The plan for a new cut in employer contributions

Summary

The government is bringing back to the table one of the key tools for boosting the economy’s competitiveness: reducing non-wage costs.

In the package of measures being prepared by the economic team for the Thessaloniki International Fair (TIF ) in September, a new cut in social security contributions for employers takes center stage, which—according to current estimates—will range between 0.5% and 1% and will take effect on January 1, 2027.

The measure is not viewed merely as yet another tax or social security relief. Within the government, it is seen as an intervention with a dual objective: on the one hand, to further reduce labor costs for businesses, and on the other, to create room for wage increases, particularly in the private sector, where pressure for better wages intensifies as the economy grows and unemployment declines.

The extent of the reduction will depend almost exclusively on the fiscal space available by the summer of 2026.

What are the facts?

The main sources of funding the Ministry of Finance is “eyeing” are additional revenue from the fight against tax evasion and social security contribution evasion —two areas where the government estimates that the results of digital cross-checks, the expansion of electronic transactions, and new control mechanisms will yield permanent and recurring revenue.

This is particularly important, as contribution reductions are also considered permanent measures and cannot be financed by one-off or extraordinary revenues.

Revenue Sources

The budget of the EFKA (Electronic National Social Security Agency) is also under scrutiny, with the data being highly encouraging as three major revenue sources appear to be contributing to the reduction of non-wage costs: increased employment, a significant reduction in uninsured or underinsured work through the use of the Digital Card, and a new source of revenue from the employment of retirees.

What is the picture

Specifically, according to projections for 2026, total revenue from contributions is expected to reach €16.8 billion, an increase of 4.5% compared to 2025, when it stood at €16.2 billion.

Of the total revenue, €9.21 billion will come from employer contributions, €5.74 billion from employee contributions, €1.42 billion from the self-employed, and approximately €452 million from farmers’ insurance contributions. These figures reflect the significant expansion of employment in recent years as well as the increase in declared earnings.

A key factor in the revenue increase is considered to be the implementation of the digital work card, through which hundreds of thousands of hours of overtime work are now reported—hours that in the past were either unreported or paid without social security deductions.

It is telling that the elimination of contributions on overtime pay not only did not reduce EFKA’s revenue but, according to estimates, led to more reported overtime hours and thus to higher total contributions.

At the same time, working retirees are providing a significant boost, as they now pay regular insurance contributions following changes to their employment status. It is estimated that approximately 300,000 retirees are working and insured, while nearly 200,000 new jobs had been created by October 2025 alone.

According to estimates by social security officials, 60% to 70% of the additional revenue comes precisely from new hires and the increase in working retirees.

Reduction in contributions

The result is that, despite a 5.4-point reduction in contributions since 2019 (the total rate of social security deductions has fallen from 40.56% to 35.16%today ), the system’s revenue collection has not been negatively affected. With the new reduction scheduled for 2027, the rate is expected to fall further to 34.66%, further boosting wages and reducing non-wage costs for businesses.

Information suggests that the new intervention will come primarily from the health sector and will be directed entirely toward employer contributions. The rationale is that reducing costs for businesses should serve as a lever for better wages and increased productivity.

In fact , an “informal social contract” is being openly discussed in government circles : lower employer contributions in exchange for higher wages and more hiring.

If the reduction is ultimately limited to half a percentage point, it will most likely come exclusively from health insurance contributions. However, if fiscal space allows for a reduction of around 1%, then a broader “cut” in employer contributions will be considered, involving both contributions to EOPYY (National Organization for the Provision of Health Services) as well as specific sectors of the Public Employment Service ( PES ), such as contributions related to vocational training.

In contrast, purely pension-related contributions —for both main and supplementary insurance—remain off the table, as they form the core of the social security system’s funding. The same appears to apply to the employer’s unemployment contribution, amounting to 1.20%, which is currently not considered likely to be affected.

Fiscal cost

The fiscal impact of the measure is not negligible. A reduction of 0.5 percentage points (already announced by Prime Minister Kyriakos Mitsotakis) is estimated to cost approximately €220 million annually, while a reduction of 1 percentage point would result in a revenue loss of nearly €450 million.

However, the economic team argues that the experience of previous years justifies the strategy of reductions, as the data show that a significant portion of the revenue loss is recouped through increased employment and rising wages.

If the new reduction in 2027 is half a percentage point, total social security contributions will have been cumulatively reduced by 5.9 percentage points since 2019. The total contribution rate will drop to around 35.66%, bringing Greece closer to the European average. If the measure reaches one percentage point, then the total reduction will approach 6.5%.

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