Tax law / MRP program
There is no doubt that human resources is becoming increasingly important. The costs associated with employment, increasing turnover and the difficulty of finding good workers increase the need for HR solutions.
It is a lengthy debate regarding how to keep employees happy and whether the salary itself is enough to motivate them in the long term. Compensation packages can determine whether employees stay with their current employer or seek new employment opportunities. What is certain is that the money is much more important.
It’s all regarding the good combination!
Therefore, in addition to salary and a possible bonus system, employers need to find a good combination of compensation packages so that the salary remains attractive but labor costs, including non-wage labor costs, increase as little as possible. This draws attention to additional services and other systems. However, following the recent reform of fringe benefits, the Hungarian wage system does not offer much scope for creativity.
The SZÉP card with its advantageous taxation is a well-known additional service. However, it has an annual cap and does not offer an attractive volume, especially for top managers. Nowadays, bonus programs, health benefits or a company car are no longer anything special. The scope of tax-free donations is limited to cultural and sports tickets, low-value gifts and daycare/kindergarten contributions, which cannot, however, be viewed as permanent wage supplements or motivational aids.
More interest in company success
As tax consultants, we are often asked whether there is a performance system that strengthens employee satisfaction and loyalty while also taking the cost situation into account. The above considerations and circumstances have recently drawn attention to employee participation programs (MRP in Hungarian).
You might think this is only for large companies. However, it may also be worth considering for smaller companies, as such a program can help motivate and improve employee performance, as well as give them a good feeling that the success of their company is reflected in their compensation.
Although MRP programs are primarily available to public limited companies, they may also apply to limited liability companies under certain conditions.
Cheaper than other incentive systems
In our experience, for employee retention and motivation purposes, an MRP program is primarily granted to either key employees or managers. Compared to other incentive systems, it is cheaper than employee stock, bonus or bonus plans and restricted stock units. In addition, receiving compensation under an MRP program is tied to the company’s economic performance.
Another advantage of the MRP program is that shares acquired and securities granted under it are tax-free and are not considered as income of the employee at the time of acquisition, so neither the employer nor the employee has to pay additional taxes.
Assuming that the employee’s annual income reaches the social tax limit, only 15 percent personal income tax is payable at the time of receipt of payments from an MRP program or at the time of sale, redemption or disposal of the acquired securities .
Conclusion
With good and timely planning that combines tax and legal considerations, an MRP program can be an attractive compensation system that strengthens both employees’ commitment to the company and their motivation. Rely on the comprehensive service packages from LeitnerLeitner, one of the most influential tax, auditing and legal consulting firms in Central Europe.
LeitnerLeitner is one of the most influential tax advisory, accounting, auditing and legal advisory firms in Central Europe with global coverage through the Taxand and Praxity network.
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