Hiring in Hungary: Employment Laws, Payroll & Benefits Guide

Overview in Hungary

Hungary, a landlocked country in Central Europe, is bordered by seven countries and features diverse terrain including the Great Hungarian Plain and the Northern Hungarian Mountains. The Danube River and Lake Balaton are significant geographical features that contribute to Hungary's economy and tourism. Historically, Hungary was established by the Magyars in the 9th century and has undergone various governance forms, from Ottoman rule to being part of the Austro-Hungarian Empire, and later a Soviet satellite state. Since 1989, Hungary has transitioned to a democratic republic and joined the European Union in 2004.

The population of Hungary is approximately 9.7 million, predominantly Hungarian and Christian. The country has a developed market economy with major industries in machinery, electronics, and automotive manufacturing. Hungary's workforce is well-educated, with a strong presence in STEM fields and high English proficiency among younger generations.

The service sector is the largest employer, with significant contributions from tourism, finance, and IT. The industrial sector is also robust, particularly in automotive manufacturing and pharmaceuticals. Agriculture, though declining, remains important in rural areas. Hungarian workplaces value direct communication, formal relationships initially, and have a hierarchical organizational structure. Family is highly prioritized, influencing work commitments and workplace flexibility.

Emerging sectors in Hungary include IT, renewable energy, and shared service centers, which are attracting significant investment due to the skilled workforce and competitive costs. The country's strategic location makes it a key logistics hub in Central Europe.

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Employer of Record Guide for Hungary

Your step-by-step guide to hiring, compliance, and payroll management in Hungary with EOR solutions.

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Responsibilities of an Employer of Record

As an Employer of Record in Hungary, Rivermate is responsible for:

Creating and managing the employment contracts
Running the monthly payroll
Providing local and global benefits
Ensuring 100% local compliance
Providing local HR support

Responsibilities of the company that hires the employee

As the company that hires the employee through the Employer of Record, you are responsible for:

Day-to-day management of the employee
Work assignments
Performance management
Training and development

Taxes in Hungary

Employers in Hungary are required to manage several tax obligations concerning employee income and other contributions:

Personal Income Tax (PIT): Employers must withhold a 15% flat rate on employee income and remit it by the 12th of the following month. Employees file annual tax returns by May 20, with extensions available.
Social Security Contributions:
- Employers contribute a 13% social tax on gross income.
- Employees contribute 18.5%.
- The minimum wage is HUF 290,800, and HUF 348,000 for skilled workers starting January 1, 2025.
Local Business Tax: Rates vary by locality, up to 2%. Settlements are due by May 31 following the reporting year, with advances on March 15 and September 15.
Other Contributions and Benefits:
- Healthcare contributions: Fixed monthly (HUF 11,800) or daily (HUF 390).
- Fringe benefits taxed at 28% up to certain limits, above which a 33.04% rate applies.
- SZÉP Card benefits remain favorable, with an annual limit of HUF 450,000, and a new "Active Hungarians” sub-account with a limit of HUF 120,000 for active lifestyle spending.
Family and Individual Tax Benefits:
- PIT exemptions for employees under 25 and specific allowances for mothers with four or more children.
- First marriage tax benefit and family tax benefits are adjusted, with some restrictions for non-EU nationals.
Other Corporate Tax Considerations:
- Development and R&D incentives are available.
- Specific allowances for startup investments and intellectual property gains.
- Tax credits for sports, film sponsorship, and energy efficiency investments.

This information, current as of February 5, 2025, is subject to change, and consultation with a tax advisor is recommended for the latest updates and personalized guidance.

Leave in Hungary

In Hungary, the Labour Code mandates a minimum of 20 working days of paid annual leave for employees, increasing with age. Employers can schedule leave but must agree mutually on the timing with employees, ensuring at least 14 consecutive days once per year and accommodating at least 7 days as per the employee's request. Unused leave can carry over with limits, and any accrued but unused leave must be compensated upon termination.

