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Employer of Record (EOR) in Hungary

Employer of Record in Hungary

Skuad’s Hungary EOR solutions help in expanding your business in new markets of Hungary keeping in mind the three key elements of cost, expertise, and time. Skuad solutions not only help in driving the business in the right direction but also help in overcoming the barriers of language, culture, and local regulations.

Hungary is one of the fastest developing countries in Europe and provides excellent opportunities for the growth of foreign businesses. Skuad will provide you access to the best local talent in Hungary without ever needing to set up a separate entity. It handles end-to-end management of human resources in compliance with local laws and regulations. Talk to Skuad experts to know more about its customized EOR solutions.

Hungary at a Glance

Population: 9,635,126 (2021 estimates) (Hungary Population 2021 (Demographics, Maps, Graphs))

Currency: Forint

Capital City: Budapest

Languages: Hungarian, Romani, Serbian, Slovene, Slovak, Croatian and German.

GDP: 176.54 (In billion US Dollars)

Employment in Hungary: What you must know before employing in Hungary?

To set up a local entity in Hungary, a company must be thorough with local employment laws. Let us briefly discuss a few important ones here.

For working in Hungary, the employer and employee must enter into a written contract duly signed by both. The absence of a written employment contract can put the employer at high risk as the labor inspectorate may prohibit further employment or may impose a penalty. Any changes in the employment contract should be in writing.

The employment contract must include the rights, responsibilities, and duties of both the employer and the employee. It should also mention the salary and the designation of the employee. The basic terms also state that as per the government directions no worker can be paid less than the statutory minimum wages and the same is reviewed by the government annually. The probation period of the employee should be mentioned in the contract and the same should not exceed more than three months. In Hungary, during the probation period, employers can easily ask the employee to leave the job without giving any notice period and without stating any valid reasons.

The employer should inform the tax authority about the joining of an employee on the first working day and similarly inform about the termination of the employee within eight working days. All the tax obligations and information to the tax department should be taken seriously by the employer so that he avoids paying unnecessary penalties imposed by the tax department.

Employers should inform their employees in writing about the working hours, break up components of the salary to be given to the employee, leave policy, and termination of the contract. All the necessary information about the employment should be given to the employee by the employer in a handbook which has all the terms and conditions and do’s and don’ts related to the employment.

Before the employee starts working, the employer needs to get his complete medical examination done by a doctor who shall issue a medical certificate stating that the employee is medically fit to work. It is also the sole responsibility of the employer to provide a healthy and safe working environment to employees. Medical examination of the employee is important before the start of the employment but if the employee is working in a hazardous environment the employer needs to get the medical checkup done for the employee after every six months.

The table below lists the main employee entitlements in Hungary.

Entitlements Explanations

Statutory Working Hours

Full-time employees can work eight hours daily. In the case of full-time employment, daily working hours can be extended up to 12 hrs. An employee can work 40 hours per week and can work not more than 60 hours per week.

  • An employee must have seven hours of an uninterrupted rest period.

  • An employee must have two rest days per week.

  • After six days of daily work, one rest day is a must for an employee.

Rules for over timing

An employer should order the employee over timing in writing. In a given calendar year, an employee can do two hundred fifty hours of overtime.

Working on Sundays

If the employer wants the employee to work on Sundays for regular working hours, the employer must give a 150% increased salary than the normal salary. Also, the employee should be given some other day off in place of Sunday.

Paid Public Holidays

Paid public holidays in Hungary are as follows:

  • January 1: New Year’s Day

  • May 1: Labor Day

  • Whit Monday (varies)

  • August 20: Hungary National Day

  • August 21: Public Holiday

  • October 23: 1956 Revolution Memorial Day

  • November 1: All Saints’ Day

  • December 24: Public Holiday

  • December 25-26: Christmas

Medical Leave

If the employee has worked for more than two years then the rate of sick pay is 60% and if it is less than two years then the rate of sick pay is 50%. The employer must pay 70% of wages for 15 working days in the event of illness.

Maternity leave in Hungary

The mother is entitled to 24 weeks of maternity leave after delivery.

