In addition to taxes, a significant portion of your gross budget sum is set aside for so-called Contributions. Contributions are mandatory payments for strictly public, social purposes – primarily intended to cover the costs of your hospital treatment (health) and the payment of your earnings after the end of your working life (pension).
A total of 20% (or depending on the country) is deducted from the Gross 1 sum.
The pension contribution is a mandatory expense that the employer deducts from your "Gross 1" salary and forwards to the state (HZMO (Croatian Pension Insurance Institute)). It is intended for the payment of pensions. Many similar systems are based on "pillars" of insurance:
This money DOES NOT GO TO YOUR ACCOUNT! With this money you earn today, the state pays pensions tomorrow to current retirees (your grandfathers and grandmothers). When you get old, the workers of the future will pay your pension from their I. pillar.
Forced savings. These 5% go every month to YOUR personal account in a selected pension fund that invests that money in stocks/bonds so that it grows, and it will serve as an addition to your pension when you retire.
The total percentage is calculated on top of, not from the Gross 1 sum.
The health insurance contribution (HZZO (Croatian Health Insurance Fund)) is treated differently than the pension contribution. It is not an employee cost (it is not deducted <em>from</em> the agreed gross salary), but it is an <strong>additional employer cost</strong>!
Health insurance is based on the principle of absolute solidarity. Regardless of whether a director has a gross salary of 5,000 EUR (and the employer pays a large amount monthly for them to the HZZO) or a cashier with a minimum wage (who pays the minimum legal amount), both have exactly the same right and treatment during surgery or service in a state hospital. The young and healthy sufinance the elderly and sick today, but in old age, someone will pay for them.