Running payroll in Slovakia

As a member of the European Union, Slovakia is a popular hiring and business destination for companies intending to establish a presence in the EU single market. However, there are several local requirements foreign companies must meet when hiring employees and processing payroll in Slovakia. 

While the tax system itself could be described as relatively simple, employers need to pay close attention to their obligations with regard to social insurance as the local social security system is administered by two different bodies with separate filing and payment deadlines.

In order to fulfill their payroll obligations (i.e. withholding and paying income tax and social security contributions on behalf of their employees), employers need to register with different local authorities. This includes:

• Registration for tax purposes with the Financial Administration of the Slovak Republic - to be done within 30 days after incorporation or establishment of a local branch

• Registration for social security purposes with the local branch of the Social Insurance Agency (SIA) in order to obtain an employer identification number (to be completed before the employee’s first day at work)

• Registration with a health insurance provider: employers need to register with the health insurance company chosen by the employee

Employees also need to be registered with the health insurance company and the SIA. The SIA registration should be completed before the employee starts working for the company, but employers have 8 days after the employee’s first working day to register them with the health insurance provider of their choice.  

It is important to note that, in most cases, foreign companies will be required to establish a legal presence in Slovakia (i.e. local legal entity or branch) in order to act as an employer. An exception applies to foreign companies which are not engaged in business activities in Slovakia and whose employees are hired in Slovakia, but perform their work outside of the country.   

Although there is no legal obligation, it is recommended to set up a local bank account to issue payments to local authorities. 

Income tax in Slovakia is administered via a two-tier system. The threshold between the two tax rates is adjusted on a regular basis. Social security contributions are shared between employee and employer, the latter paying the major share. 

Tax considerations

The tax system of Slovakia comprises two different tax rates. Employment income up to EUR 38,553.01 is taxed at a 19% rate. For income exceeding this threshold, the applicable income tax rate increases to 25% (valid for 2022 tax year).  

An employee’s taxable income includes their basic wages/salary, bonuses and any kind of benefits provided by their employer, regardless of whether they are provided in cash or in kind. Special rules apply to meal vouchers or meals offered in company canteens. Contributions to health insurance and other social security funds are deductible from an employee’s taxable income (up to a certain limit). This includes supplementary pension insurance contributions (also limited). 

There is a personal allowance available to all employees. However, the actual amount of the deduction depends on the employee’s annual income. In 2022, employees with an annual income of less than EUR 20,235.97 can claim a personal allowance of EUR 4,579.26. For employees whose income exceeds the EUR 20,235.97 threshold, the personal allowance is EUR 9,638.25 minus 25% of their aggregate annual income. If the employee’s annual income is higher than EUR 38,553, the personal allowance is zero. Further tax allowances and credits are available to employees with dependent spouses or children.

Tax residents of the Slovak Republic are taxed on their worldwide income while non-residents are subject to income tax on income earned from Slovak sources only. Employees are considered Slovak tax residents if:

• Their permanent residence is in Slovakia.

• They spend more than 183 days in Slovakia within any given calendar year.

• They have a habitual abode in Slovakia which is intended for permanent use.

Tax withholding and reporting 

Employers in Slovakia are obliged to withhold income tax at source on a monthly basis and pay the withheld amounts to the local tax authority within 5 days following the employee’s payday. A monthly payroll tax return must be submitted by the end of the month following the pay period it relates to. In addition to the monthly payroll report, employers are required to submit an annual report which is due by the end of April (for the previous year). 

The tax year is the calendar year. Individuals are only required to file a personal tax return if they receive additional income from sources other than employment. Tax returns are generally due by 31 March. Joint filing is not permitted.

Social security contributions

Social security contributions are made by both employee and employer, the latter being responsible for withholding the employee’s share during the monthly payroll processing and paying the aggregate contributions to the respective authorities. 

The total employer share of the social security contributions is 35.2% of the employee’s monthly salary, divided into social security (24.4%, but not more than EUR 1,935.16), health insurance (10%, uncapped) and occupational accident insurance (0.8%, uncapped). The Slovak social insurance system includes sickness insurance, pension insurance, disability insurance, unemployment insurance as well as a wage guarantee and solidarity reserve fund. 

Employees are required to contribute to social security (9.4%) and health insurance (4%) at a total rate of 13.4% of their income. While health insurance contributions are uncapped, an employee’s monthly social security share is capped at EUR 745.51 (in 2022). For more details, refer to the table below. 

Payments have to be made separately to the Social Insurance Agency (no later than the employee’s payday) and the selected health insurance provider (within 3 days after the employee’s payday). Filing obligations include two monthly reports, one submitted to the Social Insurance Agency (only electronic filing) and one submitted to the health insurance provider (hard copy or electronic, depending on the number of employees). The deadline for both declarations are the same as the payment deadlines set by each institution. 

Non-resident employees who pay social security contributions in another EU country or who are subject to a social security treaty between Slovakia and their usual country of residence are exempt from social security obligations in Slovakia.

Employees in Slovakia are entitled to various benefits. These include:

• Annual leave and public holidays: 20 days, i.e. 4 weeks; annual leave entitlement for employees over 33 and for those with children is 25 days; 15 public holidays

• Maternity leave: 34 weeks paid by Social Security at a rate of 75% of the employee’s usual wages - extendable to 37 weeks for single mothers and to 43 weeks in case of multiple births

• Paternity leave: there is no paternity leave as such, but fathers are granted the same rights as the mother if they decide to take care of the child after birth instead of the mother

• Parental leave: available to both parents until the child is 3 years old; a monthly parental allowance equal to EUR 280 (as of 2022) is paid by Social Security

• Sick leave: 10 days paid by the employer at rates of 25% (days 1 to 3) and 55% (days 4 to 10); thereafter, employees receive sickness benefits from Social Security at a rate of 55% of their normal salary - maximum of 52 weeks

For more information on employee benefits and other employment requirements in Slovakia (including severance pay and termination procedures), check out our Global Hiring Guide.

At the beginning of 2022, the national minimum wage in Slovakia rose to EUR 646 per month. The hourly minimum compensation employees are entitled to is thus EUR 3.713. However, the actual minimum wage an employee is entitled to depends on the type of work they perform. Under the Slovak Labor Code, professional activities are divided into 6 different classes following the complexity of the tasks and the level of qualification needed. Minimum pay increases with a rising level of complexity involved in the work-related tasks. The minimum wage for employees in the highest category is EUR 1,226 per month.

Overtime work must be paid at a rate of at least 125% of the employee’s usual hourly wages. Alternatively, overtime may be compensated by additional paid time off. Work carried out on public holidays must be paid at double rates. There is no legal obligation to pay employees a 13th salary. Employers are, however, obliged to provide their employees with daily meals - either through a company-operated catering facility or via meal vouchers.

Payroll in Slovakia is usually processed once a month. The pay date is to be fixed in the individual employment agreement. Salaries should be paid in local currency which is Euro (EUR). The most common payment method is bank transfer. After each payroll run, employers must provide their employees with a detailed payslip. The latter can be distributed either electronically or in hard copy. Employers are further required to keep payroll records for each employee.