Employers are required to maintain accurate records of leave. Hungary observes several national holidays, including March 15th for the 1848 Revolution, August 20th for St. Stephen's Day, and October 23rd for the 1956 Revolution. Christian holidays like Easter and Christmas are also public holidays.

Other types of leave include sick leave, paid at 70% for up to 15 days, maternity leave for 24 weeks, paternity leave for 5 days, and parental leave until the child's third birthday, with potential financial support. Employees may also request unpaid leave for personal reasons, education, or to care for family members.

Benefits in Hungary

Hungary's social security system includes mandatory contributions from both employers and employees, funding benefits such as pensions, healthcare, and paid time off. Employers contribute 10% towards pensions and 7.5% for healthcare, while employees contribute 10% for pensions and 4.5% for healthcare. Benefits include a state pension dependent on contribution history, a minimum of 20 days of paid annual leave, and 24 weeks of paid maternity leave. Additionally, Hungary offers optional cafeteria plans allowing employees to allocate pre-tax salary for benefits like transportation and cultural events. Employers may also provide supplementary benefits such as private health insurance and life insurance. The healthcare system is funded through compulsory health insurance managed by the National Health Insurance Fund, with optional private health insurance available for faster or broader treatment options. The retirement system combines a mandatory public pension with voluntary pension funds, offering tax advantages and a variety of investment choices to enhance retirement savings.

Workers Rights in Hungary

In Hungary, employment termination and workplace regulations are comprehensively governed by the Hungarian Labour Code and other specific laws. Termination can occur due to employee conduct, operational reasons, or health status, with varying notice requirements and severance pay conditions based on the length of employment and reason for dismissal. Anti-discrimination laws protect against workplace discrimination on multiple grounds, including sex, race, and age, with mechanisms in place for redress through the Equal Treatment Authority and courts.

Employers have significant responsibilities to prevent discrimination and ensure a safe, healthy work environment. This includes implementing non-discriminatory policies, providing ergonomic workstations, and adhering to strict safety protocols. Work conditions are regulated to include standard work hours, required rest periods, and ergonomic requirements to prevent work-related injuries.

Overall, Hungarian employment law emphasizes fair treatment, safety, and health in the workplace, aligning with EU directives to protect workers' rights and well-being.

Agreements in Hungary

Types of Employment Contracts in Hungary

Indefinite-Term Employment Contracts: Most common, offering job security without a specified end date. Termination requires a notice period based on employee seniority.
Fixed-Term Employment Contracts: Used for temporary or project-based work with a clear start and end date, not exceeding five years.
Assignment Contracts: Involves individuals working as sole traders, invoicing the company for services, beneficial for employers due to lower tax and social contributions but regulated to prevent misuse.

Key Clauses in Employment Agreements

Core Employment Details: Includes identification of parties, role definition, term of employment, and qualifications.
Compensation and Benefits: Outlines salary, payment frequency, working hours, overtime, vacation, and sick leave.
Termination Clauses: Specifies grounds for termination, notice periods, and severance details.
Dispute Resolution: Establishes procedures for handling disagreements.

Additional Contractual Features

Probationary Periods: Maximum of three months, extendable to six months via collective bargaining, with flexibility for shorter periods and easier termination conditions.
Confidentiality and Non-Compete Clauses: Protect employer's information and restrict post-employment competitive activities, with specific regulations on duration and compensation for non-compete clauses.

