Hungary - Employer of Record Services

Coberon Chronos provides Employer of Record Services for clients that want to hire employees and run a full payroll without establishing an entity in Hungary.

In Hungary, your candidates get hired by CoberonChronos’ PEO legal entity in accordance with local Labor Code and can be onboarded in days by signing a labor contract we can provide in Hungarian. The employed is eligible and assigned to work with and on your company’s behalf exactly as if he or she were your employee in-country. We prepare the monthly salary, benefits and allowances payroll based any timesheet provided and we calculate all expense reimbursement costs too. 

 

Employment At a Glance

The Hungarian labour market is well regulated and governed by the local Labour code which protects the employees’ rights. There are specific rules and procedures that must be followed in cases of new employment, working overtime, termination, illness. The labor law also very strongly protects employees being on maternity/paternity leave. Companies can be fined and sanctioned if they do not follow the statutes. The labor code has a specific section for local employee-leasing, and also permitting collective bargaining and works councils which both represent employees' rights.

Licensing requirement for Hungarian EOR / Employee-leasing temporary agencies
Companies hiring people to work on behalf of other coompanies in Hungary, as part of an EOR and local employee-leasing services, are legally require to have a temporary employee-leasing agency licence. As we take pride in following the local law rigorously, it is a great advantages for our clients that any local employee is not at risk with being employed by a local and full licenced EOR/PEOservice provider.
 
Best Practices and Standard Labor Code Details in Hungary 
It is very important that when the negotiating is on for the terms and condition of a new employment, the offer letter is advised to be finalised in a written format (via email at least), possibly get signed by both parties. 
 
Employment contract in Hungary
Generally, an employment contract is executed for an indefinite duration.

Fixed-term contracts are also allowed for up to a maximum 5 years period if they are for temporary or seasonal work. The number of fixed-term employment contracts between the same parties are not limited but each subsequent contract must be renewed minimum for the same fix period of time like the curret one states.  

Employment contracts must be in writing in the local hungarian language and include the below terms and conditions:
  • start date
  • place of work
  • job title
  • weekly working hours (e.g.: 40 hrs/week for a full time contract), 
  • probationary period
  • monthly gross salary, which must be always stated in the local currency HUF
  • a job description with responsibilities and duties. 

If the employee’s base gross salary and/or any benefits are previously agreed in foreign currency like USD or EUR than still the amount must be exchanged to Hungarian Forint and written into the employment contract. Th emonthly payroll must be done in the local currency.

Any employment contract must signed a day before the start date in order to file the necessary hiring report to the local Tax Authority and for an adequate social security coverage from day one.

Probationary period
The local Labor Code specifies that the probationary period can be set up to 3 months (max. 90 calendar days).

 

Public Holidays in Hungary
Hungary celebrates several public holidays for which employees are given the day off, including:
  • New Year’s Day: January 01, 2017
  • National Day / Memorial Day of the 1848 Revolution: March 15, 2017
  • Good Friday / Friday before Easter Sunday: April 14, 2017
  • Easter Monday: April 17, 2017
  • Labor Day / Anniversary of the accession to the EU: May 1, 2017
  • Pentecost Sunday: June 04, 2017
  • Saint Stephens Day: August 20, 2017
  • Republic Day: October 23, 2017
  • All Saints Day: November 01, 2017
  • Christmas Day: December 25, 2017
  • Second Day of Christmas: December 26, 2017

13th month salary in Hungary
In Hungary, the 13th month salary is not mandatory, however if it is offered than all employees must receive it on the equal rights specified in the Labor Code.

Bonus payments in Hungary
It is entirely up to the employer what bonus to pay or whether to pay at all. Any employee may receive for example individual bonuses based on performance and its key factors or based on corporate structure bonus plan linked to individual/department/corporate performances.
 

Standard Working Hours - Hungary
In Hungary, the standard working time is 8 hours a day, 5 days a week in full-time jobs.
 
