The system of taxes and contributions has recently undergone significant change to protect existing jobs and create new jobs, one facet of which has been aimed at reducing the burdens on human resources. As part of the job protection action plan, employers may claim relief on vocational training contributions and social tax for certain groups of employees from 1 January 2013. Accordingly, significant allowances are available from this year for employing, amongst others, young people starting their careers.
The amendment to the law entered into force on 1 January 2013, whereby employers may claim relief on vocational training contributions and social tax for employees who are in disadvantaged positions on the labour market – alongside the under-25s, those older than 55, young parents returning to work, the long-term unemployed, and those working in fields which do not require specialist qualifications. The detailed rules as well as precise knowledge of the administrative issues are important for all the groups affected.
The amount of the relief for the under-25s is 14.5% of the gross wage, but of no more than HUF 100,000, which can be claimed up until the month that the employee turns 25. This means that the employer essentially pays 12.5%, while the entire social tax of 27% must be paid for the portion in excess of HUF 100,000. This new rule is also applicable for employees under the age of 25 who have been working at the employer for several years, thus reducing the tax burden.
For employees younger than 25 and starting their careers (having not been employed longer than 180 days in jobs where social security contributions were paid), the allowance is 27% of the gross wage, but of no more than HUF 100,000 in the first two years of employment. To claim this allowance, the employee must prove to the employer with a certificate issued (once) in the last 15 days by the national tax authority that he/she has not been employed for a period longer than 180 days in a job where social security contributions were paid. This certificate is issued free of charge and may be requested by the career starter in person at their local tax authority office, or through an authorised representative after completing the given form. This allowance may be claimed by the employer for all employees who meet the conditions. It should be emphasised that the allowance is limited and is no longer available once the employee reaches the age of 25.
This allowance essentially replaces that available with the START card (the two allowances cannot be claimed at the same time). The allowance previously provided with the START card was lower, on average, than the new allowance.
According to the amendment, employers can reduce their taxable bases for the vocational training contribution – where the taxable base is the same as for the social tax – with the gross wage of all employees starting their careers as defined above (this does not apply to the under-25s who are not career starters), but by no more than HUF 100,000 per employee, when the social tax allowance referred to above is claimed for the first two years of employment.
This means it is worthwhile for employers to consider the under-25s for the allowances available, and the higher tax allowance granted for young people starting their careers could be an appealing factor when making decisions on hiring personnel.