Remote Work in Hungary

Overview of the Labour Code: Act No. XXII of 2012, known as the Labour Code, governs employment in Hungary, primarily designed with traditional office settings in mind and does not specifically address remote work.
Employment Contract: It is crucial for contracts to specify the nature of the work arrangement, including remote work, to manage expectations and clarify responsibilities.
Work Hours and Compensation: Remote workers are subject to the same standard work hours and minimum wage requirements as stipulated in the Labour Code. Employers must track work hours effectively.
Health and Safety: Employers are responsible for ensuring a safe work environment for remote employees, which may include ergonomic guidelines for home setups.
Technological Infrastructure: Essential for remote work, with a need for reliable connectivity and appropriate tools. Employers may need to provide support like internet stipends, especially in areas with poor connectivity.
Employer Responsibilities: In the absence of specific remote work regulations, employers should develop clear remote work policies, provide training, and support to manage performance and maintain a positive work culture.
Additional Considerations: Employers should address potential challenges such as work-life balance and feelings of isolation among remote workers. Flexitime and job sharing are not specifically regulated but can be arranged through agreements.
Challenges and Considerations: The variability in internet infrastructure across regions and the lack of specific regulations for flexible work arrangements require clear communication and well-defined contracts.
Data Protection in Remote Work: Employers must comply with data protection laws, ensuring security measures like encryption and access controls are in place and being transparent about data usage with employees.
Employee Rights: Employees have rights to access and correct their personal data and expect confidentiality and proper use of their data.
Best Practices for Secure Remote Work: Includes implementing strong password policies, encrypting data, maintaining separate work and personal devices, and establishing clear procedures for data breach reporting.

Working Hours in Hungary

In Hungary, the standard full-time workweek is 40 hours, typically spread over five days with 8-hour shifts, usually between 8:00 AM and 6:00 PM. Part-time work has no statutory minimum hours but cannot exceed 8 hours daily. The legal maximum for working hours is 48 per week, including overtime, which is regulated to prevent excessive workloads. Employers can mandate up to 250 hours of overtime annually, which can increase to 300 hours with a collective agreement, and an additional 150 voluntary hours, totaling a maximum of 400 hours.

Overtime must be compensated at 150% of the regular rate on weekdays and 200% on weekends and public holidays, or alternatively, employees can opt for equivalent time off. Certain groups, such as pregnant women, minors, and those with specific medical conditions, are exempt from mandatory overtime.

Employees are entitled to breaks and rest periods to ensure well-being and productivity. Breaks of 20 to 45 minutes are mandated depending on the length of the workday, and daily rest must be a minimum of 11 uninterrupted hours, potentially reduced to 8 hours for certain jobs. Weekly rest periods must include two days, totaling at least 48 consecutive hours, with one Sunday per month.

Night work, defined as work between 10 PM and 6 AM, warrants a wage premium of at least 15% if exceeding one hour. Night workers require regular health checkups. Saturdays are regular workdays, while Sundays are rest days, with weekend work requiring employee consent or collective agreement, compensated by at least a 50% wage premium or time off.

Overall, Hungarian labor laws emphasize flexibility in work hours, protection against excessive workloads, and ensuring adequate rest and compensation for employees.

Salary in Hungary

Understanding competitive salaries in Hungary is essential for attracting and retaining skilled employees. Factors influencing these salaries include industry, experience, location, company size, and market demand. For instance, IT professionals and those in Budapest generally earn more. Employers and job seekers can research salary levels through salary surveys, job boards, and recruitment agencies.

Hungary has a government-mandated minimum wage, updated to HUF 266,800 for unskilled workers and HUF 326,000 for skilled workers as of December 1, 2023. Salaries must be paid in Hungarian Forint and typically on a monthly basis by the 10th of the following month.

Employers are required to provide certain benefits such as medical exams, safety training, paid time off, and pension contributions. Many also offer additional perks like bonuses, insurance, meal and transportation allowances, and flexible work arrangements to enhance job satisfaction and competitiveness in the labor market.

Termination in Hungary

In Hungary, the Labour Code (Act I of 2012) outlines the regulations for employment termination, including notice periods, severance pay, and types of termination.

Notice Periods:

The statutory minimum notice period varies based on the employee's length of service, ranging from 30 days for 0-3 years of service to 90 days for over 20 years.
Notice periods can be modified in employment contracts but must not be shorter than seven days or longer than six months.
Exceptions include termination for cause and mutual agreement, where notice periods can be waived.

Severance Pay:

Employees are eligible for severance pay after at least three years of continuous employment, with the amount based on their length of service.
Severance pay is calculated from the employee's average gross earnings and is additional to any other owed payments.
Severance pay is not granted in cases such as misconduct, inability unrelated to health, retirement, or if the employer ceases operations without a successor.

