Social contributions

What it means

Contributions are the mandatory insurance paid to the Social Insurance Agency and the health insurer. Both the employee pays them out of gross pay and the employer pays on top, so the total cost exceeds the salary agreed.

Social insurance splits into several funds - sickness, old age, disability, unemployment, accident, guarantee and reserve - each with its own rate. Health insurance has a single rate with special cases.

Contributions are not a tax, even though they come out of the same pay as the income tax advance. Tax goes to the state budget with no entitlement in return, while insurance contributions give a right to specific benefits such as sickness benefit, a pension or health care. That is why they are calculated on a different base and reported to different institutions.

How it works in practice

The monthly cycle is fixed: register the employee before they start, calculate and withhold, file the monthly returns, pay within the statutory deadline. It all flows into the payroll record and the period’s costs.

Rates, assessment bases and caps change, so each change recalculates the total cost of employment. The same framework, with its own variations, covers managing directors and people on work agreements.

A sole trader pays contributions for themselves: health insurance from the start of the business, social insurance only once their income under the tax return exceeds the statutory threshold. The Social Insurance Agency decides from the filed return whether compulsory self-employed insurance arises and how large the advances are, so with every return we tell the client what will change from the next period.

What to watch out for

Failing to remit contributions withheld from an employee is a serious breach with criminal exposure, not merely interest. Late registration is expensive too: the employee must be registered before work begins, not on the first payday.

The contribution exemption for an agreement on temporary student work and for pensioners’ agreements applies to one agreement only and only up to the amount set by law. If a student worker claims the exemption with two employers at once, the Social Insurance Agency assesses the contributions against both and adds a penalty.