Employers and employees make social security contributions at different rates across eastern Europe, presenting coordination challenges for multinationals. A previous article discussed social security contributions in the Americas. This article highlights contribution rates in eastern Europe.
In Bulgaria, the employer’s contribution is from 14.12 percent to 14.82 percent of the employee’s salary, while the employee’s contribution is 10.58 percent. For specific types of work, such as in dangerous environments, the contributions are higher.
The basis for calculating social security is mainly the employee’s salary, however, the basis cannot be lower than the social insurance thresholds, which are individually set for different industries and types of jobs each year and cannot be higher than the “maximum social security income,” determined each year. For 2019, it is 3,000 levs—approximately $1,693.
Social security covers the following risks: temporary incapacity for work, temporary reduced capacity for work, permanent disability, maternity, unemployment, pension and death. Social security contributions are paid until the 25th of the month following the month in which the income accrued. In addition, there is a health insurance contribution of 8 percent—of which the employer pays 4.8 percent and the employee 3.2 percent—on the employee’s salary. All social security and health insurance contributions are paid by the employer. The employer withholds the correct amount from the salary and pays it to the state.
Czech employees contribute 6.5 percent of their gross taxable income to social security plans. Employers contribute an amount equivalent to nearly 25 percent of the gross taxable income of all employees. This comprises 2.1 percent for sickness insurance, 21.5 percent for pension insurance and 1.2 percent for the state unemployment plan. The maximum annual assessment base for social security contributions for both the employee and employer is 1,569,552 korunas—approximately $67,921—in 2019.
There is no maximum assessment base for health insurance purposes in the Czech Republic. Employees contribute 4.5 percent of gross taxable income to health insurance. Employers contribute an amount equivalent to 9 percent of the gross taxable income of all employees.
Note that if a person’s earnings do not exceed 3,000 korunas—approximately $130—no social security payments are payable, but health insurance must be paid, as the threshold for that is the minimum wage.
Hungarian social security covers illness, maternity, unemployment, disability and pension. Both the employer and employee must pay contributions.
The employee must pay:
- 10 percent for pension insurance.
- 7 percent for health care insurance.
- 1.5 percent labor market contribution.
These are payable based on the employee’s gross monthly salary. There is no overall cap on contributions. The employer is required to withhold the above contributions from the employee’s salary and pay directly to the Hungarian tax authority. The employee will receive his or her net salary from the employer after the deduction of social security contributions and a deduction for personal income tax.
The employer must pay:
- 19.5 percent social contribution tax.
- 1.5 percent vocational training contribution. Latvia
Currently, the total social tax payable for each employee in Latvia is 35.09 percent of his or her salary—11 percent is the employee’s part and 24.09 percent is the employer’s part.
Social security covers the risk of loss of income to a person or his or her dependents due to age, unemployment, accident at work or occupational illness, disability, sickness, maternity, child care, or expenses connected with the death of the employee or his or her dependents.
As of 2018, social security contributions also cover health insurance. The maximum amount of social security contributions is 55,000 euros—approximately $60,755—per year.
In addition, “solidarity tax” is payable by those whose income exceeds the maximum contribution. The solidarity tax rate is 35.09 percent and is calculated on the amount exceeding the maximum contribution.
Social security contributions in Poland consist of pension, disability, accident and sickness insurance. The amounts of the contributions, based on the employee’s gross pay, are as follows:
- 19.52 percent for pension insurance, paid by the employer and employee in equal parts—that is, 9.76 percent each.
- 8 percent for disability insurance—6.5 percent paid by the employer and 1.5 percent by the employee.
- 2.45 percent for sickness insurance paid by the employee.
- 1.67 percent—this percentage may vary depending on headcount and business activity—for occupational accident insurance, paid by the employer.
- 0.10 percent paid by the employer for the Fund of Guaranteed Employee Benefits.
- 2.3 percent paid by the employer for the Labor Fund.
- 0.15 percent for Solidarity Support Fund for the Disabled paid by the employer.
An additional health insurance contribution, paid by the employee, amounts to 9 percent of the assessment basis—that is, gross income reduced by the amount of the employee’s share of social security contributions.
The employer must calculate and pay all monthly contributions to the social security office by the 15th day of the month following the month for which they are payable.
As of Jan. 1, 2020, the Labor Fund contribution will amount to 2 percent while the Solidarity Support Fund for the Disabled contribution will amount to 0.45 percent. Both contributions will be paid by the employer. This change will not increase the total percentage of contributions.