In principle, the weekly hours should be split equally among the working days, and same rule goes for the part-time work schedule as well. 
Employees have the right to at least 11 hours of undisturbed rest between daily work schedules and 2 days full rest for ach week. Days free of work are Sundays and bank holidays. Employees can work no more than 250 hours in overtime per year. 
 
  • Employee is entitled to a +50% allowance on top of the normal gross salary for overtime hours worked on normal workdays,
  • Employee is entitled to double remuneration for hours worked on resting days (incl. Saturdays, Sundays, public holidays) or +50% remuneration if an extra (full) day-off is offered within 7 days.
  • Employee is entitled to special +15% remuneration for hours worked during nights (between 10pm - 06am) and other allowance may also applicable depending on the work schedule.
  • For the stand-by and on-call duty works, there are other rules to follow and can only be required for specific jobs, job titles.

However, in accordance with the Labor Code, working hours may be arranged unequal by the employer for specific periods (monthly periods but not longed then 4 month or 17 weeks) and for specific jobs within the legal limits and the resting rules must be followed for such work schedules. 

Employee's working hours must be recorded and the documented on monthly timesheets in respect to hours worked must be signed with both employee and employer.

Vacation in Hungary
Employees are entitled to be paid annual leave based on the time spent at the contract. The days increases based on the age of the employee and the number of children in the family:
  • Up to the Age of 25: 20 working days
  • From the Age of 25: 21 working days
  • From the Age of 28: 22 working days
  • From the Age of 31: 23 working days
  • From the Age of 33: 24 working days
  • From the Age of 35: 25 working days
  • From the Age of 37: 26 working days
  • From the Age of 39: 27 working days
  • From the Age of 41: 28 working days
  • From the Age of 43: 29 working days
  • From the Age of 45: 30 working days
+ extra vacation days are applicable both to mother and father based on the number of children:
  • For 1 child: + 2 working days
  • For 2 children: + 4 working days
  • For 3 children or more: + 7 working days

 

  • Vacation time shall be allocated in the year in which it is due and minimum 7 consecutive days based on the employee’s request but still a vacation must be allocated to contain at least 14 consecutive days at a time (public holidays and weekend resting days can be calculated into the 14 days).
  • If the employment relationship commenced on the first of October or subsequently, the employee shall be entitled to get vacation time by 31 March of the next year latest.
  • Employees’ paid leave entitlements and the leaves taken should be recorded and the documents in respect to leaves must be signed with both employee and employer. If an employees starts or ends work part way through a holiday year he is entitled to paid holiday on a pro rata basis. 

 

Sick Leave in Hungary
An employee is entitled to 15 sick-leave days yearly while enrolled in the national social security system. During this 15 days of period employees must receive 70% of their base gross salary which is paid by the Employer.
After 15 days, the amount paid varies from 50% – 60% depending employment social security coverage the employee has had 760 days backwards.
The sick leave allowance gets paid one third by the employer and the remaining amount is paid by the state.

If work/ occupational related accident or illness happens and the employee is unable to perform the work due to it then 4 days or more but less than 3 months, the employer must pay the injured employee at a rate of pay of at least 75% from the first day of injury until the employee returns to work. If the employee is unable to work for a period longer than 3 months, the employee must claim compensation from the State compensation fund.

Sick leave is required to be proved by a medical certificate issued by a local certified doctor. Such certificate is to be provided to the employer by the end of month. 

Maternity/Paternity Leave in Hungary
Women have 24 weeks maternity leave, but are allowed to take up to three years off and receive maternity benefits. For the first six months, a woman receives 70 percent of her base salary paid by the State; this support is called Pregnancy and Confinement Benefit. For the next eighteen months, until the child’s second birthday, a Child Care Fee (GYED) is available, however The employee is entitled to work part time and still receiving this benefit by the State.
The amount paid is 70 percent of the previous earnings of the parent taking care of the child; however it is capped, and cannot be higher than 70 percent of twice the minimum daily wage. Actually, the maternity leave may start 4 weeks prior to the scheduled delivery date unless the employee would like to work up to the delivery day on her own risk.