Types of Termination:

Termination by Notice: Both parties can end the employment with a notice specifying the termination date.
Termination for Cause: Allows immediate termination by the employer without notice due to serious misconduct or inability to perform duties.
Mutual Agreement: Both parties can agree to end the employment at any time.

Termination Process:

Involves issuing a written notice, adhering to the notice period, and settling all final payments including compensation for unused leave.
Special protections are in place for certain groups like pregnant women or employee representatives, and documentation of termination reasons is crucial.

Legal Recourse:

Employees can challenge unlawful dismissals in labor court.

Freelancing in Hungary

In Hungary, distinguishing between employees and independent contractors is essential due to differences in rights, obligations, and tax implications. Employees are governed by the Labour Code (Act I of 2012), while independent contractors operate under the Civil Code (Act V of 2013). Key factors in worker classification include the level of control by the employer, integration into the organization, provision of tools, ability to subcontract, financial dependence, and the nature of tasks.

Misclassification can result in legal and financial penalties for employers. Independent contractors typically enter into mandate agreements, focusing on delivering specific results with greater autonomy. Contract negotiation for independent contractors should address payment terms, scope of work, and intellectual property rights, with the possibility of using non-disclosure agreements to protect sensitive information.

Freelancers in Hungary must navigate tax obligations and social security contributions, with options like the Simplified Registration Scheme (KATA) providing a fixed tax rate but requiring adherence to revenue limits. Additional voluntary social security contributions can offer further protection. Insurance, such as professional liability and property insurance, is also advisable to mitigate potential risks associated with freelance work.

Health & Safety in Hungary

Overview of Hungarian Health and Safety Laws: Hungary's health and safety regulations are governed by Act XCIII of 1993 on Occupational Safety and Health, The Fundamental Law of Hungary (2011), and The Labor Code (Act I of 2012), aligning with EU directives to ensure safe working conditions for all employees.
Employer Responsibilities: Employers are mandated to identify hazards, implement safety measures, maintain a safe work environment, provide PPE, and educate employees about safety practices. They must also document and report accidents and consult with employees on safety matters.
Employee Rights: Employees are entitled to safe work conditions, necessary training, and the right to refuse unsafe work. They can participate in safety decision-making without facing repercussions for raising concerns.
Enforcement and Regulatory Bodies: The National Labor Inspectorate oversees compliance, conducts inspections, and can issue fines or sanctions. Sector-specific bodies manage safety in industries like mining and nuclear energy.
Specific Standards and Measures: Hungarian laws cover a range of workplace hazards including physical, chemical, and psychosocial risks, requiring employers to adopt preventive measures and provide occupational health services.
Employee Training and Involvement: Employers must conduct comprehensive safety training and establish safety committees in larger workplaces. Employees have rights to access all relevant safety information and participate in safety management.
Inspection Types and Procedures: Inspections can be routine, targeted, or follow-up, with processes involving employer notifications, workplace walkthroughs, and interviews, culminating in a formal report and required corrective actions.
Accident Reporting and Investigation: Employers must report and investigate workplace accidents, using standardized forms and documenting findings. The Labor Inspectorate may also conduct investigations, especially in cases of serious accidents or suspected negligence.
Compensation and Insurance: Injured workers receive benefits through Hungary's social security system, and employers carry liability insurance. Workers can also seek additional compensation through civil lawsuits for accidents caused by employer negligence.

Dispute Resolution in Hungary

Hungary's labor court system is designed to handle employment-related disputes, including individual and collective labor issues, with a structure that includes Regional Labor Courts, the Labor Court of Appeals, and the Supreme Court for final appeals. The system encourages conciliation before formal adjudication, with arbitration as a voluntary alternative.

Labor audits and inspections are conducted by the National Labor Authority to ensure compliance with labor regulations, focusing on areas like wages, working hours, and occupational safety. These audits can lead to fines, corrective actions, or more severe consequences for non-compliance.