Annual Leave Accrual Entitlement

The annual leave entitlement in Hungary is 20 working days. Employees receive basic and annual leaves each calendar year. In Hungary, the annual leave entitlement increases with age. There is no concept of seniority in annual leave entitlement.

Confidentiality of Personal Information

Rules for the consent of accessing personal information are very strict. Consent for accessing personal information must be based on affirmative action.

An entity should not risk employment based on non-compliance. Like other countries, Hungary also has compliance, social insurance, and other tax regulations that can be taken care of well by PEOs or EORs. Shed off the burden of compliance and other formalities while hiring the employees because Skuad will do it for you. Contact us.

Contractors Vs. Fixed-term employees

Different entities have different types of employee requirements. The employer is free to decide whether to hire a contractor or a full-time employee. A brief description of the two types of employment is as follows.

Fixed-term employment in Hungary

In Hungary, the fixed-term employment relationship between the employer and the employee cannot exceed more than five years and in case of termination of the previous employment another fixed-term employment relationship should be concluded within six months of the termination of the previous employment.

Part-time work in Hungary

As compared to full-time working hours, the daily working time of part-time employees may be less, but not less than four hours. Part-time workers are allowed to work up to six hours a day.

Hiring in Hungary

While hiring an employee in Hungary, it is important to find the right candidate first and then agree on the salary. Once both the parties agree on the salary, they both enter into a written contract containing all the relevant information about the employment that will include the gross salary and the first day of work. Employers should ensure that employees have all the necessary documents like tax number, work permit, resident permit, and social security number. In case the employee does not have these documents, the employer can help the employee to acquire these mandatory papers. Employers should ensure to pay salary by 10th of each calendar month and pay contributions by 12th of each calendar month. Skuad has one of the best human resource platforms that have a global reach. Skuad uses simplified self-serving onboarding tools that can easily be managed by both the employer as well as the employee. Skuad provides an excellent employee experience by finding the right kind of talent for the right kind of job. Book a Demo now.

Probation & Termination

In Hungary, the probation period cannot exceed more than three months from the date of commencement of the employment relationship. In case the probation period is less than three months, the employer has the right to extend the probation period once.

The Termination of employment in Hungary depends on the intentions of both the employer as well as the employee. In Hungary the employment can be terminated under the following circumstances:

a) Termination by giving notice

Employment in Hungary can be terminated if the employee serves the employer with the written termination notice. If both the employer and the employee mutually decide to terminate the employment relationship then it can be terminated by notice of one year from the date of commencement of the employment. In case of termination by the employer, the employer needs to state the reason in writing. Reasons mentioned by the employer should be relevant, authentic, substantial, and specific. Reasons for termination can be concerning the employer’s behavior or can pertain to connection with the employer’s operations.

The employer shall be permitted to terminate the fixed-term employment by giving notice in the following cases:

a) In case the employer is undergoing bankruptcy proceedings or liquidation.

b) The employer can terminate the employment relationship in case certain external factors are not helping him to maintain the employment relationship.

c) There might be times when the employee is not capable enough for the work he has been hired for and in that case the employer can simply give the notice to the employee for termination. The restricted cases when the employer may not be able to terminate the employment are as follows:

  • In case of pregnancy
  • In case the employee is on maternity leave
  • If the employee is on leave for child care
  • If a woman is on leave for any medical treatment related to human reproduction

b) Termination by mutual consent

Termination by mutual consent is not regulated by Hungarian Labour code provisions. In case of termination by mutual consent, both the employer and employee should agree on the termination of the employment contract.

c) Dismissal without giving any written notice

Both employer and employee may terminate the employment relationship without notice in case of the following mention circumstances:

  • If any of the party indulges in conduct which is detrimental for the employment relationship.
  • If any of the parties in any case either engage willfully or by gross negligence violates any of the substantive obligations arising from the employment relationship.

In both the above-mentioned scenarios, the right of termination without notice may be exercised within 15 days of gaining knowledge about any such incident. In the worst-case scenario, this can be exercised within not more than one year of occurrence of any type of criminal offense. In case of termination without notice by any of the parties, they must give the justification. It is not mandatory to give any reasons by either party in case both of them are in the probation period.

