A successful business largely depends on its employees. By creating working contracts that include the right terms and benefits there will be no misconception and the perfect work-life balance can be created. At Bradford Jacobs, this is our aim, and we support companies in over a hundred countries with creating compliant and balanced labor contracts.
Our team in Hungary keeps track of the Hungarian laws and regulations on a daily basis to be duly aware of updates that can be implemented in working contracts. By using our PEO and EOR service we can provide compliant labor contracts for employees in Hungary including local benefits.
To support your plans in Hungary we made this guide including the basics of employment contracts in Hungary. After reading this guide you will know everything about social security in Hungary, notice periods, and average working hours.
How Do Companies Hire Hungary Employees?
If a foreign company is looking to hire resident employees as part of their expansion into Hungary, they must comply with recruitment regulations such as tax, social security contributions and local employment laws. You probably also have to collaborate with or adhere to any collective bargaining, trade unions or work council agreements. Our PEO-services with various solutions to support your plans, can provide compliant employment contracts for your new employees.
How Do You Hire Hungary Employees?
If a foreign company is looking to hire resident employees as part of their expansion into Hungary, they must comply with recruitment regulations such as tax, social security contributions and local employment laws, as well collaborate with or adhere to any collective bargaining, trade unions or work council agreements.
In Hungary, employment relationships must be concluded in written employment contracts. There are two types of employment contracts – the indefinite contract and the fixed-term contract.
In Hungary, the Labor Code is the main source of employment law, and governs employment conditions, benefits, and health and safety regulations. National legislation also protects the basic rights of both the employers and employees. The conditions of the Labor Code that are performed may vary according to the industry and sector – so it is best to confirm with the National Employment Service or the Labor Inspectorate on what regulation applies.
Labor law in Hungary is based on the protection of both employers and employees. The employment relationship and its terms are hierarchically determined by the Constitution, international treaties, the local labor law, collective bargaining and agreements, employment rules and business practices, with the individual contract being last in the order.
To be fully aware of what you can and cannot apply to your employment practices in Hungary, it is important for the employer to know the existing labor laws and employee entitlements, as well as collaborate with the appropriate local employment organizations.
Our guide will explain employment contract guarantees and limits for both employers and employees according to Hungarian legislation.
Employment Contracts in Hungary
In Hungary, an employment contract must be concluded in writing. Failure to do so will invalidate the contract if the employee raises an objection to this within 30 days after the first day of the commencement of work. There are two types of contracts that are applied in Hungary:
- Indefinite employment contract – the standard type of employment contract in Hungary, which is used for indefinite employment.
- Fixed-term employment contract – This is also practiced in Hungary, although this type of contract must be expressly stated in the contract and agreed to by both the employer and the employee. A fixed-term contract cannot exceed 5 years. When employment is subject to a license or permit, the contract can be terminated if authorization has been received from the relevant authorities.
All employee contracts, irrespective of the type, must contain the following statutory conditions:
- the names and particulars of those engaged in the employment
- the employee’s basic salary
- the employee’s role
It is also best to include additional terms such as:
- the place of work
- probation periods
- the required notice periods
- the conditions of the collective agreement or work procedure regulations that apply to the employment relationship
- the start date and duration of the employment relationship (for fixed-term contracts only)
The Labor Code does not require the job description of an employee to be in the contract, as the contract cannot be amended separately. It is thus best practice to prepare a separate document which contains the job descriptions of all employees – the contract should refer to this document, and the relevant section should be handed over to the employee either immediately after the signing or no later than 15 days after the commencement of work.
The provisions of the Labor Code are binding – however, an agreement between both parties or a collective a collective bargaining agreement may deviate from these terms, but only in such cases where deviation provides more favorable terms for the employee.
In Hungary, collective bargaining covers about a fifth of all employees and takes place primarily in the company or organization level, but they can also be done at industry-level – although this is not common practice.
Collective agreements generally last for two years, although they are sometimes indefinite. However, agreements on company-level pay increases are usually annual.
The revised Labor Code of 2012 altered the rules concerning the unions’ right to bargaining. Union membership, instead of support in work council elections, became the key to representation.
Trade unions can only conclude collective agreements at company level if their membership exceeds 10% of those employed at the company – this same rule also applies to industry-level agreements, where unions must have 10% of those employed in the industry to be able to reach an agreement. In cases where there are several unions with at least 10% membership, the unions much co-operate to reach a single agreement.
What Laws About Employment Exist in the Hungary?
Hungarian employment law is regulated by a Labor Code, national legislation, and collective agreements, all of which have a great significance to the individual contracts between the employer and employee. Thus, companies and employers must be aware of the laws and agreements that apply for their sector’s and/or industry’s working conditions, pay, and benefits.
