The reduction of the ceiling will bring an indirect increase in wages to approximately 100,000 highly paid workers with earnings above 4,500 euros, and mainly a reduction in employer costs in insurance deductions.
The implementation of the measure means that a high earner who currently pays contributions of up to 7,373 euros will pay contributions of up to 4,500 euros, gaining a significant increase from deductions, which will now stay in the pocket.
The plan, according to reliable information revealed today by “ET”, has been discussed with the Ministry of Finance and together with the leadership of the Ministry of Labor, the ways to compensate for the loss of revenue that EFKA will have and which are estimated to be close to 190 million euros per year.
About 80,000 to 100,000 highly paid workers who currently pay contributions of over 4,500 euros and up to 7,373 euros of their wages will benefit from the reduction in insurable wages. Employers will benefit more, as they pay higher contributions (22.3% versus 13.86%).
Example
- An employee with a gross monthly salary of 5,500 euros pays a monthly contribution of 762 euros to the EFKA and has 4,738 euros left before tax. With the reduction of insurable earnings to 4,500 euros, he will have a contribution of 624 euros and an indirect salary increase of 208 euros, which will be 4,876 euros before tax. The employer, respectively, will have a reduction in charges by 335 euros.
- An employee with a gross monthly income of 7,000 euros pays a monthly contribution of 970 euros to the EFKA and is left with 6,030 euros before tax. With the reduction of insurable earnings to 4,500 euros, he will have a contribution of 624 euros and an indirect salary increase of 347 euros, which will be 6,376 euros before tax. The employer will have a reduction in charges by 558 euros.
The reduction in insurable earnings will allow companies to hire more, because they will significantly reduce the cost of insurance for their staff and will have room for new hires, as well as for larger salary increases. The workers will have an indirect increase in disposable income and this increase will be channeled into the economy with an increase in consumption.
Better return on pensions
On the pension side, savings are achieved on future expenditure while restoring reciprocity for high earners, as they now pay contributions that have no effect on the pension. With a ceiling of insurable earnings at 4,500 euros, the maximum main pension that can be paid with 40 years and a pensionable salary of 4,500 euros will not exceed 2,700 euros (at today’s prices). While the salary contributions of up to 7,373 euros will never be “returned” to them with a corresponding pension. In order for someone to have a return on his contributions with today’s insurable earnings, he would have to have an average pensionable earnings of 7,373 euros from 2002 onwards, which is unlikely. But even in this hypothetical case, the maximum main pension that a 40-year-old insured can get is 4,115 euros, which means that he will get 55% of the salary, while with the ceiling at 4,500 euros he will get a pension of 2,700 euros, i.e. 60% of the salary.
The benefits for high-wage workers and employers from the reduction of insurable earnings to €4,500
| Today (ceiling for calculation of contributions up to €7,373.53) | New system under study (reduction of the reservation ceiling to €4,500) | |||||||||
| Msalary (gross) | Eemployee contributionThememind | Eemployer contribution | Stotal contributions | Msalary before tax | Eemployee contributionThememind | Eemployer contribution | Stotal contributions | Msalary before tax | Kemployee benefitThememind | Eemployer relief |
| 2.500 | 347 | 558 | 904 | 2.154 | 347 | 558 | 904 | 2.154 | 0 | 0 |
| 3.500 | 485 | 781 | 1.266 | 3.015 | 485 | 781 | 1.266 | 3.015 | 0 | 0 |
| 4.500 | 624 | 1.004 | 1.627 | 3.876 | 624 | 1.004 | 1.627 | 3.876 | 0 | 0 |
| 5.000 | 693 | 1.115 | 1.808 | 4.307 | 624 | 1.004 | 1.627 | 4.376 | 69 | -112 |
| 5.500 | 762 | 1.227 | 1.989 | 4.738 | 624 | 1.004 | 1.627 | 4.876 | 139 | -223 |
| 5.750 | 797 | 1.282 | 2.079 | 4.953 | 624 | 1.004 | 1.627 | 5.126 | 173 | -279 |
| 6.000 | 832 | 1.338 | 2.170 | 5.168 | 624 | 1.004 | 1.627 | 5.376 | 208 | -335 |
| 6.500 | 901 | 1.450 | 2.350 | 5.599 | 624 | 1.004 | 1.627 | 5.876 | 277 | -446 |
| 7.000 | 970 | 1.561 | 2.531 | 6.030 | 624 | 1.004 | 1.627 | 6.376 | 347 | -558 |
| 7.250 | 1.005 | 1.617 | 2.622 | 6.245 | 624 | 1.004 | 1.627 | 6.626 | 381 | -613 |
| 7.373 | 1.022 | 1.644 | 2.666 | 6.351 | 624 | 1.004 | 1.627 | 6.749 | 398 | -641 |
| 7.750 | 1.022 | 1.644 | 2.666 | 6.728 | 624 | 1.004 | 1.627 | 7.126 | 398 | -641 |
*Employee contribution: 13.86%. Employer contribution: 22.3%. Total insurance contributions: 36.16%.
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