After the parties involved agreed on next year’s minimum wage, the government announced its decree entitled “Government Decree 508/2023 (XI. 20) on the establishment of the mandatory minimum wage (minimum wage) and the guaranteed minimum wage”.
The essence of this is that “the basic salary established for a full-time employee mandatory minimum amount (minimum wage) in the case of full-time work from December 1, 2023, in the case of a monthly wage of HUF 266,80061,340 forints in the case of a weekly wage, 12,270 forints in the case of a daily wage, 1,534 forints in the case of an hourly wage”.
Contrary to what is specified in paragraph (1), the basic salary established for an employee employed in a position requiring at least secondary school education or secondary vocational qualification guaranteed minimum wage in case of full-time work From December 1, 2023, in the case of monthly salary application, HUF 326,000, 74,950 forints if a weekly wage is used, 14,990 forints if a daily wage is used, 1,874 forints if an hourly wage is used.
The legislation further states that
the scope of the decree covers all employers and employees.
The government’s decision will enter into force on December 1. Paragraph 4 states that the provisions of the decree must be applied for the first time when determining wages for the month of December 2023.
But it also provides that the provisions are applied for the first time when determining benefits and subsidies for the month of January 2024 based on the amount of the minimum wage or the guaranteed minimum wage (this does not include the budgetary support provided under the law for the operation of institutions and the provision of services), benefits, and it shall be applied with regard to the provision before the age limit and the suspension of the service allowance in 2024.
|Evolution of the amount of the minimum wage|
|Minimum wage increase rate||Amount of gross minimum wage (thousand HUF)||Amount of net minimum wage (thousand HUF)||Net minimum wage increase (thousand HUF, year/year)|
|Evolution of the amount of the guaranteed minimum wage|
|Guaranteed minimum wage increase rate||Gross amount of guaranteed minimum wage (thousand HUF)||Net amount of guaranteed minimum wage (thousand HUF)||Guaranteed minimum wage increase (net, thousand HUF, year/year)|
How did we get here?
In the past few weeks, more and more attention has been paid to next year’s salary negotiations, which is not surprising, as the interested parties meet at this time every year. Basically, this negotiation takes place between the employer and employee sides, over several weeks and where the government only participates as an observer.
- At the end of October, Portfolio was the first to write that there will be no one-time HUF 100,000 wage compensation this year, and we also wrote that the minimum wage and the guaranteed minimum wage may rise by 15% and 10% respectively next year, but in the meantime some kind of compensation may be realized even this year.
- Later, it turned out that this is achieved by the parties bringing next year’s increase forward to December.
- Portfolio was the first to write that until Tuesday, the minimum wage agreement was held back by the fact that we did not know the third quarter GDP data. On Tuesday morning, however, favorable numbers about the performance of the Hungarian economy came to light, which greatly boosted the negotiations.
In a recent article published on Portfolio, Péter Virovácz, ING Bank’s chief economist, writes in relation to the agreement that there are certain periods during which the increase in average earnings exceeds the expansion of the minimum wage and there are also periods when actual catch-up is taking place, i.e. the minimum wage is more dynamic increases than the average wage. The latter is typical when the labor market is loose, i.e. the number of vacancies is low and this is combined with high unemployment. On the other hand, when the economy is in a state of labor shortage, instead of catching up, fragmentation is typical.
- While the labor market was typically loose after the 2008-2009 crisis (2009-2014), minimum wages increased by an average of 6.8 percent and average wages by 3 percent.
- On the other hand, in recent years (2015-2022), the average wage increase of 9.8 percent exceeded the average minimum wage increase of 9.0 percent.
THEREFORE, AS LONG AS THE LABOR MARKET IS TIGHT, THE INCREASE IN THE AVERAGE WAGE IS SOMETHING ABOVE THE INCREASE IN THE MINIMUM WAGE, BUT IN A WORSE CASE IT IS CLOSE TO IT.
In other words, considering that from 2024 the minimum wage will increase by 15 percent and the guaranteed minimum wage by 10 percent, the average wage increase in the economy may also develop somewhere in this range. If we also add that significant wage adjustments will also take place in the public sector, then we can end up being much closer to 15 percent than ten.
On our cover photo is Prime Minister Viktor Orbán and in the background is Minister of Economic Development Márton Nagy, who also has labor market responsibilities in the government. Source: MTI Photo/Prime Minister’s Press Office/Zoltán Fischer