There are several key areas to be aware of within Hungary’s employment framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.
Hungarian labour relationships are governed by Act I of 2012 Labour code. As Employment contracts should be in writing and should include the following information.
Within 15 days from the commencement of the employment relationship, the employer should inform the employee in writing
Specific types of contracts
There are 2 main types of employment contracts.
Duration of a fixed term contract cannot exceed 5 years. A fixed term employment relationship maybe extended between the same parties for a 6 month period or another fixed term relationship may be concluded within 6 months from the termination of the previous fixed term contract.
Includes permanent employees
*In addition there are assignment contracts (vállalkozói szerződés) where an individual works as a sole trader and invoices the company. These types of contracts are cheaper for employers since tax and social contributions are high in Hungary.
These can include:
Probationary period may not exceed 3 months. However, if the probationary period is less than 3 months parties to the employment agreement may extend the probationary period up to 3 months.
The term of the probationary period of a collective agreement cannot extend 6 months. An employment contract can be terminated by either party without giving prior notice during the probationary period.
An employment relationship can be terminated:
Termination by Notice:
Employers may not terminate the employment relationship by notice:
Employers are required to justify their dismissals. An employee may be dismissed for reasons in connection with his/her behaviour in relation to the employment relationship, with his/her behavior in connection with the employer’s operations.
Employer may terminate a fixed term employment relationship by notice:
The period of notice will be 30 days.
Where the employment is terminated by the employer, the notice period shall be extended
By agreement notice period can extend up to 6 months
A collective redundancy means when an employer, based on the average statistical workforce for the preceding six-month period, intends to terminate the employment relationship:
At least 7 days before the discussions, the employer should inform the works council, in writing, the following details pertaining to the redundancy:
An employee is entitled to severance pay if his/her employment relationship is terminated by
Severance pay shall be the sum of the absentee pay due for:
Termination without notice:
An employer may terminate an employment relationship without notice if:
Right of termination without notice may be exercised without giving reasons:
Sick leave: 15 days of sick leave per calendar year
Annual leave: Employees are entitled to 20 days of basic annual leave. They are also entitled to additional annual leave based on their age.
Allocation of annual leave shall be as follows:
Employees are entitled to the following additional annual leave as well.
Daily working time for full time employees is 8 hours and the work schedule must meet health and safety regulations effective in Hungary. Based on an agreement between the employer and employee, full time working hours per day can be extended. However, such total hours cannot exceed 12 hours a day. On average the full time hours per week would be 40 and cannot exceed 60 hours.
Rules relating to work schedules:
If the scheduled daily working time or the duration of overtime work performed
Daily rest period shall be as follows:
Weekly rest period shall be as follows:
Overtime work shall be ordered in writing. For full time jobs, two hundred and fifty hours of over time work can be ordered in a given calendar year.
On call and stand by duty:
Duration may not exceed 24 hours per day. Duration of the stand by duty may not exceed 168 hours which shall be taken as the average in the event that banking of working time is used.
Mothers will be entitled to 24 weeks of maternity leave
Employees will be entitled to unpaid leave if the employee requests leave to take care of the child until the child reaches 3 years of age
Citizens who are not insured are required to pay HUF 231 per day for health contribution
This is operational under a compulsory governmental pension fund scheme. The basis is the average monthly salary earned since 1988 multiplied by an inflation adjustment rate. Minimum pension fund benefit is HUF 28,500 per month.
Private benefit plans:
Includes voluntary schemes provided by Voluntary Mutual Pension Funds (VMPS). Members of a voluntary pension fund can decide to take either of the following actions after a 10 year waiting period.
Voluntary pension fund contributions can be made by the employee as well as the employer. 27% of the contributions paid by the employer are transferred to the state pension system and 10% contributions paid by the employee are transferred to the compulsory private pension fund.
In Voluntary Mutual Pension Funds (VMPF) employers contribute 2%-6% of salary to the funds and employees are required to make half of the employer’s contribution.
Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Hungary. For companies which intend to employ their staff directly through their incorporated Hungarian entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Hungary.
As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Hungary.
The Shield GEO solution is an attractive alternative where
– the company is looking to employ staff quickly
– the company doesn’t have an appropriately incorporated entity in Hungary
– the company wants to work within a defined budget
– the company wants to limit its initial commitment in Hungary
– the company needs help with tax, employment, immigration and payroll compliance in Hungary