Deductions from wages are subject to strict legal regulations. In our article we summarise the rules that affect this action by employers. This is because an employer can only make deductions from wages in the cases provided for by law.
Deductions from wages may only be carried out:
- based on a legal regulation,
- based on the decision of an authority or court up to the wage portion exempt from deductions,
- based on an employee’s consent and to settle receivables derived from advances provided.
Amount of deductions from wages
In Hungary, basic deductions are based on legal regulations. In this case, employers deduct personal income tax and social security contributions from employees’ gross wages. If an employer receives an enforcement resolution, the deduction will be based on the net wage. As a general rule, only 33% can be deducted from a net wage, but there can be exceptions when the deduction even reaches 50%.
Higher percentage deductions may occur in the case of the following receivables:
- child support,
- employee wage receivable due from the debtor,
- employee wage and social security benefit received without legal grounds.
Except for fringe benefits, all monetary benefits paid in light of the employee’s employment or the termination thereof and subject to personal income tax qualify as wages in Hungary.
Based on legal regulations, the portion of a monthly paid wage equalling the lowest old-age pension, which is HUF 28,500 (approx. EUR 90) in Hungary in 2017, is exempt from enforcement proceedings. This exemption shall not apply when enforcing child support and costs related to child birth.
Order of receivables
The Hungarian law on enforcement defines the order of deductions too. Consequently, the order is as follows:
- child support,
- other statutory maintenance,
- employee wages and remuneration qualifying as wages,
- any amount payable to the state from the debtor in a criminal, penal or offence procedure, or receivables derived from the confiscation of property (except for demands under civil law),
- outstanding taxes, social security and other public debts,
- other claims,
- disciplinary fine imposed in enforcement proceedings.
After full payment of the preceding receivable in the order, the claim that is next in line can be paid. If there are several receivables under the same point, the order can be established based on which claim was received earlier by the employer.
From the perspective of employers in Hungary it is very important that if the obligation regarding wage-related enforcement is violated, the employer shall have joint and several liability towards the party requesting the enforcement, up to the amount that is not deducted.
Deductions from wages based on consent
Based on an employee’s consent, employers in Hungary may deduct their own receivables up to the wage portion that is exempt from deductions. These include damages, receivables from advances, or the deduction of the consideration for working clothes or occupational safety equipment.
The regulation on deductions from wages is a key provision of the Hungarian Labour Code in respect of wage protection, thus employers always have to comply with the strict rules defined in the laws.
RELATED ARTICLES:
