Levy-deductible item

What it means

The levy-deductible item reduces the health insurance assessment base of an employee on low pay. It no longer reduces the employer’s premiums, and it does nothing at all for social insurance, where contributions are still calculated from the whole wage.

The law sets both the monthly amount and the pay level at which it starts to taper: it falls by two euro for every euro of extra pay and disappears above a certain wage. It belongs to employment and comparable service relationships, not to work agreements outside employment, and because the income limit sits below the full-time minimum wage, in practice it is part-time contracts that still reach it.

It has nothing to do with the tax-free allowance. That one reduces income tax, while the levy-deductible item reduces only the employee’s health insurance, so on the same wage one of them may apply, both, or neither.

How it works in practice

The employee claims it by a written notice and with one employer only. The payroll accountant then reflects it in the monthly calculation of contributions and in the return that goes to the health insurer. The minimum employee advance enters the calculation as well, though, and it is set without regard to the item, so premiums cannot fall below it.

Nobody loses it by not claiming it during the year: the insurer applies it in the annual reconciliation of premiums and refunds the overpayment. With several sources of income, though, the same reconciliation can produce arrears instead.

When an employee starts on part-time hours, the payroll accountant asks whether they want to claim the item and whether they already claim it elsewhere, and the written notice goes into the personnel file. At an insurer’s inspection it is the only proof that the company applied the item properly.

What to watch out for

Payroll grants the item to someone on a work agreement, or to an employee who already claimed it with another employer. The advances run low for months, the difference only surfaces at the annual reconciliation or at an inspection by the insurer, and it has to be topped up for months long since closed; by then the employee has often left and there is no pay left to withhold their share from.

The item tapers according to each month’s pay separately. Set a fixed amount for an employee on variable pay and in months with overtime or bonuses it is applied at more than is due, with the insurer charging the difference only later, at the annual reconciliation or an inspection.