Wage agreement reached in Hungary after lengthy talks

After yesterday's round of talks, the Permanent Consultation Forum of the Private Sector and the Government (VKF) was on the very brink of reaching a three-year wage agreement. The last offer on the table was for a minimum wage hike of 9 to 10% for next year and that larger increases would follow in the following two years.

Today it has emerged that the VKF members have agreed on a 9% raise to the minimum wage for 2025. The next two years will see an even bigger increase.

According to Portfolio's sources, a raise of 13% is expected in 2026, to be followed by a 14% hike in in 2027.

With they they the minimum wage would reach 50% of the the regular average gross wage by 2027. If, however, economic growth is lower than expected or planned, or if inflation turns out differently, the parties will come back to the negotiating table.

According to Portfolio's sources, employers will receive assistance in exchange for higher wage increases. While all the details are not yet known, it is understood that companies will always have to pay social contribution tax on the minimum wage of the previous year, rather based on the minimum wage for the current year.

No further tax cuts are in sight for the time being. To be precise, following an earlier announcement by Economy Minister Márton Nagy, if the 3% economic growth target is met in 2025, employers and employees may revisit this matter at the VKF talks. So tax cuts are possible in 2026 at best.

For the time being, many details of the agreement are still unknown, but we can say that the minimum wage is set to rise very sharply in the coming years.

But it is also worth noting that the guaranteed wage minimum (i.e. the minimum wage for skilled workers), which has become increasingly effective in recent years, will grow more slowly than the minimum wage in 2025. For the corporate sector, it was crucial that after the big wage increases this year, costs would rise at a more moderate pace next year.

Tax and contribution reductions do not seem to be included in the package for the time being, but it could help companies if social contribution tax had to be paid on the basis of the minimum wage for the previous year. That said, there are certainly concessions being made by both employers and employees, as well as the government, in order to reach a wage deal.

The workers' side wanted to raise the minimum wage by well over 10% in 2025, while companies were planning to raise it by 6-8%, while the government was unable to support higher wage increases with tax cuts due to the tight fiscal situation.

In comparison, a healthy compromise seems to have been reached for 2025. The question marks are more for 2026-27, as the 13% and 14% wage hikes could have inflationary and employment effects. But let's not get ahead of ourselves: we'll come back with a detailed assessment after the details on Friday!

The interesting part of the story is that in the long term, we see a fundamentally downward trend in this, as the overall skill level of workers improves and the economy whitens.

However, the trend is expected to reverse in the coming years, with more and more people earning the minimum wage and the wage minimum for skilled workers.

This is essentially linked to the government's ambition to see the minimum wage rise to half the average (regular) wage by 2027, up from 44% last year.

This would require the minimum wage to grow faster than the average wage in the coming years. This, according to government calculations, will result in more people taking home the lowest wage.

• According to an analysis obtained by Portfolio, the number of people taking home the minimum wage will rise to 341,500 in 2027 from 214,000 currently.
• Also, the number of those earning the guaranteed wage minimum will go up to over 600,000 from the current 325,000.
• Meanwhile, there will be "only" 187,000 employees earning between the two wage categories instead of the 199,000 currently.

Cover image (for illustration purposes only): Getty Images