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Is the compensation paid to an employee during redundancy subject to taxes and social contributions?
Is the compensation paid to an employee during redundancy subject to taxes and social contributions?
Are taxes and mandatory health insurance contributions withheld from compensation paid to an employee due to staff redundancy?
The State Tax Service under the Ministry of Economy stated that when the number of employees is reduced or positions are made redundant, the employer must officially notify the employee before terminating the employment contract under subparagraph “b” of Article 70 of the Labor Code, depending on the employee’s length of service, within the following periods:
up to one year of service — at least two calendar weeks;
from one to five years — at least four calendar weeks;
from five to ten years — at least six calendar weeks;
more than ten years — at least nine calendar weeks.
When an employment contract is terminated under subparagraphs “a” and “b” of Article 70 of the Labor Code, the employee must be paid severance compensation based on their length of service in the following amounts:
up to one year of service — in the amount of the average monthly salary;
from one to five years — at least 1.4 times the average monthly salary;
from five to ten years — at least 1.7 times the average monthly salary;
more than ten years — at least two times the average monthly salary.
It was additionally noted that according to Article 102.1.4 of the Tax Code, except for benefits paid for temporary disability, state benefits, pensions, scholarships, and compensations paid due to company liquidation, termination of activity by an individual employer, or staff redundancy are exempt from income tax.
Furthermore, compensations paid to employees in connection with staff redundancy in accordance with the Labor Code are not subject to mandatory state social insurance, unemployment insurance, or mandatory health insurance contributions.
Are taxes and mandatory health insurance contributions withheld from compensation paid to an employee due to staff redundancy?
The State Tax Service under the Ministry of Economy stated that when the number of employees is reduced or positions are made redundant, the employer must officially notify the employee before terminating the employment contract under subparagraph “b” of Article 70 of the Labor Code, depending on the employee’s length of service, within the following periods:
up to one year of service — at least two calendar weeks;
from one to five years — at least four calendar weeks;
from five to ten years — at least six calendar weeks;
more than ten years — at least nine calendar weeks.
When an employment contract is terminated under subparagraphs “a” and “b” of Article 70 of the Labor Code, the employee must be paid severance compensation based on their length of service in the following amounts:
up to one year of service — in the amount of the average monthly salary;
from one to five years — at least 1.4 times the average monthly salary;
from five to ten years — at least 1.7 times the average monthly salary;
more than ten years — at least two times the average monthly salary.
It was additionally noted that according to Article 102.1.4 of the Tax Code, except for benefits paid for temporary disability, state benefits, pensions, scholarships, and compensations paid due to company liquidation, termination of activity by an individual employer, or staff redundancy are exempt from income tax.
Furthermore, compensations paid to employees in connection with staff redundancy in accordance with the Labor Code are not subject to mandatory state social insurance, unemployment insurance, or mandatory health insurance contributions.