A new measure has recently been introduced to encourage employment. It allows qualifying businesses to pay significantly reduced social security contributions providing that they meet certain criteria. The reduced contributions are available for qualifying employment contracts entered into between 25 February 2014 and 31 December 2014.
For businesses to qualify, they must not have unfairly dismissed employees for objective or disciplinary reasons in the six month period prior to the new member of staff joining, and the business must be up to date with its tax and social security payments. The contracts must also be permanent and the business must maintain the overall level of permanent employment that existed at the date of hiring for a 36 month period. The level of permanent employment and the level of employment overall will be checked every twelve months.
Assuming these conditions are met, for the first two year period, the employer may make social security contributions of only 100 euros per month in relation to full-time contracts. If the contracts are part-time, equivalent to 75% or more, or 50% or more of a full time contract, then the rates are reduced to €75 and €50 respectively. These rates are only applicable to the “common contingencies” element of the social security contributions, and not to social security contributions made in relation to unemployment and professional training. These reductions in social security contributions are significantly less than the “normal” contributions which employers need to make, which amount to approximately 31.9% of an employee’s gross salary up to the current maximum limit (€3,597 monthly) for office based employees.
If an employer fails to maintain the required level of employment over the following twelve months, it must pay back the full difference between the reduced social security contributions and the full contributions it would otherwise have made. If the employer fails to maintain the level of employment during the following twenty four months, it must pay back 50% of the difference. Finally, if such a failure happens thirty six months following recruitment, it must pay back 33% of the difference.
This measure has been broadly welcomed by the business community.