CLV Partners

cafeteria

Employee Stock Ownership Program as a possible alternative to cafeteria

The Employee Stock Ownership Program (ESOP) – which has been introduced in 2015 – may offer a beneficial and flexible alternative to cafeteria for employees from a taxation point of view.
The point of ESOP is that the company’s employees acquire shares in their employer. The main purpose of the ESOP system is to create ownership interest for the participating employees. Although the employees become owners, they do not have voting rights; therefore, they have no say in the employer’s operations. Their shares only entitle them to receive payments through the company.
The law on ESOP has been changed from 1 January 2019. In this context, existing legal rules have been clarified and additional guarantee rules for employee ownership interest have been established.
The greatest advantage of ESOP lies in its taxation. Rather than the employees would be a subject to a 45% tax burden on their salary, they may receive a part of their salary with only a 15% tax burden as an ’investment income’ through the ESOP.

About the labour law related changes in 2019: the cafeteria allowances and the taxes of the retired employee’s salary

The Act XLI of 2018 on the alteration of the tax law and other related acts, furthermore on the super-tax of immigration was published on 26 July, 2018 and it will significantly amend the system of the cafeteria allowances and makes the employment of the retired persons more favourable from the next year.

We summarize the essence of the changes as follows:

– only the so called “Széchenyi Pihenőkártya” (SZÉP Card) will remain in the favourable tax category (34,5% in the next year) with a frame of HUF 450.000.-/year;
– the following allowances fall under the tax category of 40,71% in the next year: SZÉP Card over the frame detailed above; gift voucher once a year, up to max. 10 % of the wage minimum;
– all other allowances will be calculated based on the general rules, with the general tax rate as salary in the next year.

What to do in connection with the above mentioned changes:
– review of the cafeteria policy;
– review and appropriate amendment of the documents containing the cafeteria allowances (employment contracts, information letters).

In the next year in case of pensioners employed under the Labor Code no social contribution and social contribution tax (szocho) have to be paid. With regard to that the pensioners (falling into the above mentioned category) will be not entitled to social security allowances.

The labour law related changes in 2018

A summary regarding the labour law related changes in  2018 – mandatory minimum wage, social contribution tax, healthcare contribution, simplified contribution to public revenues, childcare benefits, sick pay, cafeteria rules, statutory retirement age

The labour law related changes in 2018

Government Decree No 430/2016. (XII. 15.) determines the amount of the mandatory minimum wage. The mandatory minimum wage for full-time employees increased with 8% as of 1st January 2018, from 127,500 to gross 138,000 HUF. The guaranteed minimum wage paid to skilled workers rose by 12% in the case of completion of full time working as of 1st January 2018, from 161,000 to 180,500 HUF. The social contribution tax (SZOCHO) and the amount of the healthcare contribution (EHO) reduced from 22% to 19,5%. The simplified contribution to public revenues (EKHO) also decreased, the employer shall pay 19,5% EKHO instead of the previous 20%.  

Due to the increasing minimum wage the amount of the childcare benefits (GYED), the benefits for university students and graduates grew as well as the sick pay as of 1st January 2018. The eligible families are entitled to a maximum of 193,200 HUF in childcare benefits. Students enrolled in a bachelor’s program will be eligible for 96,600 HUF support and students enrolled in a master’s program for 126,350 HUF. Female university students or graduates are eligible for an extra year of child support up to the child’s second birthday. Moreover, fathers also eligible to claim baby-care allowance (CSED) in more cases from 1st January 2018. The daily maximum of sick pay increased from 8500 HUF to 9180 HUF.   

In addition to the above, the cafeteria rules have changed. New cafeteria element: a student loan reimbursement as employer benefit can be provided tax free up to the installments but not more than 27,600 HUF monthly. The conditions for a tax free housing allowance eased, the ceiling price of this benefit became higher (nearly 83,000 HUF). The burden on employers reduced from 43,66% to 40,71% in case of certain specific benefits (Erzsébet vouchers, hot meals at the work place, monthly public transport ticket, school starting support, contribution to a voluntary health fund/pension fund). The costs of cafeteria cash payment and benefits may be granted as Széchenyi Recreation Card („SZÉP” Card: accommodation, catering, leisure) remained the same 34,22%, if it does not exceed 450,000 HUF. 

The statutory retirement age increased to 63,5 year and the amount of pensions amended favorably. The pensions (including among others retirement pension, widows’ pension, orphans’ allowance etc.) increased with 3% with the effective date of 1st January 2018. The amount of minimum pension remained unchanged (28,500 HUF).