The father is entitled to 5 (five) days off for paternity leave which the employer must allocate within two months following the date of birth upon the father’s request. The father is also entitled to take unpaid leave until the child reaches 3 years of age.

Business travelling
Generally, if employees are required to travel 15 or more days on business purposes they must be notified in written prior to 7 days before any business travles. The travel information should include the purpose of the business trip, the duration and location(s), the applicable wage and non-wage allowances incl. the daily per-diem amounts, the travel expense reimbursement and returning conditions.

Termination of Employment Contract, Severance in Hungary
 
An employment relationship may be terminated:
  1. by mutual consent;
  2. by notice;
  3. by dismissal without notice.
The reasoning shall clearly specify the grounds for termination. The burden of proof to verify the authenticity and substantiality of the grounds of the act of termination shall lie with the party taking the legal act. The employment can not be terminated during the period or a maternity/paternity leave and based on other special reasons local Labor Code specifies. 
 
The employer can set a probationary period in the employment contract and during this period the contract can be terminated in written but no explanation fo rreason is required.

When terminating employment, either party must provide a notice period of at least 30 days but no more than one year. The 30-day notice period must be extended by the following:
  • 5 days after 3 years of employment
  • 15 days after 5 years of employment
  • 20 days after 8 years of employment
  • 25 days after 10 years of employment
  • 30 days after 15 years of employment
  • 40 days after 18 years of employment
  • 60 days after 20 years of employment

The employee is entitled to severance pay if the employer terminates the employment by ordinary termination (as a result of the employee’s work or performance ability, behavior in relation to the employment relationship or the employer’s banckruptcy economic reasons). The following payments apply:

  • 1 month base gross for up to 3 years of employment
  • 2 months base gross for up to 5 years of employment
  • 3 months base gross for up to 10 years of employment
  • 4 months base gross for up to 15 years of employment
  • 5 months base gross for up to 20 years of employment
  • 6 months base gross for up to 25 years of employment
Employment Taxes in Hungary
Applicable from Jan/1/2017
The employer pays into social security at a rate of 23.5%. Additional monthly 'rehabilitation' tax is applicable for each employee and payable quarterly. Employee's contributions are the personal income tax (15%) and other, lower rate contributions such as pension, social security for health insurance and labor market contribution.

 

Health Insurance in Hungary
Hungary provides a full medical coverage to all citizens and foreign citizen employees with work permits being on a full payroll based on employment contract and based on the specific payroll contributions as one source of such coverage funding.

Additional Benefits in Hungary
Non-wage benefits are commonly offered by employers in Hungary and a wide range of benefits can be given to the employees which are specified in our Benefits in Hungary informational brochure.

Immigration / Work Permits in Hungary
Since Hungary is a member of the European Union (EU) as well as a party to the Schengen Treaty, differing rules and conditions apply to EU/EEA nationals compared to non-EU/EEA nationals. There are different types of residence and work permits issued in Hungary which include individual work permit, individual work permit within a collective work permit.
 

 

Why Coberon Chronos

In Hungary to hire a small or large number of staff can be time consuming, expensive and complex without the extensive knowledge of the local Labor Code but mostly to apply it to the best practices.

Coberon Chronos can help your business to hire your candidates, handle all the hiring administration and payroll and ensure that you’re in compliance with local labour laws, without the burden of setting up a large office or subsidiary abroad in a rush.
Our Global Employer of Record and PEO services lets you focus on running your key business in a new country.
If you have an immediate EOR needs to just would like to discuss how CoberonChronos can provide a seamless employee-leasing or PEO solution for hiring employees in Hungary, please contact us at sales@coberonchronos.com.

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