Indirect increase in public sector wages
On top of abolition of solidarity tax, scrapping of another contribution also on cards
Apart from the abolition of the solidarity tax already announced by Prime Minister Kyriakos Mitsotakis, the ministries of Finance and Labor are mulling the abolition of a special 1% contribution imposed under the 2011 bailout memorandum on the regular wages and additional remuneration of civil servants insured with the TPDY social security fund.
This will result in an indirect pay increase for public sector workers. For example, for an annual salary of 13,000 euros – a net monthly salary of 1,083 euros – the annual benefit from the abolition of the solidarity levy is 22 euros per year. With the abolition of the 1% to the TPDY, another 13 euros will be added.
For an annual income of 25,000 euros or 2,083 euros per month, the annual benefit will be 426 euros from the abolition of the solidarity contribution and with the the scrapping of the 1%, the amount could reach 521 euros per year.
An alternative is to include the fee in regular pension fund contributions, which would boost the lump sum that civil servants receive when they retire.
Accordingly, the amount that an insured person would stand to gain from an an average monthly deduction of 30 euros over a period of 10 years is estimated at 3,600 euros.
Whichever of the two scenarios is preferred, it will lead to an improvement either in the income of civil servants, in conjunction with the abolition of the solidarity contribution after 11 years, or in the lump sum, which has also been significantly reduced, based on the new calculation method.
While forecasts for the future of the TPDY are also being elaborated, the fiscal cost of a potential elimination of the contribution has not yet been calculated.
The levy had been introduced for reasons of public interest, as it was deemed necessary to address the cash flow difficulties that had arisen in the civil servants” social security fund at the time and is not a regular contribution.
It was introduced on a temporary basis and still remains in force, even though the fund’s balance sheet is now balanced, 11 years later.
Groups representing civil servants have from time to time urged the ministers concerned to address this issue.
