The new Law on Social Security (Act CXXII of 2019), which has come effect on the 1st of July 2020, standardises the system of contribution payment, modifies the relevant class of both individuals concerned with health insurance and persons engaged in auxiliary activities, and introduces a minimum amount in the contribution payment of employees.
Introducing general contribution rate
With effect of the 1st of July 2020, individual contributions payable by the insured person (4 per cent healthcare contributions in kind, 3 per cent healthcare contributions in money, 1,5 per cent labour market contributions, 10 per cent pension contributions) have been consolidated to social security contributions of 18.5 per cent, which is equal with the total per cent of the individual contributions applied previously. The new consolidated social security contributions shall be applied in all legal relationships which are subject to insurance relationship.
Individual pension contributions shall remain in force together with social security contributions since only individual pension contributions shall continue to be deducted from some of the incomes (e.g. child-care benefits, child-care assistance benefits etc.).
Family contribution benefits shall be increased by 1.5 per and may be validated from the whole amount of social security contribution of 18.5 per cent from the 1st of July 2020.
Minimum contribution base in employment relationship
Minimum contribution base has been introduced in the case of employees being engaged in employment relationship: the contribution base shall be at least 30 per cent of the prevailing minimum wage on a monthly basis from the 1st of July 2020.
It is possible to be exempted from the minimum payment obligation partly or wholly but only in the cases prescribed in the new Law on Social Security.
With respect to minimum contribution base, there is no difference between full-time and part-time employment which means that it is needed to pay social security contributions after at least the minimum contribution base of 48 300 HUF (161 000 HUF * 30 per cent) even if the monthly income of the employee is less than 48 300 HUF as a result of part-time employment.
In such cases employers are obliged to pay the social security contributions arising from the difference between the minimum contribution base and the contribution base paid effectively.
Employees, whose income does not reach the minimum contribution base, are recommended to make a declaration to clarify whether any of the exemption provisions may be applied in their case.
It is needed to pay the social security contributions arising from the difference between the minimum contribution base and the contribution base paid effectively only from September 2020.
Amendments related to the insurance relationship of own-right pensioners
Persons engaged in auxiliary activities shall not considered to be insured persons which means that they do not need to pay social security contributions at all. They are obliged to pay only personal income tax of 15 per cent after their income.
Pensioners being engaged in employment relationship have been exempted from paying contributions with effect of the 1st of January 2019. With the new amendments all own-right pensioners who are engaged in occupational activities shall not be subject to healthcare benefits as a result of the contribution payment exemption. From now on, their income shall not be the base for increasing their pension by 0.5 per cent.
Social contribution taxes
Social contribution taxes have been reduced from 17.5 per cent to 15.5 per cent with effect of the 1st of July 2020.
The contribution minimum amount has effect also on the social contribution taxes. As social contribution taxes base equals with the social security contributions base, if the social security contributions base shall be at least 30 per cent of the minimum wage, the same amount shall be applied as social contribution taxes base.
This document can be downloaded in PDF format by clicking on this link: Amendments of new Law on Social Security