Hungary also has robust mechanisms for reporting labor violations, including internal channels for organizations with over 50 employees, as mandated by the Whistleblower Protection Act, and external channels through various authorities. Whistleblowers are protected against retaliation and have rights to confidentiality and legal assistance.

Additionally, Hungary adheres to international labor standards as a member of the EU and the ILO, influencing its domestic labor laws to align with international conventions and treaties. This includes commitments to non-discrimination, fair remuneration, and prohibition of forced and child labor, continuously harmonizing its laws with international best practices.

Cultural Considerations in Hungary

Understanding communication and negotiation styles in Hungary is essential for effective professional interactions. Here are the key aspects:

Directness: Hungarians are direct in communication, valuing clear and concise messages. They are straightforward and factual, which might seem blunt to outsiders.
Formality: The Hungarian workplace is hierarchical, with a top-down decision-making process. Formality is observed, especially in using titles and polite phrases during interactions.
Non-Verbal Cues: Direct eye contact is important, and personal space is respected. Subtle non-verbal cues like pursed lips or raised eyebrows can indicate disagreement.
Cultural Considerations: Building personal relationships is crucial in business, and humor is appreciated, though cultural sensitivity is important. Negotiations are seen as cooperative, aiming for win-win outcomes, with a focus on long-term relationships.
Negotiation Strategies: Hungarians value logical arguments supported by data, take time to build relationships before discussing business, and consider long-term implications in negotiations.
Cultural Norms in Negotiations: Respect for hierarchy and indirect expressions of disagreement are common. Patience is essential as negotiations can be lengthy.
Hierarchy in Business: Hungary has a high Power Distance Index, indicating a strong hierarchical structure in workplaces. This affects decision-making, team dynamics, and leadership styles, often leading to a top-down approach and directive leadership.
Public Holidays and Observances: Understanding national and local holidays is important for respecting cultural practices and planning business activities accordingly. Most public holidays involve business closures and are rooted in historical or religious significance.

Overall, success in Hungarian business contexts relies on understanding and adapting to direct communication styles, hierarchical structures, and the importance of personal relationships and cultural norms.

Frequently Asked Questions in Hungary

Who handles the filing and payment of employees' taxes and social insurance contributions when using an Employer of Record in Hungary?

When using an Employer of Record (EOR) in Hungary, the EOR handles the filing and payment of employees' taxes and social insurance contributions. This includes the calculation, withholding, and remittance of income tax, social security contributions, and any other mandatory deductions required by Hungarian law. The EOR ensures compliance with local tax regulations and deadlines, thereby relieving the client company of the administrative burden and complexities associated with payroll and tax compliance in Hungary. This service helps companies avoid potential legal issues and penalties related to non-compliance, allowing them to focus on their core business activities.

What is the timeline for setting up a company in Hungary?

Setting up a company in Hungary involves several steps and can vary in duration depending on the complexity of the business structure and the efficiency of the processes. Here is a detailed timeline for setting up a company in Hungary:

Preparation Phase (1-2 weeks):
- Business Plan and Strategy: Develop a comprehensive business plan and strategy.
- Legal Consultation: Engage with a local legal advisor to understand the specific requirements and regulations.
- Choose a Company Type: Decide on the type of company you want to establish (e.g., Limited Liability Company - Kft, Private Company Limited by Shares - Zrt, etc.).
Company Name Reservation (1-2 days):
- Name Check: Conduct a name check to ensure the desired company name is available.
- Reservation: Reserve the company name with the Hungarian Company Registry.
Drafting and Signing Incorporation Documents (1 week):
- Articles of Association: Draft the Articles of Association and other necessary documents.
- Notarization: Have the documents notarized by a Hungarian notary public.
Opening a Bank Account (1-2 weeks):
- Bank Selection: Choose a bank and open a corporate bank account.
- Deposit Capital: Deposit the required initial capital into the bank account.
Registration with the Company Registry (1-2 weeks):
- Submission: Submit the incorporation documents to the Hungarian Company Registry.
- Registration: The registry processes the application and registers the company.
Tax Registration (1 week):
- Tax Number: Obtain a tax number from the Hungarian Tax Authority (NAV).
- VAT Registration: If applicable, register for VAT.
Social Security Registration (1 week):
- Social Security Number: Register the company with the Hungarian Social Security Authorities.
Additional Licenses and Permits (Varies):
- Industry-Specific Licenses: Obtain any additional licenses or permits required for your specific industry.
Operational Setup (1-2 weeks):
- Office Space: Secure office space and set up the physical infrastructure.
- Hiring Employees: Begin the process of hiring employees and setting up payroll.

