Understanding Payroll in Slovakia: What Global Companies Need to Know About Slovakia Payroll
A country of great natural beauty and diversity, Slovakia is home to more than 6,000 caves, 1,300 mineral springs, and more castles per capita than any other country in the world. Once part of Czechoslovakia, Slovakia became a separate independent nation from the Czech Republic following the ‘Velvet Divorce’ in 1993. Its position at the heart of Europe, sharing borders with five countries, and its status as an EU member since 2004 give Slovak businesses access to a large consumer base, although complex tax and regulatory requirements can make doing business here a bit challenging.
Today this country of 5.5 million people is looking toward the future and growing key industries like electronics, automotive exports, gas, oil, chemicals, synthetic fibers, and wood and paper products. Collectively, these areas make up more than 80% of Slovakia’s GDP. Using the Euro as its currency, Slovakia tends to trade mostly with its European neighbors, like Germany (22%), the Czech Republic (12.5%) and Poland (8.5%).
Before setting up or expanding global payroll in Slovakia, an organization’s first step is to determine the type of company to establish. Options include a limited liability company, a public limited company, or a branch office from a foreign company.
Companies can use a foreign bank account or set up an account with of Slovakia’s stable banks, a process that generally takes 1-2 days. Company directors must provide working capital, executive signatures, notarized articles of association, a trade license, and other signed documents for the Commercial Register, the Trade Licensing Office, and the Slovak Tax Authority Office.
The are no obstacles to foreign investors setting up companies in Slovakia. Foreigners can partner with Slovaks to set up companies or go it alone. In any case, both the Slovak citizen or the foreigner are entitled to the same rights and no discrimination.
Normal working hours in Slovakia range from 37-40 hours, over five days a week. Slovak employees sign contracts with their employers to ensure their rights in the working relationship. Contract details should include job description, work location, start date, salary amount, a list of pay days, work hours expected, holiday or vacation details, and notice information.
Compensation, Bonuses and Severance
Both salary and benefits are considered employment income in Slovakia. Social security deductions are paid at a rate of 9.4% by an employee and 25.2% by an employer.
The minimum wage in Slovakia is €435 for 2017. The average monthly wage for workers is around €970 per month, while skilled workers at larger companies can earn slightly more per month.
Slovak employees are seeing big changes in their take-home compensation in 2017, following the government’s decision to change the traditionally low caps on social security and health insurance contributions. In Slovakia, these mandatory deductions are calculated as a percentage of employment income, which includes gross salary and non-cash benefits. The income considered for deductions for health was previously capped at €4,290 per month, of which employees contributed 4% and employers contributed 10%. In 2017, that salary cap was removed, and both employees and employers must pay their contributing percentage of the entire salary. The salary cap for social security deductions has been increased to €6,181 per month, of which the employee pays 9.4% and the employer pays 24.4%.
An employee’s job may be terminated under a range of conditions, including immediate termination, by mutual agreement, or during a probation period. Severance pay after termination runs anywhere from 1-3 months' pay for each year worked.
Tax Requirements, Collection and Withholding
In Slovakia, the federal and local governments levy taxes on employees and companies. Corporate tax sits at 22%, slightly higher than its neighbors Poland, Hungary and Czech Republic, all at 19%.
The mandatory health and social insurance contributions are important revenue sources for the Slovak government. Slovak employers are responsible for deducting income tax and social security contributions from an employee’s salary. Employees living and working in Slovakia must pay tax in the country on their worldwide income if they’ve lived there for six consecutive months over a year. Under six months, an employee needs to pay tax only on income earned in the country.
Leave - Sick, Maternity, Vacation, Absence, Holidays
The Slovakia Labour Code stipulates that employees receive four weeks (20 work days) of paid holiday per calendar year. If an employee is more than 33 years old, he or she is entitled to an extra week of holiday with full pay.
Maternity leave in Slovakia is 34 weeks, and the government pays 65% of the worker’s salary during her leave. If cases of multiple births, the worker can receive up to 43 weeks off for maternity leave.
More men are taking time off work around the birth of a child. To help ease any strain of reduced income, the government pays a parental allowance of €203.20 per month to eligible families.
There are 15 national public holidays in Slovakia, commemorating both secular and religious celebrations. Employers are required to honor these public holidays regardless of where they fall in the calendar.
|Date||Slovakia Public Holiday Schedule|
|January 1st||Day of the Establishment of the Slovak Republic|
|January 6th||Three King's Day|
|Friday before Easter Sunday||Good Friday|
|Monday after Easter Sunday||Easter Monday|
|May 1st||Labor Day|
|May 8th||Day of Victory Over Fascism|
|July 5th||St. Cyril and Methodius Day|
|August 29th||Slovak National Uprising Anniversary|
|September 1st||Slovak Constitution Day|
|September 15th||Day of Our Lady of Sorrows|
|November 1st||All Saints Day|
|November 17th||Struggle for Freedom and Democracy Day|
|December 24th||Christmas Eve|
|December 25th||Christmas Day|
|December 26th||St. Stephen's Day|
In a still evolving country like Slovakia, it’s a big task for companies to understand and manage compliance in taxes and payroll regulations. That’s why global companies seek out knowledgeable partners to provide payroll solution assistance. The insight and experience of established service providers can be of significant benefit to multinationals expanding in Slovakia.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.