tax burdens on wages

Tax burdens on wages

The tax burdens on gross wages can be divided into two main groups: 

• taxes and contributions payable by the employee and
• taxes and contributions payable by the employer. 

Taxes and contributions on wages of employees may be the following: 

• 15 percent personal income tax (PIT), 
• 18,5 percent social security tax.

Employer have to pay the following taxes and contributions on gross wages: 

• 13 percent social contribution tax. 

Subject to the fulfilment of various conditions defined in legal regulations, the taxes and contributions payable may be reduced by tax, tax base and contribution allowances. In certain cases, tax or contribution exemption applies. For example, no financial form health insurance and labour market contribution payment obligation arises in the case of employees in pension on their own right. 

Definition of base wage

It characteristics are:

• it is always time-based, 
• it is specified in the employment contract, 
• its amount may not be lower than the minimum wage determined by the government, 
• it can be an hourly wage, daily wage, weekly wage or monthly wage. 

Definition of tax wedge

Tax wedge shows the number of units of tax and contribution burdens relating to 100 units of income provided.