In total, the process of setting up a company in Hungary can take approximately 6-10 weeks, depending on the efficiency of each step and the specific requirements of your business. Using an Employer of Record (EOR) service like Rivermate can significantly streamline this process, as they handle many of the administrative and compliance-related tasks, allowing you to focus on your core business activities.

What is HR compliance in Hungary, and why is it important?

HR compliance in Hungary refers to the adherence to the country's labor laws, regulations, and standards that govern employment practices. This includes ensuring that all employment contracts, workplace policies, and HR practices align with Hungarian labor legislation. Key aspects of HR compliance in Hungary include:

Employment Contracts: Hungarian labor law mandates that employment contracts must be in writing and include specific details such as job description, salary, working hours, and duration of employment.
Working Hours and Overtime: The standard working week in Hungary is 40 hours. Employers must comply with regulations regarding overtime, which is generally capped and requires additional compensation.
Minimum Wage: Employers must ensure that employees are paid at least the national minimum wage, which is periodically adjusted by the government.
Leave Entitlements: Hungarian law provides for various types of leave, including annual leave, sick leave, maternity leave, and parental leave. Employers must ensure that employees receive their entitled leave and that it is properly documented.
Health and Safety: Employers are required to maintain a safe working environment and comply with occupational health and safety regulations. This includes conducting regular risk assessments and providing necessary training and equipment.
Termination and Severance: Termination of employment must comply with Hungarian labor laws, which include specific notice periods and, in some cases, severance pay. Employers must follow proper procedures to avoid wrongful termination claims.
Data Protection: Compliance with data protection laws, including the General Data Protection Regulation (GDPR), is crucial. Employers must ensure that employee data is collected, processed, and stored in accordance with these regulations.

Importance of HR Compliance in Hungary:

Legal Protection: Adhering to HR compliance helps protect the company from legal disputes and potential lawsuits. Non-compliance can result in significant fines, legal penalties, and damage to the company's reputation.
Employee Satisfaction and Retention: Compliance with labor laws ensures fair treatment of employees, which can lead to higher job satisfaction and retention rates. Employees are more likely to stay with a company that respects their rights and provides a safe and fair working environment.
Operational Efficiency: Proper HR compliance ensures that the company operates smoothly without interruptions caused by legal issues or disputes. This allows the company to focus on its core business activities.
Reputation Management: Companies that comply with labor laws and treat their employees well are viewed more favorably by customers, investors, and potential employees. This can enhance the company's reputation and attract top talent.
Risk Management: By adhering to HR compliance, companies can mitigate risks associated with non-compliance, such as financial penalties, legal actions, and loss of business licenses.

Using an Employer of Record (EOR) like Rivermate can significantly simplify HR compliance in Hungary. An EOR takes on the responsibility of ensuring that all employment practices comply with local laws and regulations. This includes managing payroll, taxes, benefits, and other HR functions, allowing companies to focus on their core business activities while minimizing the risk of non-compliance.

Is it possible to hire independent contractors in Hungary?

Yes, it is possible to hire independent contractors in Hungary. However, there are several important considerations to keep in mind when doing so.

