G-P provides employer of record services for customers that want to hire employees and run payroll without first establishing a branch office or subsidiary in Hungary. Your candidate is hired via G-P’ Hungary Professional Employer Organization (PEO) in accordance with local labor laws and can be onboarded in days instead of the months it typically takes. The individual is assigned to work on your team, working on your company’s behalf exactly as if he or she were your employee to fulfill your in-country requirements.
Our solution enables customers to run payroll in Hungary while HR services, tax, and compliance management matters are lifted from their shoulders onto ours. As a Global PEO expert, we manage employment contract best practices, statutory and market norm benefits, and employee expenses, as well as severance and termination if required. We also keep you apprised of changes to local employment laws in Hungary.
Your new employee is productive sooner, has a better hiring experience and is 100% dedicated to your team. You’ll have peace of mind knowing you have a team of dedicated employment experts assisting with every hire. G-P allows you to harness the talent of the brightest people in more than 185 countries around the world, quickly and painlessly.
Hungary is a landlocked, Central European country with a population of almost 10 million. It’s a popular tourist destination and in 2013 more tourists visited Hungary than there are citizens of the country. Hungarian businesses tend be structured hierarchically and the environment is fairly formal. Personal relationships are critical to successful business dealings so face-to-face discussions are essential. Because relationships are so important to Hungarians, you may be invited to socialize after hours or go on sightseeing trips. These are great opportunities to connect with your business partners and you should not pass them up.
Hiring in Hungary
The Hungarian labor code gives strong protection to employees. There are specific rules and procedures that must be followed in cases of termination, illness, or maternity benefits, and companies can be fined and sanctioned if they do not follow the statutes. Both collective bargaining and works councils, which represent employees, are permitted.
When negotiating the terms of an employment contract with an employee in Hungary, it may be useful to keep the following standard benefits in Hungary in mind:
Employment Contracts in Hungary
The general rule in Hungary is that employment contracts are executed for an indefinite duration. Fixed-term contracts are also allowed if they are for temporary or seasonal work.
Employment contracts must be in writing, in the local language, and must include the terms of the employee’s compensation, benefits, responsibilities, hours and holidays, probation period, and job title. It is best practice to also include termination requirements. An offer letter and employment contract in Hungary should always state the salary and any compensation amounts in Hungarian forint rather than a foreign currency.
Working Hours in Hungary
The standard work week in Hungary consists of up to 8 hours a day, 5 days a week. Employees can work no more than 250 hours in overtime per year and must be paid 50% on top of gross salary for overtime hours worked.
Holidays in Hungary
Hungary celebrates 10 public holidays for which employees are given the day off, including:
- New Year’s Day
- Revolution Day
- Easter Monday
- Labor Day
- Whit Monday
- Saint Stephen’s Day
- Republic Day
- All Saints’ Day
- Christmas Day
- Second Day of Christmas
Vacation Days in Hungary
Employees in Hungary are entitled to at least 20 days off per year. The amount increases based on the age of the employee as follows:
- Up to the Age of 25: 20 business days
- From the Age of 25: 21 business days
- Up to the Age of 31: an additional business day every 3 years
- Up to the Age of 45: an additional business day every 2 years
- From the Age of 45: 30 business days
Hungary Sick Leave
An employee is entitled to 15 sick days annually while enrolled in the national social security system. Employees generally receive 70% of their salary which is paid by the employer. After 15 days, the amount paid varies from 50% – 60% depending on the term of service. One third is paid by the employer and the remaining amount is paid by the state.
If an employee is unable to work due to a work related accident or occupational illness for 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 Compensation Fund.
Maternity/Paternity Leave in Hungary
Pregnant employees are entitled to 24 weeks of maternity leave (CSED). The leave must start at least 4 weeks prior to the scheduled delivery date. The amount of the childcare fee per calendar day is 100% of the calendar day’s base or the calendar day’s income. The amount determined in this way is the gross amount subject to personal income tax, taking into account the tax benefits, the personal income tax advance is deducted by the body determining the benefit. No social security contributions are payable after this amount.
The father is entitled to 10 days off for paternity leave no later than the end of the second month following the childbirth or adoption, which must be granted at a time appropriate to his request, in no more than two parts. For the first 5 days, he is entitled to an absence fee, during days 6-10 he is entitled to 40% of the absence fee.
Parental Leave: One parent is entitled to take additional leave until the child reaches 2 years of age. The amount paid is 70% of previous earnings, however, the amount cannot exceed 70% of twice the minimum daily wage. One parent is also entitled to extra annual paid time off, 2 days for 1 child, 4 days for 2 children, or 7 days for more than 2 children under 16 years of age.
The employee is eligible for 44 working days of parental leave until the child’s 3rd birthday provided that the employee has one year of employment at the company – not necessarily at the time of the childbirth or adoption, if this requirement is met later, the employee can claim the parental leave. The employee receives a 10% of absence fee during the parental leave and cannot be eligible if receives CSED, GYED, or GYES.
Health Insurance in Hungary
Hungary provides full medical coverage to all citizens, with payroll contributions as one source of funding. The government pays contributions for certain groups such as the unemployed and pensioners.
The 13th month bonus is not mandatory in Hungary, however, performance based bonuses are common.
Termination/Severance in Hungary
The employer can set a probationary period in the employment contract. Local labor laws do not specify the maximum probationary period, however, it must be reasonable given the circumstances of the job.
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 amounts:
- 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 ability, behavior in relation to the employment relationship or the employer’s operations or economic reasons). The following payments apply:
- 1 month for up to 3 years of employment
- 2 months for up to 5 years of employment
- 3 months for up to 10 years of employment
- 4 months for up to 15 years of employment
- 5 months for up to 20 years of employment
- 6 months for up to 25 years of employment
The amount of severance pay is increased by 3 months if the employee is terminated within 5 years of his/her eligibility for old age pension or old age pension with age allowance.
Paying Taxes in Hungary
The employer’s statutory social security contribution is 15.5% of gross salary. The employee’s contribution is 18.5% – 10% for social security and 7% for health insurance and 1.5% unemployment contribution.
This information is provided as generally accepted information and is not intended as advisory services.
Establishing a branch office or subsidiary in Hungary to engage a small team is time-consuming, expensive and complex. Hungarian labor law has strong worker protections, requiring great attention to detail and an understanding of local best practices. G-P makes it painless and easy to expand into Hungary. We can help you hire your candidate of choice, handle HR matters and payroll, and ensure that you’re in compliance with local laws, without the burden of setting up a foreign branch office or subsidiary. Our Hungary PEO and Global Employer of Record solution provides you peace of mind so that you can focus on running your company.
If you would like to discuss how G-P can provide a seamless employee leasing or PEO solution for hiring employees in Hungary, please contact us.