Employing in Hungary
Situated in the heart of Europe, Hungary is the optimum expansion location for businesses involved in manufacturing, services and logistics — and the ideal base for investors who are planning cross-border business developments.
Foreign companies are often attracted to Hungary’s highly skilled and highly educated labour force, particularly in the engineering, pharmaceutical, IT, mathematics, economics, physics and professional services sectors. (Around two-thirds of the workforce in Hungary has completed secondary, technical or vocational education.)
Yet, where Hungary really stands out compared to other countries in the region is the Hungarian government’s dedication to streamlining business processes and increasing the competitiveness of both SMEs and large enterprises through a wide range of incentives. There are various refundable and non-refundable incentives available for companies looking to expand into Hungary, including cash subsidies, tax incentives, low-interest loans and land at reduced prices.
With the exception of work performed abroad, all wages shall be established and paid in Hungarian forints.
Registration has to be made at the latest on the day the employee starts at the workplace but before the commencement of their work.
In the employment contract, the parties may stipulate a probationary period of not more than three months from the date of commencement of the employment relationship. In the event that a shorter probationary period has been stipulated, the parties may extend the probationary period once. In either case, the duration of the probationary period may not exceed three months (there’s no minimum prescribed in the law).
No extension is permissible after three months have been reached.
During the probationary period, the employer and the employee have the right of termination without notice.
The period of notice is 30 days.
The notice period shall begin at the earliest on the day following the date when dismissal is communicated. However, certain cases such as incapacity to work due to illness may delay the first day of the notice period.
Where employment is terminated by the employer, the 30-day notice period shall be extended:
- by five days after three years
- by 15 days after five years
- by 20 days after eight years
- by 25 days after 10 years
- by 30 days after 15 years
- by 40 days after 18 years
- by 60 days after 20 years of employment with the employer
By agreement of the parties, the notice periods may be extended by up to six months.
Pursuant to the Hungarian Labor Code, ‘daily working time’ shall mean the duration of working time fixed by the parties or specified by employment regulations for:
a) Full-time jobs; or
b) Part-time jobs
The daily working time in full-time jobs is eight hours.
The scheduled daily working time of an employee may not be less than four hours, with the exception of part-time work.
According to the work schedule:
- The daily working time of employees shall not exceed 12 hours
- The weekly working time of employees shall not exceed 48 hours
In a given calendar year, 250 hours of overtime work can be ordered.
In addition to the 250 hours, a maximum of 150 hours of overtime work can be ordered in a given calendar year subject to a written agreement between the employee and the employer.
If the employer requests the employee to perform overtime, then additional compensation is payable.
The parties may agree a salary which is inclusive of the compensation for the overtime. The parties may also stipulate a fixed monthly payment covering regular wages and wage supplements as well. In this case, if one hour overtime is requested, we would still need to pay the proportionate basic salary and the relating supplement.
This means that the overtime still has to be counted and (the proportionate salary) paid.
Employees who are ill are entitled to 15 days’ sick leave per year and receive 70% of their salary met by the employer. After these 15 days, the employee may receive a minimum of 50–60% of the base salary: two-thirds of this will be paid by the government, with the rest falling to the employer.
New mothers receive 24 weeks of maternity leave, at a minimum of 70% of their base salary. They may also take up to three years off and receive maternity benefits. Fathers are entitled to five days of paternity leave, which can be taken in the first two months following the birth.
An employment relationship may be terminated:
- By mutual consent
- By notice
- By dismissal without notice
An employment relationship may be terminated either by the employee or the employer by notice. The employer may not terminate the employment relationship by notice:
- During pregnancy
- During maternity leave
- During a leave of absence taken without pay for caring for a child
- During any period of actual voluntary reserve military service
- In the case of women, while receiving treatment related to a human reproduction procedure, for up to six months from the beginning of such treatment
(All of the above cases apply only if the employee has informed the employer thereof.)
Employers are required to justify their dismissals. The reasoning shall clearly specify the grounds for termination, and it shall also be authentic and reasonable. Employees may terminate the employment by notice without reasoning.
An employee may be dismissed only for reasons in connection with their behavior in relation to the employment relationship, with their ability or in connection with the employer’s operations.
The notice period shall begin at the earliest on the day following the date when dismissal is communicated; however, some exceptions exist, and they may delay the commencement date.
In the event of dismissal, the employer shall excuse the employee concerned from work duty for at least half of the notice period.
An employee shall be entitled to severance pay if the employment relationship is terminated by the employer.
Severance pay shall be the sum of the absentee pay due for:
- One month, in the case of at least three years
- Two months, in the case of at least five years
- Three months, in the case of at least 10 years
- Four months, in the case of at least 15 years
- Five months, in the case of at least 20 years
- Six months, in the case of at least 25 years
The amount of severance pay shall be increased if the employment relationship is terminated within a five-year period before the date when the employee reaches the age limit for old-age pension.
The employee shall not be entitled to receive severance pay if:
- They are recognised as a pensioner at the time when the notice of dismissal is delivered or when the employer is terminated without succession
- They are dismissed for reasons in connection with their behaviour in relation to the employment relationship or on grounds other than health reasons
Termination without notice
An employer or employee may terminate an employment relationship without notice if the other party:
- Wilfully or by gross negligence commits a grave violation of any substantive obligations arising from the employment relationship
- Otherwise engages in conduct that would render the employment relationship impossible
Employees are entitled to paid annual leave based on the time spent at work, comprising vested vacation time and extra vacation time. The amount of vested vacation time shall be 20 working days.
Employees shall be entitled to extra vacation time as follows:
- One working day over the age of 25
- Two working days over the age of 28
- Three working days over the age of 31
- Four working days over the age of 33
- Five working days over the age of 35
- Six working days over the age of 37
- Seven working days over the age of 39
- Eight working days over the age of 41
- Nine working days over the age of 43
- 10 working days over the age of 45
Employees shall be first entitled to extra vacation time in the year when reaching the age specified above.
Employees may also be entitled to extra vacation for other reasons, such as if they have children. Regarding children, employees entitled to:
- Two working days for one child
- Four working days for two children
- A total of seven working days for more than two children under 16 years of age
The Hungarian Labor Code respects calendar years. Vacation time shall be allocated in the year in which it is due, but if the employment relationship commenced on 1 October or subsequently, the employer shall be entitled to allocate vacation time by 31 March of the next year. If vacation time could not be allocated as written above for reasons attributable to the employee, it shall be allocated within 60 days after the cause ceases to exist. (This usually happens when the employee comes back to work from maternity leave.)
Vacation time shall be considered allocated during the year when it’s due, provided that it begins during that year and the portion allocated in the following year doesn’t exceed five working days. In the event of economic reasons of particular importance or any direct and consequential reason arising in connection with its operations, the employer:
- May amend the date of vacation previously agreed upon
- May recall the employee from vacation
- ay allocate one-fourth of the employee’s vacation time by 31 March of the following year if so stipulated in the collective agreement
By agreement of the parties covering a calendar year, the employer shall be entitled to allocate the vacation time related to the age of the employment (above the basic 20 days) by the end of the year following the year when due.
Public holidays are 1 January, 15 March, Good Friday, Easter Monday, 1 May, Whit Monday, 20 August, 23 October, 1 November and 25–26 December.
There’s no regional variance.
Keen to engage a EOR in Hungary?
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