Breaking: Agreement Reached on Proposed Hungarian Minimum-Wage Increase
Tom Szigeti 2016.11.22.
Concluding round-table discussions, Government and business leaders have reached an agreement in wage negotiations: employers have agreed to the government’s wage hike, in exchange for reduced contribution requirements.
Economy Minister Mihály Varga described today’s agreement as a “milestone….they have reached a compromise agreement that will provide the basis for a six-year economic plan.”
Under the terms of the agreement, the base minimum wage will increase by 15% in 2017, while the ‘guaranteed wage minimum’ (which applies to skilled, professional labor) will go up by 25%. These increases will be continued the following year, with a further 8% hike in the minimum wage and a 12% hike in the ‘guaranteed wage minimum’ set for 2018.
In exchange for agreeing to this minimum wage increase, employers will see their social contribution tax lowered to 22%, a five-point decrease from the current rate of 27%. This will be followed by an additional 2% decrease in 2018.
Mr. Varga added that, if wage increases in the first nine months of 2017 exceed 11%, then there will be an additional 0.5 percent reduction in employers’ social contribution tax in 2018.
In addition, the corporate income tax rate will be modified to a flat 9%; currently it operates on a two-tier system, with small businesses paying 10% and larger corporations paying 19% (read our article on corporate tax changes here).
According to financial news site portfolio.hu, Economy Minister hopes to see a bill codifying this agreement submitted to Parliament on Wednesday, with an accelerated time table for debate and discussion “as we are already in November.”