At Bradford Jacobs, our Employer of Records (EOR) platforms provide reliable solutions for companies wishing to establish their presence in the Hungarian economy. Compliance with the local payroll laws and regulations are vital to a business’ smooth and hassle-free transition, which is where we come in. We offer dedicated Hungary Payroll solutions that can be personalized to your requirement.
We aim to make business expansion easy. We navigate the administration of the Hungarian payroll system for you – and as part of our service, we make the returns and associated payments for wage taxes and social security contributions directly from our payroll system to the local tax authorities. We do the work, so you do not have to.
You may encounter some challenges regarding payroll, but allow us to take the reins and answer any of your questions and concerns with our trusty guide on payroll for Hungary.
What Hungary Payroll Options Are Available for Companies?
Businesses in Hungary have access to a variety of payroll options, depending on their needs:
- Remote payroll: Businesses can operate under a single payroll system for all employees, by adding employees in Hungary to your parent company’s payroll. However, these employees will have to operate under different regulations, which can cause some confusion.
- Internal payroll: You may also operate payroll out of your subsidiary, especially if you are committed to growing your company’s presence in Hungary. However, this does require hiring a dedicated HR staff that understands the local employment and compliance laws.
- Hungary payroll processing company: If you are keen on outsourcing, working with a Hungarian payroll processing company will help in your payroll process – but not when it comes to compliance.
- Hungary payroll outsourcing: An option that solves both payroll and compliance needs - working with a company like Bradford Jacobs. We can handle both your payroll and compliance for all your employees in Hungary. We take the stress of administration off your shoulders so you can focus on your other strengths.
Hungary Payroll Services
Payroll regulations in Hungary change frequently, and businesses can risk sanctions and financial penalties if they do not comply with these changes. Our payroll service requires staying up to date with these shifting demands – which includes administering returns and associated payments for wage tax and social security contributions directly from our payroll system to the tax authorities. Our role consists of:
- Registering with the National Tax and Custom Administration for a tax number identification number
- Registering with the National Health Insurance Fund (NEAK) to pay social security contributions
- Registering employees with the State Employment Services
- Register with the online Company Gate Services for administration services
- Creating employment contracts for your new employees, in Hungarian and English
- Applying for employees’ special expatriation status (if applicable)
- Calculating employees’ monthly salary and sending them their pay slips
- Researching for any available tax incentives
- Submitting employees’ or employer’s wage tax returns and national insurance forms
- Corresponding with the applicable national authorities regarding payroll changes and payments
- Creating and submitting your company’s annual accounts, administration, and year-end statements
- Creating payment schedules for wage tax, national insurances, and net wages
- Ensuring proficient personal income tax returns for you and your employees
Outsourcing payroll is a popular practice for Hungarian employers, and it is easy to see why. Outsourcing company payroll saves money and time, and guarantees paid employees, filed tax returns, and fulfilled social security obligations in full and on time. Bradford Jacobs provides the complete service to remove the anxiety and stress from your administration.
Learn more about Hungary Payroll and PEO services.
What Is Required to Set up Hungary Payroll?
The requirements for setting up Hungary payroll will depend on how you establish your presence in the country. If you would like to set up as a subsidiary, you will need to have your subsidiary established first – but this can take some time, depending on where you incorporate as well as the entity type you choose. To start processing payroll in Hungary, you will need:
- A local tax identification number
- Registration with the National Tax and Custom Administration
- Registration with the National Health Insurance Fund
- A local bank account (optional)
- An online “Company Gate” service for administrative purposes
Registering with the authorities and the bank will take at least 5 working days to a few weeks, depending on the documentation required.
What Entitlement/Termination Terms Are Needed to Set up Hungary Payroll?
Employees in Hungary benefit from entitlements for both employment and termination that are enforced by the local legislation, collective bargaining, trade councils and labor institutions:
National Minimum Wage: There is a basic minimum wage of 167,400 HUF, as well as a guaranteed minimum wage of 219,000 HUF when the job requires a secondary education and/or vocational qualifications.
Working Hours: Normal working hours for full-time employment are 8 hours a day and 40 hours a week.
Overtime: An employer may require an employee to work up to 250 hours of overtime in a year – but if the employer completes a contract or agreement with the employee in writing, the number increases with an additional 150 hours, and cannot exceed a maximum of 400 hours in a year.
An employee can have 4 hours maximum of overtime daily, and 8 hours of overtime per week. Employers can take up to 36 months to settle payments of accrued overtime and may agree directly with employees on overtime arrangements, without including unions.
For overtime work employees are entitled to a 150% rate of their hourly wage, and overtime work on holidays and weekends are paid at a rate of 200%.
Annual Leave: All employees in Hungary are entitled to a minimum of 20 paid leave days per year.
