving license or language skills, then a guaranteed minimal salary applies. In 2023, the guaranteed minimal salary for full-time jobs is HUF 296,400.
Overtime regulations in Hungary stipulate that any additional hours worked beyond the regular working hours must be compensated accordingly. Overtime must be paid at the actual hourly salary plus a 50% overtime allowance. If overtime work is performed on a Sunday or public holiday, the overtime allowance increases to 100%. However, if the overtime is compensated on a regular workday, the allowance can be reduced to 50%.
Work on public holidays also comes with additional compensation for employees. In most cases, working on public holidays entitles employees to a 100% allowance on top of their normal hourly salary. However, there are certain industries or sectors where working on public holidays is common practice and may not warrant additional compensation.
HOW ABOUT THE TAXATION ON EMPLOYEE BENEFITS?
When it comes to employee benefits, most of these are considered taxable in Hungary. In fact, they are taxed as if their value were given as net salary. Considering the various taxes and contributions, these benefits carry a tax burden of approximately 70% in total. However, there are a few benefits that receive more favourable tax treatment.
One popular employee benefit in Hungary is the SZÉP recreational card. This card functions like a normal bank card but can only be used for accommodation, catering, and leisure expenses within Hungary. Employers can provide up to HUF 450,000 per year with a tax rate of 28%. Any amount beyond this limit is subject to a higher tax rate of 33%. While this is still lower than the total tax on net salary, it provides some relief for employees.
Additionally, entrance tickets to cultural and sports events can be given to employees and others tax-free up to the monthly minimum salary each year. This allows employers to provide these benefits without imposing additional tax burdens on their employees.
In terms of additional extras that employers can provide to their employees, there is flexibility in Hungary. As mentioned earlier, most benefits are taxed as net salary, which means that employers can provide a wide range of extras based on what they believe would be effective for their employees. This can include things like gym memberships, wellness programs, educational opportunities, and more.
It is important for both employers and employees to understand the regulations and calculations related to payroll taxes in Hungary. Employers are responsible for deducting the appropriate taxes and contributions from their employees’ salaries and ensuring that they are paid on time. Employees should also be aware of the tax discounts they may be eligible for and take advantage of them either through proper declarations or through annual tax returns.
Overall, payroll taxes in Hungary play a crucial role in financing social benefits and supporting various government programs. Understanding how these taxes are calculated and applied can help both employers and employees navigate the complex world of payroll in Hungary.
With further questions on payroll taxes, feel free to contact Leinonen Hungary (contact@leinonen.hu, phone: +363 0474 9321)
