Introduction to Payroll in Hungary

Constantly improving IT infrastructure and a highly technical talent pool make Hungary an attractive outsourcing destination. With candidates possessing near-native English proficiency in a time zone compatible with numerous outsourcing countries, many companies trying to expand internationally are faced with one challenge when it comes to building and paying a team in Hungary: compliance. Hungary’s local labor laws dictate HR and payroll processing, and running afoul of legislation opens you up to costly penalties and legal fees. What you need is an in-between to smoothly navigate the compliance requirements of running payroll in Hungary.

Employee compensation, benefits, and taxes in Hungary

Skuad’s local legal expertise guarantees your payroll in Hungary is consistently compliant with local labor laws. In addition, Skuad’s global HR platform seamlessly runs everything you need for payroll processing, including wage calculations, taxation, deductions and benefits, and more:

• Income, regional, or corporate taxes
• Social contributions for health insurance, unemployment benefits, and pension
• Different types of holiday and leave compensation
• Other employee deductions

Payroll Process in Hungary

The steps to payroll in Hungary are the same as nearly anywhere else in the world, with local employment legislation making changes to minutiae. The payroll process is composed of the pre-payroll phase, payroll computation, and post-payroll phase.

Pre-payroll phase

As the due diligence stage where data is collected and validated and policies are standardized, the pre-payroll phase is critically important to ensuring the latter processes work as intended.

Setting up the organization

Every company will have its unique approaches, philosophies, and policies. During the pre-payroll phase, you need to ensure that all of these are aligned with local labor laws. Pay careful attention to the following things:

Business profile

The registered business numbers or other identifying information that comprise your business profile are required for the submission of mandatory government forms and other supporting documentation related to payroll.

Work location

Workplace policy should be tailored to the location. Note that even different locations in the same country should ideally have their own policies.

Leave policy

The various types of leaves and how much they are paid will naturally impact payroll. Ensure that leave policy is accurate, compliant, and transparent to avoid potentially hefty penalties.

Attendance policy

Attendance policy comprises the lion’s share of payroll computation, so it should be clear and transparent for your employees and fully compliant with local labor laws. Take care to incorporate changes due to increased or reduced time (e.g. overtime or half-days), and integrate attendance tracking tools such as online timesheets.

Statutory components

Throughout your payroll and HR policies, Hungary’s local employment legislation mandates some required components to which you need to pay close attention. Discuss with your compliance team or your provider to make sure you meet all the statutory components.

Salary components

The parts that make up an employee’s salary can generally be divided into the base rate (that meets locally mandated standards), market and industry rates, company policy, and supplementary benefits. It is especially important that you make your salary policy clear to your remote employees.

Pay schedule

Employees in Hungary expect to be paid monthly. According to local labor law, you need to pay no later than the 10th of the following month, and in Hungarian forints.

Employee information

The input collection and validation work involved in the pre-payroll phase includes employee information and anything that influences payroll. Think invoices, reimbursement receipts, and even shift adjustment approvals from direct-line supervisors.

Payroll calculation phase

The second phase is focused on a singular task: the actual calculation of wages. If your pre-payroll phase is not properly configured, this stage will fail regardless of what software you use to automate the work.

Post-payroll phase

Salary payments

This is the stage where you send advice to your bank or payment processor to implement wage disbursement.

Payroll accounting

Accounting is for internal purposes — to keep track of the massive business expense that is employee wages.

Payroll reporting and compliance

On the other hand, reporting is typically for external purposes — this is to ensure compliance with local government reporting requirements.

Book a demo with Skuad today and see for yourself how to effectively run payroll in Hungary.

Payroll Processing in Hungary

Highly technical and legally fraught processes like payroll can prove to be thorny bottlenecks in an outsourcing strategy. Not only does it combine sensitive information from remote employees, but it also involves confidential financial data. Last but not least, it directly impacts the employee experience, which in turn, influences performance and churn rate.

If you want to run payroll in Hungary smoothly, you’re going to need a payroll processing company.