Annual leave increases progressively according to the employee’s age. This starts from the employee’s age of 25. The number of vacation days is raised by 1 day every 3 years during the employee’s twenties, and 1 day every 2 years during the employee’s thirties and forties.
Sick Leave and Pay: Employees in Hungary are entitled to 15 days of sick leave per year. Sick leave is paid by the employer at a rate of 70% of the employee’s daily salary.
However, as of the 16th day and onwards, the payment will vary between 50-60%, which depends on the terms of the employee’s contract. 1/3 of sick pay is paid by the employer and 2/3 are paid by the National Health Insurance Fund.
Holiday Leave: There are 11 national holidays that are observed in Hungary:
- January 1st: New Year’s Day
- March 15th: Revolution Day
- Easter Monday
- May 1st: Labor Day
- Whit Monday
- August 20th: Hungary’s National Day
- October 23rd: 1956 Revolution Memorial Day
- November 1st: All Saints’ Day
- December 24th: Christmas Eve
- December 25th: Christmas Day
- December 26th: Boxing Day
It is customary in Hungary, however, for employers to grant additional days for holiday leave. Employees may be required to work depending on the employment contract or the nature of the business they work in.
For work performed on public holidays, employees must be remunerated at 100% of normal pay – this is also paid for any work performed on Easter Sunday, Whit Sunday, or any other public holidays which fall on a Sunday.
Maternity Leave: Pregnant employees are entitled to 24 weeks of maternity leave, but they are also entitled to take up to 3 years of further leave and receive extra maternity benefits. These benefits are paid by the National Health Insurance Fund (NEAK).
For the first 6 months, they are entitled to a Pregnancy and Confinement Benefit (CSED), which is paid at a rate of 70% of the employee’s average salary. After that, for the next 18 months until the child’s second birthday, mothers are entitled to a Child Care Fee (GYED) at the rate of 70% of their salary and is capped at double the minimum wage.
An additional benefit known as Child Home Care Allowance (GYES) is available for both unemployed parents and grandparents that are caring for a child until they reach the age of 3.
Paternity Leave: Fathers are entitled to five days of paid paternity leave following the birth of their child, which can be taken in one or several parts until the end of the second month after the birth.
Any income or taxes relating to this period of supplementary leave will be reimbursed by the State Treasury.
Parental Leave: After maternity leave is done, one parent may take parental leave until the child reaches 2 years old. Parental Leave is paid at the rate of 70% but is capped at double the minimum daily wage. In addition, one parent is entitled to additional compensated time off under certain conditions and is granted up until the child reaches the age of 16:
- 2 extra days for 1 child
- 4 extra days for 2 children
- 7 extra days for 3 children or more
Termination/Severance: For employment termination, both the employer and employee must provide termination in writing and include a justified reason for the dismissal or resignation, respectively. The notice period for termination, however, depends on the length of employment and the employment contract:
- Probation: Effective immediately
- Temporary/fixed-term contract: Terminates at the end of the employment term
- Permanent Contract: Termination requires a notice period between 30-90 days (depending on the length of service).
Severance payments vary between 1-9 months, depending on the length of service and the employee’s age. An employee is entitled to severance pay in the following employment termination situations:
- By the employer
- Upon the termination of the employer without succession
- If the transferee employee is not covered by the Labor Code during a change as a legal succession or a business transfer
13th month pay is not practiced in Hungary.
What Taxation Rules Exist for Payroll?
An important aspect of Hungary payroll is knowing the local tax regulations. In Hungary, employees are obligated to pay a flat income tax rate and contribute to health insurance and social insurance through monthly salary deductions.
The tax year runs from 1 January to 31 December. Employee salaries are paid monthly and pay slips may be provided online on the 10th of every month. The employer must also file monthly social security declarations and yearly income tax reports, which state employees’ yearly earnings.
Employers and companies in Hungary are obliged to make the following tax payments:
- Corporate Tax: Companies are subject to a corporate income tax of 9%.
- Income Tax: Personal Income Tax in Hungary is withheld by the employer and paid to the tax authorities every month. An employee’s income is taxed at a flat rate of 15%.
- Social Taxes: In Hungary, employers contribute a monthly rate of 17% of the employee’s salary, which is split into a social security contribution of 15.5% and a vocational training fund of 1.5%, whilst employees pay social security contribution rates of 18.5% of their salary, which is withheld by the employer and split as so:
- Pension - 10%
- Health Insurance - 7%
- Unemployment - 1.5%
For more information on taxes, you can check out our Hungary Tax page, or check out Hungary’s National and Customs Administration.
Outsource your payroll in Hungary
If you are looking to expand into Hungary and need your employees’ payroll managed with extensive management in compliance, contact us today to see what our International Payroll services can do for you.