Economy 24 October 2024, 9:37am

Government starts negotiations with employers' and employees' organisations on wage increases

Nagy Károly

An agreement is being outlined at the Permanent Consultation Forum of the Private Sector and the Government (VKF), with the number 3 at its heart. The 3-year bargain could be based around GDP growth of at least 3% and inflation of 3%, according to information obtained by Portfolio. However, according to our sources, no tax and contribution cuts are expected next year to compensate for the significant wage increases. This could happen at most a year later, if GDP growth is above 3% in 2025. Minister of National Economy Márton Nagy held a meeting with the members of the VKF on Tuesday. The ministry said that as the fiscal situation improves, the tax burden on employers could fall further in the coming years.

munka worker dolgozó hegesz fizetés bérek

On Tuesday 22 October, Minister of National Economy Márton Nagy met with members of the Permanent Consultation Forum of the Private Sector and the Government (VKF). Although there have been many statements from the government on the minimum wage, the guaranteed wage minimum and their rate of increase, the cabinet has only just started wage negotiations with representatives of employers' and workers' organisations, not only for next year, but also for 2026 and 2027.

Moreover, this year is a completely different year from the last, when discussions were held within the VKF. It is normal business practice for the different positions of business and employee representatives to converge, but this was not the case. It was the government's evolving ideas that have been in the public eye in recent months.

It turns out that the government would target half of regular earnings as the minimum wage.
For a long time, it seemed that the guaranteed wage minimum would converge with the minimum wage in a few years, but this does not seem to be the case.
We have also heard that by 2026-27 we will reach an average gross salary of €1 million and a minimum wage of €1,000, but in recent weeks we have seen the outlines of this happening by 2028.

Now that the government's plans are being outlined, they have also been shared with those who should actually be negotiating on wages.

Imre Palkovics, president of the National Federation of Workers' Councils, told Portfolio that Tuesday's talks were "both more and less than wage negotiations".

We were still discussing models with Márton Nagy, Minister of National Economy. What the government expects in 2025, in '26, in '27 and from '28 onwards,

Palkovics said.

The Minister stressed that any significant wage increase only has a chance if it is backed by economic growth. Without performance, there will be no wage outflows, said Imre Palkovics, describing the atmosphere of the talks.

Márton Nagy stressed in the meeting with employers' and employees' organisations that it is realistic to have an average gross wage of HUF 1 million and a minimum wage of EUR 1,000 from 1 January 2028. This will require significant economic changes in the coming years. While there was an economic downturn in 2023 and economic growth of 1-1.5% is expected this year, the government expects GDP growth of 2-4% in 2025 and 4-6% in 2026 and 2027. This is exactly the level of growth that will certainly be needed to meet wage growth plans, while economic policy makers will also need to ensure that inflation does not move away from the target of 3% +/- 1%.

László Perlusz, Secretary General of the National Association of Entrepreneurs and Employers (VOSZ), said that it is gratifying that they were able to discuss the government's wage and employment plans with the Minister of National Economy and then with the State Secretaries of the Ministry of Economy.

In any case, the main message is that economic growth is the basis for everything,

Perlusz said.

"The forced wage catch-up will not happen without public support. We are also demanding intervention and a reduction in the tax and contribution burden, as was the case under the previous long-term wage agreement between 2017 and 2022. Then, for real wage increases above 5%, the social contribution tax was reduced by 2 percentage points," said Perlusz.

The Minister of National Economy said that there is no budgetary room for such assistance next year, but if economic growth is above 3% in 2025, we can return to it,

Perlusz stressed.

According to a statement released by the Ministry of National Economy on Tuesday afternoon, "the fiscal position will continue to improve in the coming years thanks to the increased economic expansion. This process opens up the possibility of a further reduction in the tax burden on employers in the coming years, which could lead to a lower tax wedge".

"We are still rethinking our options, because it is clear that companies have a different scope for wage increases in the case of growth between 1-1.5% than in the case of GDP growth above 3%", the VOSZ Secretary General explained.

László Perlusz is cautious about wage developments. In his view, it would not be good if businesses went bankrupt en masse because of forced wage increases.

"1000 companies disappear every month. The number of registered partnerships fell by 23,000 between September 2022 and September 2024. Many businesses can't keep up. This is another reason why we need to be more cautious about next year's wage increases, because nobody wants mass layoffs and company bankruptcies," said the VOSZ Secretary General. "We are looking at our options, but we think we can afford a more modest wage increase next year. I don't want to give a number, but we would certainly raise the minimum wage more than the guaranteed wage minimum."

Employers have indicated they are also open to a 3-year wage agreement because it would make economic planning more predictable.

However, workers are already committed to a double-digit pay rise next year, and are open to different pay rises in 2026 and '27, depending on the level of the increase.

Our union's position remains that we support a 10% guaranteed wage minimum increase by 2025 and a 12% minimum wage increase by 2025,

said Imre Palkovics, referring to the government's earlier calculations.

They believe that these increases can be economically justified. "To do this, we need to increase the productivity of firms, which we hope will be achieved through the various measures the government has planned. However, if the wage increase targets are not met in the next 3 years, we are convinced that firms will face even higher labour emigration and outflows from the country", Palkovics stressed.

The parties will meet again on 11 November to discuss wage increase plans for the coming years.

In the meantime, the Ministry of National Economy is also running new model calculations on possible wage growth paths. These will be discussed at the next meeting in November. For the time being, it seems most likely that an agreement on 2025 wages will be reached by the end of November or the beginning of December, and that for 2026, '27 and '28 wages, a deal could be reached that guarantees further significant wage increases for the lowest wages only if economic growth is above 3% and inflation is kept under control at around 3%.