Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Hungary might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labor contracts for employees in Hungary including local benefits.
After reading this guide you will know everything about social security in Hungary, notice periods, and average working hours. We also included some essential aspects of the work ethics and culture in Hungary.
What Hungary Compensation Laws Exist?
In Hungary, compensation laws are set by the Labor Code and national legislation, but the types of compensation can vary according to the sector the employees are in, regulations of applicable collective agreements, and the internal regulations of the company.
For example, there is no 13th month payment in Hungary, but companies can choose to pay a yearly bonus – other employee bonuses are also negotiated between the employer or employer when the contract is being drawn up and signed.
There are, however, other benefits/compensation that are guaranteed by national legislation:
- National Minimum Wage: There are two types of in Hungary: the basic minimum wage, and the guaranteed minimum wage (for secondary qualifications and higher). Employees in Hungary must receive at least these amounts for their work. Both were recently increased in 2021 to HUF 167,400 and HUF 219,000, respectively.
- Social Security Contributions: Employees in Hungary are entitled to social security benefits. Social security contributions are paid monthly through contributions by the employee and the employer (employee contributions are withheld by the employer), and include insurance for state pensions, unemployment, and health insurance.
- Notice Periods: Notice periods in Hungary are mandatory and vary according to the termination type.
- Termination and Severance: Employees are entitled to severance pay after having served for 3 years or more in employment and is granted expect in cases of termination due to misconduct. Termination can be of either the employee’s or the employer’s will. The standard notice is one month but may also depend on the grounds of dismissal.
- Work Hours and Breaks: Employees are entitled to paid breaks, which are between 30-60 minutes in an average workday.
- Sick Leave: All employees in Hungary are entitled to sick leave and compensation, which is paid by both the employer and social security funds.
- Holiday/Vacation Leave: Employees are entitled to annual leave, as well as leave on public holidays. Annual leave starts at 20 days and increases according to an employee’s age.
- Maternity Leave: Employees are entitled to 24 weeks of maternity leave but are also allowed to take up to 3 years off and receive maternity benefits by the National Health Insurance Fund (NEAK). For the first six months, mothers are entitled to a Pregnancy and Confinement Benefit (CSED) at a rate of 70% of their salary.
- Paternity Leave: Fathers are entitled to 5 days’ leave in the first two months of the child’s birth. Any income and taxes related to this period is reimbursed by the Hungarian State Treasury.
- Parental Leave: After the maternity leave is over, one parent is entitled to parental leave up until the child reaches the age of 2 years old, as well entitled to a Child Care Fee (GYED) at a rate of 70% of the salary that can go up to double the minimum wage.
Social Security in Hungary
Employees in Hungary are entitled to social security benefits. Social security contributions are paid monthly to the Tax and Customs Administration and the National Health Insurance Fund through contributions by the employee (18.5%) and the employer (17%). Employee contributions are withheld by the employer and paid to the relevant authorities on the employees’ behalf.
Social security contributions include insurance for state pensions, unemployment, and health insurance.
- Employer’s Contributions: Social Security (15.5%), Vocational Training Fund (1.5%)
- Employee’s Contributions: Pensions (10%), Health Insurance (7%), Unemployment (1.5%)
Foreign nationals are not subject to the Hungarian social security systems if their assignment does not exceed 2 years, which applied to both the individuals’ part of the social security contributions and the social tax payable by the employer.
Statutory Cost in Hungary
Statutory Costs in Hungary include meeting the standard employee wages, income tax, and social taxes.
Employers must meet the minimum wage (basic or guaranteed, depending on the employee’s qualifications), and ensure that the necessary payments from their wages to the local authorities are made on time, which include:
- Income Tax – income tax is to be withheld from the employee every month and paid by the employer monthly to the local tax authorities.
- Social security – social security payments are to be made by both the employer and the employee monthly.
What Benefits Are Guaranteed in the Hungary?
Overtime: Overtime payment is guaranteed to workers at no less than 150% of workers’ hourly rate.
Health Insurance: All employees benefit from national health insurance if they are paying social security contributions.
Public Holidays: Hungary enjoys about 11 annual public holidays, and employees are entitled to get those days off, as well as receive compensation for them.
Vacation Leave: Vacation leave is also guaranteed in Hungary, which starts at 20 days, and increases according to the employee’s age.
Sick Leave: Sick leave and sick leave payments are guaranteed and paid by both the employer and social security funds.
Maternity Leave & Paternity Leave: Expectant mothers are entitled to 24 weeks of maternity leave, with pay. 5 days of paternity leave within the first two months of the child’s birth is also guaranteed to an employee.
Parental Leave: Parental Leave of up to 2 years is also guaranteed to employees in Hungary and is compensated by the National Health Insurance Fund.
Unemployment: An individual who has worked at least 360 days in three years before becoming a jobseeker is entitled to unemployment benefits – which is calculated at one day’s benefits for every 10 days worked, and the allowance is equal to 60% of the previous average pay.
What Restrictions Exist for Benefits and Compensation in Hungary?
Probation: Probation cannot exceed 3 months and are not entitled to severance pay during this time.
Severance Pay: Employees are only entitled to severance pay after 3 years of employment and is capped at 6 months after 25 years of work.
Overtime: Overtime cannot exceed 400 hours in a year and must generally be agreed to by both the employer and the employee in writing.
Unemployment Benefits: Jobseeker benefits cannot be higher than 100% of the minimum wage and is capped at a maximum of 90 days.
Health Insurance and other Benefits in Hungary
In Hungary, employees are entitled to health insurance, and have a choice of public private healthcare. Public healthcare is delivered through a state system which entitles citizens to free or low-cost healthcare and is funded by compulsory monthly social security payments.
However, private health insurance options are also available and can be acquired on the employee’s or company’s initiative.
Company benefits, however, may vary according to the industry and sector, but can normally include private healthcare and a company car.
Contact us to see how we can benefit your plans in Latvia
Employment law in Hungary is established through a combination of different types of legislation – employment law, the labor code, collective agreements through trade unions and work councils. Employment compensation, benefits, social security contributions, and health insurance must be attended to swiftly and efficiently to ensure a smooth transition of your new venture into Hungary.