Contribution cut from 2025
Social security costs to be reduced further as of next year, for a total of one percentage point
reduction in social security contributions by employers, which the government plans to implement in two phases, will start in 2025, it has been confirmed.
The reduction will be by one percentage point and will be split into half a point in 2025 and half in 2027, although there is pressure to accelerate it either later next year or in 2026. In any case, according to Minister of National Economy and Finance Kostis Hatzidakis, within 2025 the total contributions will be 35.66%, from the current 36.16%, and there will be 0.5 of a point left to be cut subsequently. “The further reduction of social security contributions by one point is our commitment,” the competent minister of labor, Domna Michailidou, has announced to all social partners who are urgently requesting the limitation of non-salary costs.
She adds, of course, that “each percentage point reduction corresponds to an approximately 400-million-euro revenue reduction for the Single Social Security Entity (EFKA), which burdens the state budget,” and concludes that for this reason the implementation of the reduction of non-salary costs is a difficult equation and “needs careful handling.”
In this equation, it is estimated that economic growth, the increase in employment, and increases in employee salaries will play an important role, as the replenishment of the loss of income caused by the new reduction of contributions will on the one hand raise the possibility that the second installment of the 0.5% reduction will come sooner. Moreover, according to Deputy Minister of Labor and Social Security Panos Tsakloglou, the reduction of contributions by 4.4 percentage points implemented during the previous four years has contributed decisively to the drop in unemployment by more than 7 percentage points since the summer of 2019.
According to Hatzidakis, in 2025 there will also be an increase in pensions by about €400 million, based on the well-known mathematical formula – i.e. 50% of inflation plus 50% of the increase in the growth rate.