Employment Regulations
Key Factors to Consider When Employing 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.
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
Statutory Working Hours
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:
- Work will be allocated for a five day work week (Monday to Friday)
- Daily working time will not exceed 12 hours or 24 hours in the case of stand by jobs
- Weekly working time of such employees shall not exceed forty eight hours or seventy two hours in the case of stand by jobs
Rest breaks:
If the scheduled daily working time or the duration of overtime work performed
- Exceeds six hours, a twenty minute break will be provided
- Exceeds nine hour s, an additional twenty five minutes will be provided
Daily rest period shall be as follows:
- At least seven hours of uninterrupted rest period
- At least eight hours of daily rest shall be provided to employees working on
- Split shifts
- Continuous shifts
- Multiple shifts
- Seasonal jobs
- Stand by jobs
Weekly rest period shall be as follows:
- Two rest days per week
- After six days of continuous work, one rest day shall be provided
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.
Specific Regulations about Overtime
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.
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.
Annual Leave Accrual Entitlement
Employees are entitled to 20 days of basic annual leave. They are also entitled to additional annual leave based on their age.
- One working day over the age of twenty-five;
- Two working days over the age of twenty-eight;
- Three working days over the age of thirty-one;
- Four working days over the age of thirty-three;
- Five working days over the age of thirty-five;
- Six working days over the age of thirty-seven;
- Seven working days over the age of thirty-nine;
- Eight working days over the age of forty-one;
- Nine working days over the age of forty-three;
- Ten working days over the age of forty-five
Allocation of annual leave shall be as follows:
- Allocate 7 working days of vested time in a given year of not more than 2 parts
- Vacation shall include at least 14 consecutive days at a time
Employees are entitled to the following additional annual leave as well.
- Two working days for one child, four working days for two children, a total of seven working days for more than two children
- Paternity leave: Father will be entitled to five days of vacation in case of the birth of one child, seven working days for the birth of twins
- Young workers (until they reach the age of eighteen) will be entitled to five extra days of vacation each year
- Employees working permanently underground will be entitled to five extra days of annual leave each year
Paid Sick Leave Entitlement
15 days of sick leave per calendar year.
Maternity Leave in Hungary
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.
Employment Termination in Hungary
An employment relationship can be terminated:
- By mutual consent
- By notice
- By dismissal without notice
Employment Termination
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;
- Four months, for up to fifteen years;
- Five months, for up to twenty years;
- 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
Statutory Notice Period Employer With Cause
Employers 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
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:
- In the event of liquidation or bankruptcy
- For reasons related to the worker’s ability
- Due to unavoidable external reasons
Statutory Notice Period Employer Without Cause
An employer may terminate an employment relationship without notice if:
- Willfully 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
Right of termination without notice may be exercised without giving reasons:
- By either party during the probationary period
- By the employer during fixed term relationships
Probation Period
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.
Pension Requirements
Employer and Employee contributions
Employer social security contributions total 19.5% of gross monthly compensation, and employees contribute 18.5% (10% pension, 7% health, 1.5% unemployment) from their salary. There is an exemption for non-EU expats and their employers, as well EU citizens whose country has a tax treaty with Hungary.
Retirement benefits
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.
- Continue make contributions
- Withdraw partial or full savings from their account
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.
