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GYED (child care fee)

24 August 2018

           

GYED (child care fee) for fathers, or the advantages and drawbacks of GYED received by working fathers

 

It is a more and more popular idea among families with children that the working father claims GYED for the child and the mother stays at home with the baby without receiving any provision.

               Currently, wage-earning activities can be carried out without any limitation while receiving GYED already from the day when the infant care benefit (CSED) expires, or from the 169th day calculated from the birth of the child. As a result, mainly for financial considerations, in cases where the father has a higher income or the mother would only be entitled to receive child care benefit (GYES), the father receives the fee while working even in full time, and the mother stays at home with their child or children.

               Whichever parent claims the fee, the same conditions must be met. The insured parent must be insured at least for 365 days during the two years preceding the birth of the child, and it is important to mention here that the insured period does not have to be continuous. With this modification, the government closed down a loophole in 2017 as earlier the 365 days had to be completed before submitting the claim, so the missing time could also be recovered after the birth of the child.

               If all conditions prevail for the claim, the fee is paid until the child becomes 2 years old and in the case of twins until the 3rd year of age. As a main rule, the calendar day base is determined for the fee on the basis of the 180 calendar days’ income calculated retroactively from the last calendar day of the second month preceding the month of claim. If the employee has no 180 calendar days’ income in the current employment, 120 calendar days’ income calculated retroactively from the last calendar day of the second month preceding the month of claim shall be taken into consideration. If the insured person has no 120 calendar days’ income but has continuous insurance coverage at least for 180 calendar days before the start of the fee payment, the calendar day base for the fee payment is determined in consideration of the actual or contract-based income. The calendar day amount of the GYED is 70% of the calendar day base determined with the above calculation methods. The employee receives the amount remaining after deducting the personal income tax and the pension contribution from the fee. However, it must be taken into account that the actually paid GYED may not exceed 70% of the double of the current minimum wage, which is gross monthly HUF 193,200 in 2018.

               The GYED received by the working father can have short term advantages for the family, but may have long-term disadvantages for the mother.

The clear advantage in the short run is that the family has more revenue at a monthly level. Families primarily use the father’s GYED if the mother were only entitled to receive GYES, or she were entitled to both CSED and GYED but its amount would be lower. The most extreme case is if the mother were only entitled to GYES but the father received the maximum amount of GYED. In such a case, in 2018 the difference between the possible provisions for the mother and the father (excluding the tax base allowance) is net HUF 119,250 (the GYES is net HUF 25,650, and the maximum payable GYED – without tax allowance - is 144,900). The difference may further increase if the family tax base allowance is used monthly.

However, it is also worth mentioning the long-term disadvantages that the mother suffers in this case. The first drawback is that although she is away from work on unpaid leave in order to care her child, her insurance is suspended from the first day spent without provision because she receives no provision. In the event of suspension for more than thirty days, the continuous insurance scheme will be interrupted, and if she started work again, the calculation of time spent in insurance would be re-started. She will be entitled to sick pay only in consideration of the number of days spent in insurance after the interruption. It is important to point out that she will be entitled to sick pay only in 50% for 730 days (two years) after the interruption, and in the first 180 days the amount of provision may exclusively be determined on the basis of the minimum wage, regardless of her contractual wage.

Since the mother is not insured in this case and does not become entitled to the in-kind health insurance provisions in any other manner either, she has to pay her own health service contribution to the National Tax and Customs Administration. This amount is based on the current minimum wage. In 2018, it is HUF 7320 per month, which is HUF 244 per day. It is important that the mother has to arrange for this payment on her own, and the employer only has the obligation of notification. The mother who does not claim the provision has to register for the obligatory payment in form number ’T1011. Should she fail to do so, the tax authority may collect the amount for the period in arrears, but maximum for five years retroactively.

In addition to the suspended insurance, the mother suffers another significant drawback, namely that in the lack of provision this period will not be considered in her service period later, when her pension is calculated.

It is also worth taking into account the case when the mother does want to return to work yet but she would like to have another baby. In this case, the mother has no title for CSED and the father cannot receive this type of provision either. In this case, the mother is entitled to receive GYES - instead of CSED - for 168 calendar days from the date of the child’s birth, due to the lack of relevant income and to the interrupted insurance scheme, and when the GYES expires, the father can once again receive GYED for the latter child, as well.

In summary, as can be seen, the opportunity for the father to receive GYED can be an important financial advantage for families with small children but it is important that the family should consider not only the short-term financial advantages but also the long-term drawbacks when making their decision.

Marianna Gönczi |