By Jan Stojaspa
High-income individuals will face higher social security burdens in Slovakia as the country removes the ceilings for mandatory health insurance contributions beginning Jan. 1, 2017.
The decision was passed by the Slovak parliament Nov. 30 as an amendment to Act No. 580/2004 on health insurance and signed into law by the president yesterday, Elena Bianchi, a press officer at the president’s press department, told Bloomberg BNA on Dec. 16.
The latest amendment compounds a decision made earlier this fall to raise the maximum amount used in the calculation of mandatory social insurance contributions—which make up the other and significantly larger part of Slovakia’s social security—to seven times the average monthly salary from five.
Taken together, the two decisions will result in lower net salaries for high-income employees—barring the rare scenario when an employer decides to compensate the employee loss of net income with a salary increase—and hundreds of euros in additional labor costs for employers, Lubica Dumitrescu, a tax director with Deloitte Tax in Bratislava, Slovakia, told Bloomberg BNA in a Dec. 16 telephone interview.
Mandatory health insurance and social insurance contributions in Slovakia are calculated as a percentage of employment income, which includes both gross salary and non-cash benefits.
For mandatory health insurance, employees pay 4 percent while employers pay 10 percent. The contributions are paid monthly and, for 2016, cannot exceed 171.60 euros ($179.09) for employees and 429 euros ($447.73) for employers due to the amount used in their calculation being capped at five times the average monthly salary from two years prior. For 2016, this capped amount is 4,290 euros ($4,477.39).
For mandatory social insurance, employees pay 9.4 percent while employers pay 25.2 percent. Mandatory social insurance contributions are also paid monthly and, for 2016, cannot exceed 403.26 euros ($421.08) for employees and 1,046.75 euros ($1,093.02) for employers (plus 0.8 percent of employment income for accident insurance and already uncapped) due to the amounts used in their calculation being capped at five times the average monthly salary. For 2017, this amount is set at 6,181 euros ($6,454.19), which is seven times the average monthly salary from two years prior, Dumitrescu said.
There are estimated to be roughly 15,000 individuals in Slovakia earning more than 4,290 euros a month and most of them are employed, she said.
Higher contributions will typically result in lower net incomes for employees by “a couple of hundred euro,” Dumitrescu said. And labor costs will rise as employers spend more on their employee’s social security, she said.
As a result, employers are unlikely to compensate their employees for losses in net income, Dumitrescu added. “What I hear in the market is that very few employers are entertaining the idea of raising salaries to maintain [their] employees’ net salaries at current levels,” she said.
To contact the reporter on this story: Jan Stojaspal in Prague at firstname.lastname@example.org
To contact the editor on this story: Jared Mondschein at email@example.com
The Nov. 30 amendment to Act No. 580/2004 on health insurance is available, in Slovak, at http://www.nrsr.sk/web/Dynamic/Download.aspx?DocID=433275.
More information on payroll issue sin Slovakia is available in the Slovakia country primer.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)