Payroll Processing Company in Hungary

Deploying seamless payroll in Hungary entails understanding the local labor laws and employment legislation that dictate and guide its many moving parts. This compliance requirement, however, is often too work-intensive for companies looking to outsource. It requires too much in-country expertise, and worse, almost every new outsourcing destination will require the same level of effort. Global HR and payroll platforms like Skuad are key to deploying a successful outsourced payroll process. Skuad’s local legal expertise ensures compliance with labor legislation while its platform provides seamless, cost-efficient payroll processing and HR operations for remote teams.

Payroll Management in Hungary

Payroll management goes hand in hand with processing and is typically also governed by local labor laws. Skuad’s services include payroll management, which is the financial and records keeping back-office functionality that maintains payroll-related documentation.

Payroll Compliance in Hungary

Hungary’s Act I of 2012 on the amended Labor Code ("Labor Code") governs the country’s employment law. In addition, the Civil Code and collective bargaining agreements influence labor practices.

Indeed, Hungary’s Labor Code is similar to other European countries in that it only outlines the minimum requirements of employment contracts. Further details are hammered out by bargaining agreements, while implementation and other areas are impacted by other laws.

This means HR and payroll in Hungary need to be compliant with multiple sets of codified rules, making it a bit more complicated to approach.

Payroll Components in Hungary

The specific components of Hungary guided by local labor laws that you need to immediately be aware of include the following:

Compensation

Hungary’s minimum wage is set at 200,000 Hungarian Forint or HUF ($558.24) monthly, as of the latest increase in 2022. Meanwhile, gross average wages come in at HUF 526,844 ($1,470.36) per month.

Working hours

Working hours in Hungary are typically eight hours a day, five days a week, either from 8 a.m. to 4 p.m. or 9 a.m. to 5 p.m. on weekdays. Weekends are rest days for most of the population.

Overtime laws

The maximum cap on overtime hours in Hungary is 250 hours per calendar year, but it's extended to 300 hours for unique cases. Usually, workweeks do not exceed 48 hours, including overtime.

Social security

So-called social tax in Hungary is contributed at a rate of 18.5% and 13% of the employee’s salary by the employee and employer respectively.

Sick leave

Employees are entitled to 15 days of paid sick leave, paid at 70% of their base rate. For extended sick leave beyond these 15 days, social insurance provides a sickness benefit of 60% of an employee’s rate for 180 days.

Parental leave

New mothers are entitled to 24 weeks of maternity leave, four of which can be taken before the due date of the pregnancy. They are paid 70% of their daily rate as infant care allowance throughout the duration. This period is transferable to new fathers, as well.

Public holidays

Hungary’s public holidays are below:

• January 1: New Year's Day
• March 15: Revolution Day
• April 15: Good Friday
• April 18: Easter Monday
• May 1: Labor Day
• June 6: Whit Monday
• August 20: Saint Stephen's Day
• October 23: Republic Day
• November 1: All Saints' Day
• December 25: Christmas Day
• December 26: Boxing day

Payroll taxes

The personal income tax in Hungary is set at 15% of their base rate.

Other laws

Some other basic components that impact payroll include termination and probation. Probation periods in Hungary last up to three months. Notice of termination spans 30 to 90 days, depending on the employee’s time spent with the company.

Schedule a demo with Skuad’s experts to better understand the nuances of payroll in Hungary.

Conclusion: Outsourcing Hungary Payroll Processing

Ambitious goals for business growth typically require strategies such as outsourcing. Due to compliance issues, however, outsourcing to a new market can hamper your efforts to scale your business instead of bolstering it. Key HR functions like payroll processing are always going to come with specific guidelines mandated by local labor laws. What you need to smoothly run payroll in Hungary is a global HR and payroll solutions platform like Skuad.

Skuad guarantees that your payroll processing is seamless and compliant, so you can focus on actually building and running your remote teams. Better yet, Skuad’s global recruitment and management services can extend HR functions from just payroll to anything else you require in flexible terms.

Ready to run payroll in Hungary? Book a demo with Skuad and see how you can maximize the international growth of your company.

Hungary’s exchange rate currently stands at $1 for every HUF 358.38.