EOR Solution

EORs are instrumental in creating talent acquisition and human management strategies that are locally compliant and can produce the most efficient results. By hiring global employees under its local business entity, an EOR is legally responsible for all the candidates it hires. It handles the process of visa, immigration, and work permit diligently and takes care of all the formalities of relocating employees from one country to another.

Skuad’s EOR solutions can be customized to your business needs. Join hands with us to manage your end-to-end requirements. You can trust us to take into consideration all the local employment laws, country-specific norms, and other statutory requirements for putting together the employment contracts.

Types of Visas in Hungary

Airport transit visa

If the person just has to pass through Hungary while going to some other destination country, then the person needs the airport transit visa.

Tourist visa

If you are just going for a holiday to Hungary then you would need a tourist visa.

Visitor’s Visa

In case the person is planning to visit Hungary with family members or friends then you will need a visitor visa.

Business Visa

If you are planning to visit Hungary for business purposes, then you would need a Schengen business visa.

Official Visit Visa

If you have to visit Hungary for an official purpose, you will need an official visit visa.

Work Permit

Hungary is a member of the European Union and also a party to the Schengen Treaty. Foreign nationals from non-EU/EEA member companies need to have a valid work permit to work in Hungary. The Official Hungarian Gazette has the number of work permits that can be issued to foreign nationals which are being given by the Minister of National Economy. All foreign nationals must have a work permit if they intend to work in Hungary.

A work permit is of utmost importance in Hungary. EU citizens do not require a work permit to work in Hungary, but the employer must inform the employment center of the same. Non-EU citizens must have a valid work permit. Either the employer or the employee needs to apply to the employment center for residential accommodation along with a work permit application to the immigration authority. The employment center issues work permits to non-EU citizens for a maximum tenure of two years only. It can be extended thereafter.

Different types of work permits are as follows:

  • Individual Work permit
  • Residence permit
  • Joint work permit

Processing time of work permit

An individual needs 90 days to obtain approval for a joint work permit which is valid for two years. This type of work permit can be extended for another two years.

Payroll & Taxation

Companies usually best achieve their targets if they partner with a global payroll company that has experienced manpower and is well aware of the Hungarian payroll regulations. At Skuad we have global tie-ups with many multinational companies and hire the best talent in the country.

Taxes in Hungary

A flat rate of 15% is applicable on personal income tax. Tax contributions payable in Hungary are as follows:

Payable by the Employee

Pension contribution

10%

Health care contribution in kind

4%

Health care contribution for financial allowance

3%

Vocational Training contribution

1.5%

Tax payable by an employer

Social contribution

15.5%

Vocational training contribution

1.5%

What is the tax year-end?

31st December is the tax year-end.

Incorporation: How to set up a subsidiary in Hungary

Starting a company abroad is not at all an easy task as one needs to get the company registered and pay taxes accordingly. Skuad provides a one-stop solution to all such opportunists to make the launch of their business grand and successful.

We at Skuad will manage all the paperwork, keeping in view the deadlines, and will help in making the business more productive and successful.

PEO

A Professional Employer Organization (PEO) leases employees to an employer. It handles multiple employee-related liabilities where organizations can outsource their HR functions, including payroll, compensation, benefits, taxes, and payroll administration.

Comparing a professional employer organization and an EOR

  • A PEO works as a co-employer, whereas an EOR works as a full legal employer of your remote team.
  • A PEO has some liabilities of the workers, whereas an EOR has complete liabilities.
  • With a PEO, you need to make decisions all the time; with an EOR, all HR-related decisions and paperwork are made by the EOR, giving you more time to look after other aspects of your business.

Conclusion

Skuad offers quick, cost-effective, and streamlined solutions to businesses looking to expand in Hungary. Having a reputed employer of record helps to overcome all the challenges related to recruitment and hiring in a remote destination. Skuad’s unique and hi-tech platform can add value to your expansion plans in Hungary. Book a demo by filling up the form below.

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