Understanding Hungarian Payroll: Net-to-Gross Salary and Taxes
- Team of keyHRinfo.com
- 6 days ago
- 3 min read
Updated: 5 days ago
keyHRinfo.com offers services in areas of payroll implementation, payroll data migration, payroll consolidated reports and analytics to international companies with presence in Hungary.
Each country has its own rules and regulations in regards salaries. Hungary has simplified the payroll related tax structure, thus from administrative point of view the Hungarian payroll is more simple than before. Also there are many tax exemption possibilities that employees can benefit from. Many of the exemptions can be even applied simultaneously.
Navigating payroll in Hungary can feel complex, especially when calculating salaries and taxes. Whether you're an employer or employee, understanding how gross and net salaries are derived, alongside the tax obligations, is vital. This guide breaks down the basics of Hungarian payroll to demystify the process and empower you with practical insights.
The Basics of Gross and Net Salary
In Hungary, the terms gross salary and net salary are essential in payroll discussions:
Gross Salary: The total amount paid by the employer, which includes all pre-tax earnings.
Net Salary: What employees take home after taxes and other statutory deductions have been applied.
The gap between gross and net salary comes down to various contributions and tax requirements that are deducted at the national level.
Key Taxes and Contributions in Hungarian Payroll
Hungary has a structured system of taxes and contributions, which include:
Personal Income Tax (SZJA):
Flat rate of 15% applied to gross salary.
It is deducted directly from an employee’s earnings.
Social Security Contributions:
Employees contribute 18.5%, divided as:
Pension fund contribution: 10%.
Health insurance contribution: 7%.
Labor market fund contribution: 1.5%.
Employers pay additional contributions, but these are not deducted from the employee's gross salary.
Other Adjustments:
Family tax allowances: Families with children receive deductions that reduce income tax and increase net salary.
Special allowances for students or certain demographic groups, providing tax relief in specific cases.
Net-to-Gross Calculation
Employers often reverse the calculation to determine gross salaries based on net salary targets. For example:
Begin with the desired net salary.
Add back the deductions:
Income tax.
Employee contributions.
Adjust for additional allowances or bonuses. This ensures the employee receives the desired amount after all payroll obligations are fulfilled.
How Family Allowances Impact Payroll
Hungary’s payroll system includes provisions for family tax benefits, offering relief based on the number of dependent children. Parents can deduct a fixed amount per child from their taxable income, which directly increases their net salary. For example:
Families with one child receive a deduction, while families with two or more children see progressively higher benefits. These allowances are a crucial aspect of payroll, allowing families to retain more of their earnings.
Other tax allowances that employees can benefit from:
for employees younger than 25 years
first married
mother's younger than 30 years
mothers with 4 children
other cases like eg disabilities
Payroll Compliance for Employers
Employers in Hungary must ensure full compliance with payroll regulations. This includes:
Calculating salaries and contributions accurately.
Submitting tax declarations to the Hungarian tax authority (NAV).
Staying up to date with changes in laws, such as adjustments to tax rates or contribution rules. Compliance not only avoids penalties but also fosters trust and transparency with employees.
The Role of Payroll Software
Modern payroll systems simplify Hungary’s intricate calculations by automating processes. Employers can use software tools to:
Factor in personal deductions, allowances, and contributions.
Automatically generate payslips.
Ensure compliance with Hungarian laws. Such systems save time and reduce errors, especially for companies with large workforces.
Hungarian payroll is a blend of structured calculations and nuanced allowances. Understanding the interplay between gross and net salaries, taxes, and contributions ensures accurate and efficient payroll management. Whether you're calculating your own salary or managing payroll for a company, mastering these concepts empowers informed decisions and financial transparency.
You can read more about this subject here:
Overview of Hungarian Payroll Tax Reporting
What are the Key Considerations for Implementing Payroll in Hungarian Startups
keyHRinfo.com offers innovative HR and Payroll services for startups from reviewing the needs, to the solution proposal, implementation and operational phases. Also ongoing assistance for operational, audit and Mergers and Acquisitions.
keyHRinfo.com Contact: viola.pokhe@keyhrinfo.com
Comments