Legal Framework: Independent contractors in Hungary are governed by the Hungarian Civil Code, which outlines the terms and conditions under which they can operate. Unlike employees, contractors are not subject to the Hungarian Labor Code, which means they have more flexibility but also fewer protections.
Contractual Agreement: It is crucial to have a well-drafted contract that clearly defines the scope of work, payment terms, duration, and other relevant conditions. This contract should explicitly state that the relationship is one of an independent contractor and not an employment relationship to avoid any legal ambiguities.
Taxation: Independent contractors are responsible for their own taxes, including social security contributions and VAT if applicable. They must register with the Hungarian tax authorities and comply with all tax filing requirements. Employers do not withhold taxes for contractors, which simplifies payroll but requires contractors to be diligent about their tax obligations.
Misclassification Risks: One of the significant risks of hiring independent contractors is the potential for misclassification. If a contractor is found to be functioning more like an employee (e.g., working under direct supervision, using company equipment, having set working hours), Hungarian authorities may reclassify the relationship as employment. This can result in back taxes, penalties, and other legal issues for the hiring company.
Benefits and Protections: Independent contractors do not receive the same benefits and protections as employees, such as paid leave, health insurance, and severance pay. This can be a cost-saving measure for companies but may also affect the attractiveness of the position to potential contractors.
Intellectual Property: Ensure that the contract includes clauses related to intellectual property (IP) rights. Typically, any IP created by an independent contractor should be assigned to the hiring company, but this needs to be explicitly stated in the contract to avoid disputes.
Termination: The terms for terminating the contract should be clearly outlined. Unlike employees, independent contractors do not have the same protections against unfair dismissal, but having clear termination clauses can help prevent potential conflicts.

Using an Employer of Record (EOR) service like Rivermate can simplify the process of hiring independent contractors in Hungary. An EOR can handle the complexities of local compliance, tax regulations, and contractual agreements, ensuring that your business remains compliant with Hungarian laws while mitigating the risks associated with misclassification and other legal issues. This allows your company to focus on core business activities while leveraging the expertise of local professionals.

How does Rivermate, as an Employer of Record in Hungary, ensure HR compliance?

Rivermate, as an Employer of Record (EOR) in Hungary, ensures HR compliance through a comprehensive understanding of local labor laws, regulations, and best practices. Here are several ways Rivermate achieves this:

Local Expertise: Rivermate employs local HR professionals who are well-versed in Hungarian labor laws and regulations. This local expertise ensures that all employment practices are compliant with national standards, including hiring, contracts, payroll, and terminations.
Employment Contracts: Rivermate ensures that employment contracts are drafted in accordance with Hungarian labor laws. This includes specifying terms of employment, job descriptions, compensation, benefits, and termination conditions. These contracts are regularly updated to reflect any changes in legislation.
Payroll Management: Rivermate handles payroll processing in compliance with Hungarian tax laws and social security regulations. This includes accurate calculation of wages, deductions, and contributions to social security, health insurance, and other statutory benefits.
Tax Compliance: Rivermate ensures that all tax obligations are met, including income tax withholding, corporate taxes, and value-added tax (VAT) where applicable. They stay updated on tax law changes to ensure ongoing compliance.
Benefits Administration: Rivermate manages statutory benefits such as health insurance, pension contributions, and other mandatory benefits. They also offer guidance on additional benefits that can help attract and retain employees while remaining compliant with local laws.
Labor Law Adherence: Rivermate ensures compliance with Hungarian labor laws regarding working hours, overtime, leave entitlements (such as annual leave, sick leave, and maternity/paternity leave), and workplace safety regulations.
Employee Onboarding and Offboarding: Rivermate manages the entire employee lifecycle, from onboarding to offboarding, ensuring that all processes comply with Hungarian labor laws. This includes proper documentation, notice periods, and severance payments where applicable.
Data Protection: Rivermate ensures compliance with data protection regulations, including the General Data Protection Regulation (GDPR), which is applicable in Hungary. They implement robust data security measures to protect employee information.
Dispute Resolution: Rivermate provides support in handling employee disputes and grievances in accordance with Hungarian labor laws. They ensure that any disciplinary actions or terminations are conducted legally and fairly.
Continuous Monitoring and Updates: Rivermate continuously monitors changes in Hungarian labor laws and regulations. They proactively update their policies and practices to ensure ongoing compliance, reducing the risk of legal issues for their clients.

