Definitive Guide to Hiring in Hungary

Hiring in Hungary

Hiring employees compliantly in Hungary means doing it yourself or using an Employer of Record like Global Expansion. You should be careful using independent contractor agreements in Hungary so that you don’t run afoul of employment laws. To hire an employee compliantly and offer them mandatory benefits and compliant agreements, you can:

(a) Establish your own new legal entity, banking, accounting and payroll service in Hungary; or

(b) use an Employer of Record like Global Expansion who can handle all of the details for you.

Labor Laws in Hungary

Employee Probation Period

• In the Hungarian employment contract the parties may stipulate a probationary period of not more than three months from the date of commencement of the employment relationship.

Annual Leave in Hungary

• The basic annual leave entitlement is 20 working days.
• The annual leave entitlement of employees is increased with additional days depending on the age (not the seniority) of the employee with up to 10 additional working days.
  • 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

Holidays in Hungary

Maternity Leave Hungary

• Pregnant employees are entitled to 24 weeks of maternity leave.
• The leave must start 4 weeks prior to the scheduled delivery date.
• The employee is entitled to 70% of her average salary.
• During the first 6 months of nursing, the employee is entitled to two hours of work time allowance daily and one hour after that until the child reaches 9 months.

Paternity Leave Hungary

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

Sick Leave in Hungary

• 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.
• A sickness benefit (Táppénz) can be granted for a maximum of 1 year while the person is validly insured.

Working Hours in Hungary

• The standard work week in Hungary consists of up to 8 hours a day, 5 days a week.
• The standard number of working hours in Hungary is 40 hours per week in full time employment

Overtime in Hungary

• Employees can work no more than 400 hours in overtime per year and must be paid 50% on top of gross salary for overtime hours worked.

Termination of Employment in Hungary

• An employment relationship in Hungary may be terminated in three ways: by mutual consent, by notice, by dismissal without notice.
• An employment relationship may be terminated by the employee and the employer by notice.
• The employer shall be permitted to terminate a fixed-term employment relationship by notice:
  • if undergoing liquidation or bankruptcy proceedings; or
  • for reasons related to the employee’s ability; or
  • f maintaining the employment relationship is no longer possible due to unavoidable external reasons.
• The termination by mutual consent is not regulated by expressed Hungarian Labor Code provisions. Termination by mutual consent allows to the employer and employee to agree freely but in agreement with each other on the conditions of termination.
• Employer or employee may terminate an employment relationship without notice if the other party:
  • willfully or by gross negligence commits a grave violation of any substantive obligations arising from the employment relationship; or
  • otherwise engages in conduct that would render the employment relationship impossible.
• The right of termination without notice may be exercised within a period of fifteen days of gaining knowledge of the grounds.
• Therefore, in any case within not more than one year of the occurrence of such grounds, or in the event of a criminal offense up to the statute of limitation.

Notice Period in Hungary

• 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

Severance in Hungary

• 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.

Hungary Salary and Wages

13 / 14th Month Salary in Hungary

• No
• There is no statutory requirement to pay the 13th or 14th month salary.
• There is a fraction of employees between (12% to 14%) receive a 13th month salary.

• In Hungary, social security contributions cover health, pension and unemployment insurance.
• The social security contribution base is the gross income paid to the employee.
• The employer's contribution rate ('social tax') is 13% in 2023.
• The employees' social security contribution rate is 18.5%.
• 15% of the unused amount of the child tax base allowance can be deducted from the total amount of 18.5% social security contribution obligation.

Immigration Hungary

Under the current law, a work permit is not required for EEA and Swiss citizens to work in Hungary. For such citizens, the local sponsoring company must notify the Hungarian Labor Office by the date on which the EEA citizen begins working.

Short-term work permit

• Individuals who are not nationals of EEA countries or Switzerland and who are assigned to Hungary for less than 90 days need to have a valid short-term work permit before beginning working in Hungary even if they are not employed by the local sponsoring company.
• The sponsoring company is responsible for filing a workforce demand and a separate work permit application at the regional metropolitan labor bureau.
• The labor bureau grants a work permit to a foreign citizen if the following conditions are satisfied:
  • A Hungarian or EEA citizen with appropriate skills and credentials cannot be found to fill the position.
  • The foreign citizen’s qualifications are appropriate for the requirements of the position.
  • The type of work does not fall under the exceptions set out by the Ministry of Labor.
  • In general, a short-term work permit is issued within approximately 21 calendar days and is valid for a maximum of 90 days.
  • If the work period exceeds 90 days, a combined residence and work permit application must be submitted.
• Citizens of EEA-member countries may be self-employed in Hungary.
• Posted workers performing working activities within the framework of cross-border services are not required to obtain a work permit.

