As Minister of State for Employment Sándor Czomba said at a press conference, as of 1 January 2014 the scope of tax incentives related to the employment of parents with small children will be extended while existing allowances are kept in place within the framework of the “parental benefit extra” programme.

Sándor Czomba said that in case an employer employs a parent with at least three children, who receives or have received parental benefit and childcare allowance, he is exempted from paying the entire amount of social contributions and training contributions for three years instead of the current two years, while the so-called “half social contribution” subsidy period is to increase from one year to two years.

Accordingly, in case a parent with three or more small children is employed, the employer can benefit from a tax exempt period of 3+2 years instead of the former 2+1 year model. Currently, employers can save HUF 858 thousand for employing a parent with one or more small children, as they are exempted from paying contributions in the first two years and they only pay “half social contribution” in the third year. The maximum amount of applicable allowances for a parent with three or more children increases from the current HUF 858 thousand to HUF 1 374 thousand, therefore through the parental benefit extra employers can claim HUF 516 thousand more of subsidies over five years for these parents.

As another positive change, the Minister of State added, following the parental benefit and the childcare allowance period, these incentives are applicable until the end of the 69th month instead of the current 45th month.

The Minister of State said that the latest data are signalling a positive trend, as in Hungary 235 thousand more people are in employment compared to the date when the new Government took office. These results, he stressed, did not come from thin air, the Government had had to implement several measures by which the Government – despite a sluggish economic recovery -- has managed not only to maintain but improve the level of employment, even within the private sector.

He emphasised that one element out of the relevant set of instruments was the Job Protection Action Plan, in place as of 1 January, which has targeted six priority groups: people under the age of 25 years, those aged 55+, unskilled people, career-starters, long-time unemployed people and parents with small children. With regard to these, employers have to pay only half the amount of employment-related taxes or, in certain cases, they are exempted from paying any levies on monthly wages below HUF 100 thousand.

In September, employers claimed this subsidy form for employing some 740 thousand people and gained HUF 10bn from tax incentives, while this amount totalled HUF 85bn for the nine months since the beginning of the year.

The Minister of State spoke appreciatively of the element of the Job Protection Action Plan which is aimed at stimulating the employment of parents with small children. It has been an obvious sign of success, Sándor Czomba emphasised, that while the number of parents with small children for whom employers could use incentives was 14 548 in January and this figure almost doubled to 29 342 by September. In his opinion, this was due to the fact, among others, that the allowance can be used in a very flexible way, as it can be adapted to various family setups and conditions.

Sándor Czomba pointed out that in order to assist mothers who no longer received parental benefit and childcare allowance, other flexible employment provisions have also been introduced. Among these the Minister of State highlighted that the Labour Code prescribes for employers even in the private sector to offer part-time jobs in case parents decide to return to their former place of work. Deputy President of Hungarian Chamber of Commerce and Industry Tamás Bihall said at the press conference that they are prognosticating an increase of 30 thousand for the number of people in employment in the coming years.

Thanks to the fourth pillar (i.e. the extension of the social contribution tax subsidy and the 50 percent decrease of payable contributions beginning with the fourth and fifth year of employment), the propensity of parents to return to the labour market may boost labour force by 15-20 thousand people. The first pillar (i.e. mothers may take a job after the child turns one year old while they continue to be entitled to both parental benefit and childcare allowance) is also expected to add another 10-15 thousand people to the pool of employees.

The Chamber is also anticipating, Tamás Bihall added, that the labour market will also be reinvigorated in another way, as – for example -- mothers with two small children will return to work after 4-4.5 years instead of the current average of 6 years, which will also boost employment.

(Ministry for National Economy)