Hungary PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Hungary to companies willing to enter the Hungary market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Hungary.  However our solution allows you to start the operations in Hungary within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

Hungary fast facts

Population, million: 9.77

Land area, sq. km: 93,030 km2

Capital: Budapest

Local currency: Forint (HUF)

Hiring, Negotiating and Doing Business in Hungary

Necessity of written employment contract

Employment contracts must be concluded in writing (Article 76(2), Act XXII of 1992 on the Hungarian Labour Code). However, an employee can only claim that the employment contract is invalid if it has not been recorded in writing within 30 days from the day on which he starts work.

The employment contract must set out:

• The employee’s personal base wage.
• The employee’s job function.
• The place of employment.

The parties may settle any further issues in the contract. Employers must inform the employees of their respective job functions and the level of education required for any particular job or position.

On concluding the employment contract, the employer must notify the employee of:

• The regular working hours.
• Other parts of the employee’s remuneration.
• The date the wages are paid.
• The date the employment starts.
• The number of days of paid annual leave, and the procedures for allocating and determining the leave.
• The procedures in relation to the employer and employee’s notice period.
• Any collective agreement applicable to the employee.
• The name of the local trade union branch and whether there is a works council (for example, a central works council or shop steward).

The employer must provide the above information in writing to the employee within thirty days from the conclusion of the employment contract.

Hungary Employment Contract

Types of employment agreements

Temporary workers

Part-time, fixed-term and temporary workers have the same rights as other employees. In relation to remuneration, they are entitled to proportionate personal base wage and other allowances.

Agency workers

Agency workers have similar rights as the employer’s own employees (for example, collective agreements can be extended to them). However, due to the nature of the employment, there are some differences. For example, the employment contract of the agency worker cannot contain a non-compete clause. In addition, special regulations are set for the information and notification obligations of the user undertaking, as well as for holiday entitlement and termination of the employment relationship.

In relation to remuneration (for example, personal base wage, allowances and overtime pay), special conditions apply which do not fully follow the principle of equal salary for equal work.

Hungary working hours

The working time restrictions for full-time employment are an average of eight hours a day or 40 hours per week over a maximum four-month period (working cycle).

Special rules apply to employees working on-call duty.

The minimum number of statutory paid holidays depends on the employee’s age and varies from 20 to 30 days. For example, an employee of 26 is entitled to a minimum holiday of 21 working days, while an employee of 46 is entitled to a minimum of 30 days of annual statutory paid holiday. Special categories of employees are entitled to additional holiday, such as:

• Single parents and employees assuming a greater role in raising a child according to the parents’ decision: two to seven days per year, depending on the number of dependant children under the age of 16.
• Blind employees: five days per year.
• Employees under the age of 18: five days per year.
• Employees working permanently underground: five days per year.
• Employees working at least three hours per day at a workplace subjected to ionising radiation: five days per year.

Vacation leave 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

Sick leave: 

Employees are entitled to 15 days’ sick leave per year. During the term of the sick leave employees generally receive 70% of their base salary (including regular allowances). This amount is paid by the employer. After this time, the exact amount of payment may vary from 50% to 60% of the base salary depending, among other things, on the term of service. One-third of this amount is generally paid by the employer and two-thirds is paid by the state. Different rules apply in cases of injury suffered in the course of performing work or occupational disease.

Hungary Maternity Leave

Pregnant employees (or those having given birth) are entitled to 24 weeks’ maternity leave. The leave must be scheduled to start four weeks before the expected birth date, if possible. During the entire period of maternity leave, the employee is entitled to 70% of her average salary, if she is regarded as insured under the Health Insurance Act LXXXIII. of 1997.

In addition, the employee is entitled to a leave of absence without pay until the child reaches the age of three, to care for the child at home. After the end of maternity leave period (see above), the insured employee is entitled to 70% of her average salary. This 70% is capped at HUF102,900 monthly and is only payable until the child reaches the age of two.

Hungary Severance Laws

When terminating the employment relationship by ordinary termination, the notice period must be at least 30 days, but cannot exceed one year. The 30-day notice period is extended by:

• Five days after three years of employment with the employer.
• 15 days after five years.
• 20 days after eight years.
• 25 days after ten years.
• 30 days after 15 years.
• 40 days after 18 years.
• 60 days after 20 years.

Severance payments

The employee is entitled to severance pay if the employer terminates the employment relationship by ordinary termination, or following the dissolution of the employer company without legal succession. The employees are entitled to receive varying amounts of severance pay depending on the length of employment with the employer.

A severance payment is the sum of the average earnings of:

• One month for up to three years’ employment.
• Two months for up to five years.
• Three months for up to ten years.
• Four months for up to 15 years.
• Five months for up to 20 years.
• Six months for up to 25 years.

Hungary Tax

The PIT rate is 15% of taxable gross income.

Social security contributions

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).

Additional Benefits in Hungary

Additional private health care coverage is sometimes offered by employers in Hungary.

Meal vouchers and other non-wage benefits are commonly offered by employers in Hungary. The annual limit for non-wage benefits with a tax liability of 35.7% is HUF 450,000. Non-wage tax benefits exceeding the HUF 450,000 are subject to a 51.17% overall tax liability.

Hungary Holidays

• 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

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.