Full impact of Slovak additional salaries to be seen in 2019-2020

Larger junior ruling partner, nationalist SNS, expects the real effect of introducing the 13th and 14th salaries to be visible in 2019 and 2020, because then the additional salaries will be exempted from taxes and levies to a much larger extent, according to Zuzana Skopcova, head of the office of SNS chairman Andrej Danko. She adds that the tax relief in this regard will be implemented gradually. According to her, some effects have already been felt, because the 13th salaries are exempted from health insurance levies this year, and tens of thousands of employees have enjoyed the additional money. Skopcova noted that next year, the 13th salaries will be exempted from both health insurance levies and income tax, whereas the 14th salaries will be fully exempted from health and social insurance contributions, as well as from, income tax. According to her, the impact of the measure can be evaluated and further improvements can be considered only after the fully-fledged exemptions are in place. She added that SNS will continue to introduce measures intended to increase the monthly net wages.

On a related note, Club 500, an association of large employers, called for new talks with the government on further lowering the tax and contribution burden, especially for low-income employees. Club 500 calls for intensive communication between government and employers that will enable the setting up of a stable and sustainable tax and levy system, and avoiding its frequent change.

We recall that in February, the parliament adopted amendments to the labor code that raise the night and holiday work bonuses, introduce weekend work bonuses, and regulate the status of 13th and 14th salaries. According to the labor ministry, the new texts are intended to better compensate people in order to retain qualified workers in the country. Another objective is reducing night work, but an employers’ representative commented that the government efforts are misplaced in this respect. The amendments concerning night, holiday and weekend work bonuses were proposed by lawmakers from leftist senior ruling Smer, while the texts for exempting the 13th and 14th salaries are an initiative of SNS. Overall, the introduction of compulsory 13th and 14th wages would hurt the employers, in our view, as they would increase their labour costs without necessarily increasing the labor productivity, which in the end might hurt companies’ competitiveness or press them to reduce profit margins, delay investments and expansion plans.

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