ECONOMY

Gov’t seeks to encourage wage increases via contribution cuts

gov-amp-8217-t-seeks-to-encourage-wage-increases-via-contribution-cuts

As part of its goal to ease the burden on businesses and to increase disposable incomes, the government has made the final tweaks to its four-year plan to gradually reduce wage contributions.

The plan has been incorporated into the social security bill which will be ratified in Parliament in January and is expected to take effect in July.

Indeed, in the effort to ensure that the measure serves to deter employers from failing to insure (or adequately insure) staff, this reduction applies only to full-time employees.

Presenting the plan, Labor Minister Yiannis Vroutsis stated that reducing contributions will help support the economy and ensure a higher disposable income for all, meaning higher wages.

In practice, the reduction is expected to significantly ease the burden on both individuals and businesses, and it is hoped that it will unleash productivity and boost the creativity of financial units. Moreover, it is also seen leading to the reinvestment of disposable income for the benefit of the economy.

According to the plan, the reduction will be implemented in phases, beginning in the second half of 2020, with a projected 0.92 percentage point cut – 0.48 percentage points for employers and 0.42 percentage points for employees.

More specifically, 0.75 percent will be cut from the contributions currently paid by both employers and employees toward benefits for the unemployed.The remaining 0.15 percent will be deducted from employees’ contributions to the social policy account.

The estimated gross cost of the measure as reflected in the draft state budget amounts to roughly 123 million euros (0.06 percent of GDP).