What payroll is made of
Payroll starts from gross pay, the amount stated in the employment contract. From it, personal income tax (IIN) and the employee's state social insurance contributions (VSAOI) are withheld. On top of that, the employer pays its own share of VSAOI for each employee; it is not part of gross pay, but it is a cost to the company.
Current rates
| Item | Value |
|---|---|
| Basic IIN rate | 25.5% |
| VSAOI in total | 34.09%: employer 23.59% / employee 10.50% |
| Non-taxable minimum | EUR 550 a month (fixed) |
| Minimum wage | EUR 780 a month |
Rates and thresholds tend to change every year; check the current values on the VID website before you calculate.
Calculation steps
- Start with gross pay.
- Deduct the employee's VSAOI share of 10.50%.
- From the remainder, deduct the applicable non-taxable minimum and the relief for dependants.
- Calculate IIN at 25.5% on the taxable amount.
- Net pay = gross − employee VSAOI − IIN.
A simple example
For an employee with gross pay of EUR 1,000, the employee's VSAOI is deducted first, then the non-taxable minimum and reliefs are applied, and only then is IIN calculated. In addition, the company pays the employer's VSAOI share of 23.59% to the budget, so the total labour cost is always higher than gross pay. The exact figures depend on the current rates and the employee's payroll tax book data.
How the software helps
The software calculates payroll from each employee's data and, as a result, also prepares the employer's report for EDS. If you are VAT-registered, the article on how to prepare the VAT return in EDS will also help. The whole payroll process happens in the same accounting software for small businesses.
Filing in VID EDS
Frequently asked questions
What is the difference between gross and net pay?
Gross pay is the amount before taxes stated in the employment contract. Net pay is what the employee receives after personal income tax and state social insurance contributions are withheld.
What affects the non-taxable minimum?
From 2025 the differentiated non-taxable minimum was abolished: it no longer depends on income. In 2026 it is fixed at EUR 550 a month and applies if the employee has submitted a payroll tax book to this employer. For pensioners the non-taxable minimum is EUR 1,000 a month.
Does the software file payroll taxes with VID itself?
No. The software calculates payroll and prepares the employer's report up to the status "Ready for submission", but you file it in VID EDS yourself, manually.