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Employment in Hungary

Key points on employment in Hungary

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.

  1. Contracts

    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.

    • Employee’s base wage and job function
    • Term of the employment contract. In the absence of the term, the employment contract is deemed to be for an indefinite period of time.
    • Workplace details
    • A probationary period of not more than 3 months from the date of commencement of the employment relationship

    Within 15 days from the commencement of the employment relationship, the employer should inform the employee in writing

    • Daily working time
    • Wages above the base wage and other benefits
    • Frequency of wage payment and day of payment
    • Job functions
    • Number of days of paid annual leave
    • Rules governing notice period
    • Whether a collective agreement applies to the employer

    Specific types of contracts

    There are 2 main types of employment contracts.

    • Fixed term (határozott időre szóló munkaszerződés)

    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.

    • Indefinite (határozatlan időre szóló munkaszerződés)

    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:

    • Full or part time work
    • Teleworking
    • Permanent employment relationships

Employee Entitlements

Information Explanation
Working on Sundays ?

If Sunday work is carried out during regular working hours the employee must receive 150% of their regular daily salary and be granted another day off.

Disclosure and Confidentiality of Personal Information ?

Employers shall inform their employees with regard to processing personal information. Employers are permitted by law to disclose personal information of their employees in cases specified by law.

Employee Protection and Anti-discrimination Rights ?

Personal rights of employees falling within the labour code shall be respected. Employees are protected for minimum wages, labour conditions, young workers, personal data,  and protection of personal rights etc.

Time Off Work ?

Annual leave is 20 days. Additional holidays may be granted on special circumstances.

  • Employees younger than 18 years of age – 5 days
  • Parents with children – upto 7 days depending on the number of children

Maternity leave is provided upto 24 weeks.

Medical Leave ?

If the employment has been for more than 2 years the rate of sick pay is 60% and if it has been less than 2 years the sick pay is 50%. The employer is required to pay 70% of wages for a maximum of 15 work days in the event of illness.  However, the maximum amount of sick pay cannot exceed two times the minimum wage.

Employment Termination

Information Explanation
Resignation / End of Service Payment ?

Employees can terminate their employment contract by giving written notice.

Severance / Redundancy Pay ?

Severance pay shall be the sum of the absentee pay due for;

  • one month, for up to three years;
  • two months, for up to five years;
  • three months, for up to ten years;
  • d) four months, for up to fifteen years;
  • e) five months, for up to twenty years;
  • f) six months, for up to twenty-five years of employment
Termination of Employment ?

Employees can terminate their employment contract by giving written notice.

Labor code prohibits employers from terminating the employment relationship by ordinary notice if

  • Employee is unable to work due to illness, and during a maximum of 1 year period following the expiration of the sick leave period
  • Unable to work due to an accident or an occupational disease
  • On sick leave to take care of a sick child
  • On leave of absence to take care of a close relative
  • Pregnant or on maternity leave for a period of 3 months after giving birth
  • On unpaid leave to take care of children until the child reaches 3 years of age
  • Absent due to regular or reserve army service
  • Absent due to disability with reception of rehabilitation benefits

Employers cannot terminate workers during these leave periods plus 15 days thereafter for periods exceeding 15 days. If this period exceeds 30 days, no termination may occur during the 30 day period.

Under the Labor code, a minimum of 30 day notice period maybe extended depending on the duration of employment.

 

The period of notice will be 30 days.

Where the employment is terminated by the employer, the notice period shall be extended

  • by five days after three years;
  • by fifteen days after five years;
  • by twenty days after eight years;
  • by twenty-five days after ten years;
  • by thirty days after fifteen years;
  • by forty days after eighteen years;
  • by sixty days after twenty years

By agreement notice period can extend up to 6 months

Collective redundancies:

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:

  • of at least ten workers, when employing more than twenty and less than one hundred employees,
  • of 10 per cent of the employees, when employing one hundred or more, but less than three hundred employees,
  • of at least thirty workers, when employing three hundred or more employees, inside a period of thirty days, for reasons in connection with its operations

At least 7 days before the discussions, the employer should inform the works council, in writing, the following details pertaining to the redundancy:

  • the reasons for the projected collective redundancies
  • the number of workers to be made redundant broken down by categories
  • the period over which the projected redundancies are to be effected, and the timetable for their implementation
  • the criteria proposed for the selection of the workers to be made redundant
  • the conditions for and the extent of benefits provided in connection with the termination of employment relationships, other than what is prescribed in employment regulations

Outsourcing Employment Through a GEO Employer of Record Service

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

 

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