Huge increase in salary in Hungarian tourism
From January on, skilled labor wages in tourism (785 euros) may exceed the average ones (590 euros); the collective contract will be signed this autumn, according to the information of Magyaridok.hu. This is a tactic to end the lack of labor force in tourism.
From January 2018, the skilled labor working in tourism might expect two times the salary that was the minimum for skilled workers two years ago, as co-president of ÁPB (Branch Communication Committee of Tourism) stated. István Hülvely mentioned that the salary under discussion exceeds the minimum salary of 590 euros which was determined by the government for the competitive market.
It is necessary because the situation of labor force is critical: it is one of the greatest challenges the Hungarian economy might face in the next twenty years. The co-president highlighted that they are currently working on a collective contract for the branch that provides the highest minimum salary for the catering and accommodation branch – according to the number in list of services provided – from next year.
He also mentioned that, from the perspective of employers, they are also planning to include a guaranteed addition to wages in this branch. This raise will be valid for everyone represented by a bilateral committee or the ones who join voluntarily. The government will be able to decide about the obligatory extension of the contract for the entire branch. Hülvely reminded that there is already a valid contract in tourism, the one which was extended by György Matolcsy in 2001; they are planning to renew this from the next year.
He highlighted that this raise would not only affect new employees. According to the wage pyramid, those who are already working as maîtres will receive higher salaries in proportion.
Illegal is not fair
Hülvely mentioned that the drastic raise in the branch is important from the perspective of competition, as it balances the competition between the honest companies and the grey zone. As Hungary is still lagging behind compared to Western Europe, it is a considerable factor in labor utilization as well, as he emphasized.
As a member of the presidency of the Hungarian Hotel & Restaurant Association, he mentioned that most of the Hungarian accommodation market operates in the grey zone, which is not a favorable tendency. The employers who employ illegally do not pay taxes, so they have an advantage over honestly taxing companies.
This doesn’t seem to be fair. The labor force will move to the employer who can pay them more, and the employers managing finances more effectively can pay more.
The association of hotels states that this branch must become honest because, despite the increasing results in tourism, the grey zone is increasing at the same time.
Export customs are high
Entirely legal companies may compete with the grey ones because of the raised salaries. Most of the market agrees with this strategy, so the Hungarian Hotel & Restaurant Association concluded multiple bills that they submitted to the Hungarian Tourism Agency.
As the VAT of catering will be decreased to five percent from January, the association also tries to achieve a similar decrease on the field of accommodation. Besides this, both catering and accommodation would assume paying a common 4 percent of contribution that will be used for national development. This way the decrease of VAT, along with the other suggestions of the association, will result in a break even budget.
Hülvely also emphasized that the field of hotels is the only one in which more than two thirds of the income is received in foreign currencies, while it is the only branch of export in which the services have to be sold to foreigners with the Hungarian VAT. Moreover, according to a recent survey, tourists visiting Hungary spend four times the sum they spend for their hotel rooms at other businesses, so they are critical parts of the economy. Accommodation is the only branch where VAT functions as an export custom and a factor of competitiveness, so it plays a vital role, as Hülvely highlighted.
Hülvely emphasized that it would create a winning situation for employees if there would be a planned guarantee that could confine envelope wages. He states that the increased, registered and taxed salaries might attract labor force back to Hungary. Those who work among honest circumstances might get loans more easily. Employees with higher, legal payments might be represented in the consumer market in a wider aspect, which would lead to further income.
The expert also mentioned that employees of the tourism sector greatly depend on the tips, which add great sums to their salaries.
It is a great source of illegal income, which could be made transparent by introducing a common service fee. The service fee means a favorable form of taxation, which would appear as legal income after which the employer pays VAT and some other taxes, then the net sum is distributed among the employees. He noted that there has been a tax paying duty after tips for decades, but only a few people pay it. The expert also mentioned that, according to the records of National Tax and Customs Administration, only 113 citizens admitted that they received tips.
Compared to this, the fee might seem as a tax, but it is still a cheaper solution than ordinary payment. As Hülvely summarized, they are planning to confine the grey market by increasing salaries and assuming additional contributions, while the competitiveness of the legal market and the tax incomes would increase.