Before you make your first hire at your Hungarian company, consider the payroll costs you will incur through their employment. Read on to learn about minimum wages, payroll taxes, and company costs.
Salaries are defined in the labor contract
In Hungary, salaries are normally paid monthly. The monthly salary is defined in the labor contract you sign with your employee before they start working for you, alongside their standard weekly working hours. Full time employment means 40 hours a week (usually distributed over 5 days, 8 hours a day). Additional hours must be compensated for by wage supplements. Salaries must be paid by the 10th day of the following month.
The salary defined in the labor contract is a gross salary, from which employees pay taxes. Since different tax benefits may apply, agreeing on a gross salary makes salary negotiations more transparent for both parties. At the same time, it will be your task as an employer to forward the relevant taxes to the authorities on behalf of your employee, who will only receive their net salary. Your accountant or payroll specialist can do the calculations for you, you only have to make the transfers.
Calculating payroll costs
Above the gross salary, your company must pay a tax after each employee. As a result, you should consider not only the gross salary but also the relevant payroll tax when budgeting for the payroll costs.
This payroll tax is currently 13% of the gross salary, and is called social contribution tax (“szociális hozzájárulási adó” in Hungarian, or “szocho” for short).
This tax applies only if your company pays the corporate tax in the regular tax regime (TAO, where corporate tax is 9%). However, if your Hungarian company qualifies for the small business tax regime (KIVA), the payroll tax is included in the KIVA tax. Click here to learn more about KIVA.
Minimum wage in Hungary
To ensure that employees always receive a living wage, minimum wage is defined by law, and it is adjusted yearly. If you have employees whose salary is the same as the minimum wage, you must raise their salary every year to keep up with official requirements. (At the same time, it makes sense to review wages at least yearly to keep up with inflation and to reward the commitment and professional development of your employees.)
In fact, there are two types of minimum wage in Hungary, one lower and one higher. Whether you must apply one or the other depends on the requirements of the job. If the job requires at least a high school diploma, the higher minimum wage will apply, which is normally referred to as guaranteed minimum salary. If the job does not require a high school diploma, you do not have to apply the higher salary even if the employee does have a high school diploma or a college degree.
In 2023, minimum wage in Hungary is as follows:
Guaranteed minimum salary
Total payroll costs
(Of course these payroll costs apply only if your are paying your company taxes in the regular, TAO tax regime.)
Read more about the minimum wage in Hungary here.
When to make your first hire?
Luckily enough, you do not have to make your first hire right when your Hungarian company is set up. If you set up your registered seat with a virtual office provider, the employees working there take care of the incoming official mail on your behalf, and forward it to you or your accountant as necessary. (The accountant is also a must, but it can be a provider too.) Starting your operation supported by expert providers is a great way to save on payroll costs, especially in the first few months. This way you can focus your resources on what you do best: growing your business.
Ask for expert help from Helpers
Helpers offers assistance in business setup and administration, focusing on small and medium-size companies. This includes not only company registration, but also accounting and virtual office, complete with legal and tax advisory as necessary. Let us know your plans in Hungary, and let us help you realize them.