What are the employer costs in Hungary? What is the employer tax in Hungary?

Understanding Employer Costs in Hungary

When thinking about company formation in Hungary, it’s crucial to understand the various employer costs associated with hiring employees. These costs extend beyond just salaries and can significantly impact your overall budget and financial planning. This article provides a comprehensive overview of employer costs in Hungary, helping you make informed decisions as you establish your business.

1. Gross Salary vs. Net Salary

The gross salary is the total amount paid to an employee before any deductions, while the net salary is what the employee takes home after taxes and social contributions. In Hungary, employers are required to consider both when calculating payroll expenses.

2. Payroll Taxes and Contributions

In Hungary, employers must pay several taxes and contributions on top of employees’ gross salaries, including:

• Social Security Contributions: Employers contribute approximately 18.5% of the employee’s gross salary, which consists of:
  • 10% for pension contributions
  • 8.5% for health insurance contributions
• Additional Contributions: On top of the social security contributions, employers also pay a 13% social contribution cost, which is applied after the gross salary.
• Personal Income Tax: Employers are responsible for withholding and remitting the 15% personal income tax from employees’ salaries to the tax authority.

3. Additional Costs

Apart from mandatory taxes and contributions, there are additional costs that employers should consider:

• Employee Benefits: Offering benefits such as health insurance, meal vouchers, or transportation allowances can enhance employee satisfaction and retention but will also add to overall costs.
• Recruitment Costs: Hiring new employees often involves recruitment expenses, which can include job postings, agency fees, and interview costs.
• Training and Development: Investing in employee training can lead to increased productivity and job satisfaction. However, this also requires budget allocation for training programs, workshops, and educational resources.
• Office Space and Equipment: If you’re hiring employees, consider costs associated with office space, furniture, and equipment like computers and software necessary for their roles.