Employer of Record in Hungary

Hiring in Hungary for the first time can be overwhelming, especially when navigating unfamiliar employment laws. Whether you hire independent contractors, set up a legal entity, or use an EOR service, understanding the local employment landscape is crucial for success. Playroll’s comprehensive guide can help you get started if you're hiring locally or relocating a team member.

Companies can hire employees in Hungary in the following three ways:

• Setting up a local entity. Entity establishment reduces risk exposure and enables direct hiring, but can be costly and time-consuming – making it less practical for companies seeking quick and flexible solutions for hiring in Hungary.
• Partnering with an Employer Of Record. An EOR, like Playroll, is a third-party entity that serves as the legal employer of your international workforce which hires, pays, and manages compliance with Hungary’s labor laws and tax regulations.
• Hiring independent contractors. Hiring contractors gives companies a flexible, affordable alternative to hiring local employees, though it involves unique misclassification risks.

Businesses can only operate smoothly in Hungary if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Hungary below, to avoid any compliance issues.

Employment Contract Requirements

When hiring in Hungary, an employment contract must be created at the end of the employment agreement. This written document should contain, at a minimum, the following details:

• Identification of both parties (employer's personal details included)
• Specific workplace(s)
• Outline the job position, including duties and responsibilities
• Clearly state the basic salary and any additional compensation or benefit

Onboarding Process

We can help you get a new employee started in Hungary quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations. For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Hungary

In Hungary, the regular workweek spans 40 hours, usually distributed as 8 hours per day across a five-day schedule. Employees in Hungary are entitled to two rest days in a given week. If the scheduled daily working time exceeds 6 hours the employee shall be entitled to a minimum 20-minute break from work.

Overtime in Hungary

Overtime in Hungary is regulated by employment contracts or collective agreements. If an employee is asked to work beyond the regular hours or on weekends/public holidays, the weekly limit is 48 hours or 72 hours if the employee is required to be on call. The maximum limit on overtime is 250 hours per calendar year. Overtime work beyond the standard 40-hour week should be paid at 150% of the basic salary rate. During weekends and public holidays, overtime is compensated at 200% of the basic salary rate.

Probation Period in Hungary

In Hungary, the standard probation period is a maximum of three months. If the agreed probation period is shorter than three months, it can be extended once, but the total probation period cannot exceed three months.

Fiscal Year in Hungary

1 January - 31 December is the 12-month accounting period that businesses in Hungary use for financial and tax reporting purposes.

Payroll Cycle in Hungary

The payroll cycle in Hungary is usually monthly, with employees being paid by the 10th of the month..

Minimum Wage in Hungary

The minimum wage for employees in Hungary is typically 1,534 HUF per hour, amounting to ~266,800 HUF per month for a typical 40 hour work week.

Bonus Payments in Hungary

The provision of a 13th-month salary is not legally required in Hungary, employers have the option to provide bonuses at their own discretion.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 13% on top of the employee salary in Hungary.

Employee Payroll Tax Contributions

In Hungary , the typical estimation for employee payroll contributions cost is around 18.5%.

Individual Income Tax Contributions

Hungary applies a 15% flat rate for individual income tax. For employees under 25, a reduction to the taxable amount is applicable based on their earnings within the consolidated tax base, capped at a maximum monthly discount of 499,952 HUF.

Pension in Hungary

The pension system in Hungary encompasses both state and private pension schemes. The state pension system relies on contributions from employees, employers, and the government. The retirement age typically stands at 62 for both genders, although it can vary based on factors like the number of years of pension contributions. It's essential to recognize that pension systems undergo adjustments over time, subject to factors such as government policies and economic conditions.

Mandatory Leave Entitlement in Hungary

The annual leave entitlement in Hungary is 20 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Hungary

There are 11 officially recognized national holidays in Hungary listed below:

Paid Time Off in Hungary

Every employee is entitled to 20 days of paid vacation yearly, increasing to a maximum of 30 days for employees aged over 45. Additional details relating to annual leave in Hungary include:

• Employees with children under 16 receive extra vacation days based on the number of children: two days for one child, four days for two children, and seven days for three children.
• If a child has disabilities, an additional two days are given. Both parents can ask for this extra vacation time.

Maternity Leave In Hungary

Eligible employees are entitled to 24 weeks of paid maternity leave. Additionally, employees can take up to three years of leave and receive maternity benefits. The following details are applicable:

• For the first six months, mothers are entitled to Pregnancy and Confinement Benefit (CSED) at a rate of 70.00% of the salary.
• For the next eighteen months until the childs second birthday, mothers are entitled to a Child Care Fee (Gyermekgondozási díj " GYED) at a rate of 70.00% of the salary up to a maximum of double the minimum wage.
• A benefit called Child Home Care Allowance (Gyermekgondozási segély " GYES) is also available for parents or grandparents taking care of a child up to the age of three.
• The benefits are paid by the National Health Insurance Fund of Hungary (NEAK).

Paternity Leave In Hungary

A father is eligible for 10 days of paid paternity leave, or 12 days in the case of multiple/complicated births, to be taken within the two months following the child's birth.

Sick Leave In Hungary

Employees receive paid sick days according to the following:

• 15 paid sick days annually when unable to work. The employer covers 70% of their salary during this period.
• Beyond 15 days, the payment ranges from 60% of the employee's average income in the preceding 180-day period, with a specific daily cap (50% if the employee has been insured for less than 730 days or if employee is staying in the hospital). This is covered by the state social security system.

Parental Leave In Hungary

Both fathers and mothers are now individually granted 44 working days of paid parental leave. Parental leave can be utilised until the child reaches 3 years of age, given that the employee has completed a minimum of one consecutive year of employment.

Bereavement Leave

Bereavement Leave is not a statutory right in Hungary but can be offered by employer.

Termination Process in Hungary

In Hungary, either party can terminate employment by providing written notice and - if initiated by the employer - reasoning must also be provided. The notice becomes effective upon communication to the concerned party. Employment may be terminated for the following reasons:

• Redundancy from restructuring or staff reduction
• Misconduct or unacceptable behavior
• Poor work performance

Notice Period in Hungary

In Hungary, the standard notice period is 30 days. In cases where the employer initiates the termination of employment, the initial 30-day notice period must be extended by a specific number of days, determined by the employee's years of service:

• After three years of service: five additional days notice is required
• After five years of service: 15 additional days notice is required
• After eight years of service: 20 additional days notice is required
• After ten years of service: 25 additional days notice is required
• After fifteen years of service: 30 additional days notice is required
• After eighteen years of service: 40 additional days notice is required
• After twenty years of service: 60 additional days notice is required
• No notice is required whilst on probation.

Severance in Hungary

After three years of service, employees get severance pay based on service length and age, ranging from 1-6 months salary. Fixed-term contracts dont require severance pay.

• After three years of service: five additional days notice is required
• After five years of service: 15 additional days notice is required
• After eight years of service: 20 additional days notice is required
• After ten years of service: 25 additional days notice is required
• After fifteen years of service: 30 additional days notice is required
• After eighteen years of service: 40 additional days notice is required
• After twenty years of service: 60 additional days notice is required