Intra-Corporate Transfer (ICT) Residence Permit

• The intra-corporate transfer (ICT) residence permit applies to non-EEA citizens posted in Hungary from a company established outside the EEA or Switzerland. The home and host companies must be the members of the same company group. The permit can be obtained if the posted employee has been working at the home company for at least three consecutive months.
• The maximum validity period is three years in the case of executive employees and specialists and one year in the case of interns.
• Labor market evaluation is not necessary for an ICT residence permit. The ICT residence permits cannot be extended.
• Applying for an ICT residence permit is mandatory if the background of the Hungarian working activity is in line with the ICT residence permit requirements. The combined work and residence permit applies only if the ICT requirements are not met. Non-EEA or Swiss citizens posted to the branch office of the home company may apply for a residence permit for purpose of employment.
• In the ICT permit application process, applicants must prove the following:
  • They have valid passports.
  • They have the necessary qualifications to work in Hungary.
  • The conditions of the assignment are shown in the ICT agreement between the host and the home company.
  • The host and the home company belong to the same company group.
  • They receive sufficient income to live in Hungary.
  • They have comprehensive health insurance or sufficient funds to use medical services.
  • They have a property rental agreement or proof of ownership of property in Hungary

EU Blue Card

• To work as a highly-qualified worker, you have to apply for an EU Blue Card. You should obtain your Blue Card before entering Hungary, as this will include permission to enter and reside in Hungary. Alternatively, you can apply for the EU Blue Card in Hungary while staying in Hungary on another permit.
• An EU Blue Card shall be made out for a period of at least one year. If the contract of employment covers a period less than this period, the EU Blue Card shall be issued or renewed for the duration of the contract of employment plus three months.
• The EU Blue Card is a permit to work in a job that requires advanced skills. This means that the job must attract a certain minimum salary, which is set according to a method of calculation established by the government.
• For 2016, Hungary set the minimum salary threshold at: 158 000 HUF (13 716 EUR).

Value Added Tax (VAT) in Hungary

• Hungarian VAT law is administered through the Ministry for National Economy and the National Tax and customs authority.
• Companies with a Hungarian VAT number must submit periodic returns detailing all taxable supplies (sales) and inputs (costs).
• VAT returns filed by non-resident traders in Hungary are generally submitted monthly by the 20th of the month following the reporting month-end.
• The standard VAT rate in Hungary is 27%.
• There is a reduced rate of 5% and 18%.

Mandatory Benefits in Hungary

• These are mandatory benefits as postulated by law
• These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, notice period, severance pay and 13th month pay
• Mandatory benefits also include social security benefits.

Payroll Accrual in Hungary

Country Accruals Additional Information

Description

The social security contribution base is the gross income paid to the employee. The employer's contribution rate (so-called 'social tax') is 15.5%.

The employees' contribution rate is 18.5% (10% pension contribution, 7% health insurance contribution, and 1.5% unemployment contribution).

15% of the unused amount of the child tax base allowance can be deducted from the health insurance and pension contributions. The contributions are payable at least on the minimum wage (HUF 161,000 per month in 2020, the guaranteed minimum wage for those employed in jobs requiring at least secondary level qualifications or vocational training is HUF 210,600 in 2020).

For 2021, these numbers are not available yet. Employers, and also individuals who are paid by a non-Hungarian company, are liable for both social security payments and the electronic filing of monthly social security declarations.

As a general rule, dependent persons over 18 years of age are only eligible for healthcare services if they pay healthcare service contributions. Uninsured persons are liable for monthly contributions of HUF 8,000 (as of 2021)

Payroll Accruals Additional Information

Accrued Benefits in Hungary

Why use Global Expansion to hire in Hungary

Establishing a branch office or subsidiary in Hungary can be time-consuming, expensive and complex. With such a robust labor market in place, one must pay great attention to detail when structuring employment because Hungary labor laws are complex.

The company also has a responsibility to comply with specific employment practices dictated by Hungary law to maintain its good standing as an equal opportunity employer.

Global Expansion makes it easy for you to expand into Hungary. We'll help you hire your candidate of choice, handle HR matters and payroll, and ensure that you comply with local laws without the burden of setting up a foreign branch office or subsidiary. In addition, you'll have complete control and direction over your employees.

We enable you to stay in control of everything. Our Hungary Global Professional Employer Organization (PEO) and Employer of Record (EOR) solution provides you with peace of mind to focus on running your company and the security to enter new markets.