In employment, certain forms of legislation must be followed, which include:
- National Minimum Wage: There are two types of mandatory minimum wage in Hungary – the mandatory monthly minimum wage (HUF 167,400), as well as the guaranteed minimum wage (HUF 219,000), which is given to those who possess at least a secondary level qualification or second vocational qualifications. All employees must receive the amount of the qualifying minimum wages, at least.
- Working Hours: The regular working hours are 8 hours a day, and 40 hours a week. However, the employer and employee can agree to increase the daily working hours to 12 hours daily for employees working on-call.
- Overtime: The employer may require employees to work up to 250 hours a year, but this can be increased via written agreement by an additional 150 hours, adding up to 400 hours per year. Daily, overtime can be 4 hours daily, and 8 hours weekly. Employees are entitled to a 150% pay rate during overtime work, and a 200% rate for overtime work on a rest day or a holiday.
- Rest Days: Employees are entitled to 2 rest days in a given week.
- Healthy and Safety: The employer should ensure the existence of health and safety working conditions and should cooperate with employee health and safety representatives to achieve this.
- The Second EU Data Protection Act: affects the data rights of EU employees.
- Annual Leave: Basic annual leave in Hungary is 20 working days and is increased with additional days depending on an employee’s age, with up to 10 days.
- From the age of 25 – 1 working day
- From the age of 28 – 2 working days
- From the age of 31 – 3 working days
- From the age of 33 – 4 working days
- From the age of 35 – 5 working days
- From the age of 37 – 6 working days
- From the age of 39 – 7 working days
- From the age of 41 – 8 working days
- From the age of 43 – 9 working days
- From the age of 45 – 10 working days
- Sick Leave: An employee is entitled to 15 days of paid sick leave, which is paid at 70% of the employee’s average daily wage. After that, sick pay is paid by the social security system, but only for a period of up to 1 year.
- Maternity Leave and Protection: Mothers are entitled to 24 weeks, 4 of which may be taken before the estimated date of delivery. Those on maternity leave are also entitled to an infant care allowance for a maximum of 168 days following childbirth, and women receiving this are also entitled to healthcare services. The rest of the leave is unpaid. Pregnant women are also protected by the state and cannot be terminated from employment in Hungary.
- Probation: A probation period may be agreed upon between the employer and the employee, but it cannot be longer than 3 months. A collective bargaining agreement, however, can increase the probationary period to 6 months.
- Termination Notice: During the probationary period, the employment contract may be terminated with an immediate effect. After that, it depends on the conditions of employment or termination. The standard termination notice is one month.
- Severance Pay: Employees dismissed by way of notice after service of more than 3 years and must receive one month’s severance pay. Severance pay increases according to the length of employment, with a maximum of six months’ severance payment after 25 years of service.
Entitlement to severance pay also depends on the reasons for termination. Severance payments are only due in cases of termination on operational grounds or due to medical reasons. In case of dismissals for non-performance or disciplinary reasons, employees are not eligible to receive severance pay.
How Do You Onboard Hungary Employees Internationally?
Considering whether to move existing employees into Hungary or recruit new staff in-country is the first phase of a parent company’s plan to onboard employees in a new territory. You must then deal with acquiring the right visas and work permits and ensure compliance with all local laws and regulations at the risk of attracting fines and sanctions from Hungarian authorities.
The most efficient and effective method of onboarding employees into Hungary is through a global recruitment company such as Bradford Jacobs. Our Professional Employer Organization (PEO) and Employer of Record (EOR) services will manage every stage of the employment process from finding the employee to seeing that their first check is paid on time. We can ensure the right people in the right time to help you get the ball rolling on your business expansion plans.
Translating Hungary Employment Contracts
When translating contracts, one must consider the nature of law and legal language, and their accompanying complexities in legal translations. Employers must deal with two legal systems, as well as the cultural and linguistic differences between the source and target languages.
Legal systems have their own cultural, social, and linguistic structures. Incompatibility of these structures between the source and target languages are where the difficulties lie in translating legal documents.
Translating a document without an understanding of the similarities and differences between both systems, the intention behind the translation, the knowledge of the legal writing style of the target language, and the correct legal terminology can be risky and might lead to serious consequences and proceedings.
Contact us to find out how we can help with your expansion goals
Bradford Jacobs’ comprehensive knowledge of all aspects of Hungarian employment laws make us the ideal partner for your expansion into the gateway to Central and Southeast Europe.
The global reach of our Professional Employer Organization (PEO) recruitment platforms combined with the in-country knowledge of our Employer of Record (EOR) specialist teams guarantee a successful and smooth transition of your employees into your new territory.