What is cafeteria in Hungary? Learn about fringe benefits

When you hear the word “cafeteria”, normally you would think of a self-service restaurant. In Hungary, however, “cafeteria” is the collective term for fringe benefits you can give your employees above their gross salary. Learn how it works, and see if it can be beneficial to your Hungarian company.

Cafeteria can make you a more attractive employer

When you are hiring employees, whether from Hungary or from abroad, you probably want to present yourself as an attractive employer to retain employees and reduce costs related to recruitment. Offering a competitive salary is only the first step towards that. Work-place perks can vary widely from flexible working hours and providing free snacks and coffee to taking care of the work permit procedure for your employee with a professional provider like Helpers. Offering fringe benefits through a cafeteria plan is another option for that.

What’s so good about fringe benefits?

Fringe benefits in Hungary are something you give your employees above their gross salary. They are taxed differently from regular salary, where you as the employer pay social contribution tax on the gross salary, while the employee pay personal income tax and social security contribution. Instead, the employee receives net benefits, while you as the employer pay more taxes. However, the tax content of the fringe benefits is lower than the tax content of regular employment costs.

Fringe benefits usually involve targeted spending, such as spending on transportation, health, or recreation, which make the economy more transparent, while the sectors involved can receive a boost.

At the same time, the targeted nature of fringe benefits sometimes makes it difficult to fully exploit them, which can make employees resent the scheme. Moreover, the tax benefits available through cafeteria elements have been reduced severely over the last few years.

The most popular cafeteria elements

The most well-known cafeteria element in Hungary is the SZÉP card, which works very much like actual money, but sums sent there can normally be spent only on holiday accommodation, hot meals, and culture, managed in separate “pockets” of the card. Because of the pandemic, money in either pocket can be spent on groceries too until 31 May 2022.

Other popular fringe benefits include covering the costs of children’s daycare, professional trainings, contributions to voluntary health funds or pension funds, or tickets to sporting or cultural events.

Creating a cafeteria plan for your Hungarian company

Employers offering fringe benefits must have a transparent cafeteria plan from which employees can pick elements (like from the menu of a cafeteria) they think would benefit them the most. The cafeteria plan should include how and when it can be changed by the employer, under which conditions employees can make changes to the arrangement they chose, and if there are any circumstances under which they can lose their cafeteria rights.

Since cafeteria is something you offer your employees above their gross salary, it does not have to be indicated in the labor contract. However, it makes sense to at least refer to it to make the agreement more transparent for both parties.

Before you make a cafeteria plan for your company,

  • survey if there is a demand,
  • consult your accountant to see how much you can save on fringe benefits,
  • consult your accountant to see how much extra it will cost you to introduce fringe benefits.

Decide if cafeteria is for your company or not

While fringe benefits are not part of the regular salary, providing them can be perceived as a raise from the employees’ point of view. Since they are taxed more favorably than regular salary, they let your company save on employment costs while giving better support to your employees. However, creating a cafeteria plan is not necessarily the best course of action to every company, either because they eat up the savings, or because there is no demand, or because you as an employer consider actual money the most straightforward form of compensation.

In any case, consult both your accountant and your employees before making such a big decision. If your accountancy is with Helpers, you can rest assured that you will receive the right support in all your ventures. Helpers has more than 15 years of experience in providing comprehensive business assistance in Hungary, and we are confident that we will be able to offer tailored solutions to you too.