If, after the company is incorporated, the managing director takes no action—that is, does not take a position, does not sign an agreement to serve as managing director, or does not pay himself any other form of compensation—he has the status of an unpaid managing director.

Within a company, an executive officer may hold the following positions:

Managing Director – Employment Contract

As a natural person, a managing director may enter into an employment contract with the company if the contract covers activities other than those arising from his or her role as managing director. Under such a contract, the managing director’s social security contributions are the same as those of a regular employee, with the exception of the payment to the guarantee fund (0.25% of the assessment base), which the managing director does not pay.

If you choose an employment relationship, you must follow the provisions of the Labor Code. The minimum wage is currently €700. The minimum wage increases based on the job’s difficulty level, ranging from 0% to 100% (there are 6 difficulty levels). If the position is classified as “director,” the minimum wage should be €1,400.

With a monthly salary of €700, you will pay €98 for health insurance, €242.20 for social insurance, and €42.67 in income tax. The tax and contribution burden ranges from 34% on a gross salary of €700 to 49% on a salary of €5,000.

Managing Director – Contract for the Performance of Duties

The second option is to sign a contract to serve as an executive director. If a regular salary is specified, the procedure is the same as for an employment relationship. You must register with insurance providers and submit monthly reports and statements. If the compensation is irregular, the procedure on a monthly basis is slightly different. 

The advantage of a contract for the position of managing director is that there is no minimum amount of compensation for performing the duties of a managing director. So there’s nothing stopping you from setting your compensation at, say, 50 € per month. 

Effective January 1, 2023, a minimum assessment base for health insurance purposes will be introduced, set at €234.42. This means that you would pay at least €32.81 in health insurance contributions even if your monthly earnings were €50.

Social insurance is undergoing even more radical changes. In order for your income to count toward the qualifying period for the minimum pension, you must earn at least 24.1% of the average wage for that year. For 2023, this amount is approximately €350.

For a salary of €350, you will pay €49 in health insurance and €121.09 in social insurance. You do not pay income tax if you claim the tax-exempt allowance per taxpayer.

Managing Director Without a Contract

If no contract regarding the performance of the duties of the managing director has been signed, the managing director is not paid any compensation.

So which option is the best?

In light of current legislation, we recommend choosing a contract for the position of managing director with a remuneration of €350. This will minimize your social security and health insurance contributions, and at the same time, your “time worked” will count toward the years required to qualify for the minimum pension.

If you are a retiree, a student, an employee at another company, or a self-employed individual, someone else is paying your health insurance, so you no longer need to be a “self-payer” for health insurance. In this case, the best option for you is to serve as an executive without compensation and pay yourself the entire profit in the form of dividends.