By leveraging Rivermate's services, companies can confidently expand their operations in Hungary, knowing that all HR and employment-related matters are handled in full compliance with local laws and regulations. This allows businesses to focus on their core activities while minimizing legal and financial risks.

What options are available for hiring a worker in Hungary?

In Hungary, employers have several options for hiring workers, each with its own set of legal, administrative, and financial considerations. Here are the primary options available:

Direct Employment:
- Permanent Employment Contracts: This is the most common form of employment in Hungary. It involves hiring an employee directly under an indefinite-term contract. The employer is responsible for all aspects of employment, including payroll, taxes, social security contributions, and compliance with Hungarian labor laws.
- Fixed-Term Contracts: Employers can hire workers for a specific period or project. These contracts must comply with Hungarian labor regulations, which include limitations on the duration and renewal of fixed-term contracts.
Temporary Employment:
- Temporary Agency Work: Employers can hire workers through temporary employment agencies. The agency acts as the employer, handling payroll and compliance, while the worker performs tasks for the client company. This option provides flexibility but can be more expensive due to agency fees.
Freelancers and Independent Contractors:
- Freelancers: Hiring freelancers or independent contractors can be an option for specific projects or tasks. However, it is crucial to ensure that the working relationship does not resemble an employment relationship, as this could lead to reclassification and legal issues.
- Consultants: Similar to freelancers, consultants can be hired for their expertise on a contractual basis. This arrangement is suitable for short-term or specialized projects.
Outsourcing:
- Outsourcing Services: Employers can outsource certain functions or projects to third-party service providers. This can include IT services, customer support, or manufacturing. The outsourcing company handles the employment and compliance aspects.
Employer of Record (EOR):
- Employer of Record Services: Using an EOR, like Rivermate, allows companies to hire workers in Hungary without establishing a legal entity in the country. The EOR acts as the legal employer, managing payroll, taxes, benefits, and compliance with local labor laws. This option is particularly beneficial for companies looking to expand quickly and efficiently without the administrative burden of setting up a local subsidiary.

Benefits of Using an Employer of Record in Hungary

Compliance and Risk Management:
- Legal Compliance: An EOR ensures that all employment practices comply with Hungarian labor laws, including contracts, working hours, termination procedures, and employee benefits.
- Risk Mitigation: By handling all legal and regulatory requirements, an EOR reduces the risk of non-compliance, which can result in fines and legal disputes.
Cost Efficiency:
- Reduced Overhead: Setting up a legal entity in Hungary involves significant time and financial investment. An EOR eliminates these costs, allowing companies to allocate resources more effectively.
- Scalability: EOR services provide flexibility to scale the workforce up or down based on business needs without the long-term commitment of establishing a local entity.
Administrative Relief:
- Payroll and Tax Management: The EOR manages payroll processing, tax withholding, and social security contributions, ensuring accuracy and timeliness.
- Employee Benefits Administration: An EOR handles the provision and management of employee benefits, such as health insurance, pensions, and other statutory benefits.
Speed to Market:
- Quick Onboarding: An EOR can facilitate the rapid hiring and onboarding of employees, enabling companies to start operations in Hungary quickly.
- Focus on Core Business: By outsourcing employment administration to an EOR, companies can focus on their core business activities and strategic goals.
Local Expertise:
- Knowledge of Local Market: An EOR has in-depth knowledge of the Hungarian labor market, cultural nuances, and employment practices, providing valuable insights and support.
- Employee Support: The EOR can offer local support to employees, addressing their concerns and ensuring a positive employment experience.

In summary, while there are multiple options for hiring workers in Hungary, using an Employer of Record like Rivermate offers significant advantages in terms of compliance, cost efficiency, administrative relief, speed to market, and local expertise. This makes it an attractive option for companies looking to expand their operations in Hungary without the complexities of establishing a local entity.

Do employees receive all their rights and benefits when employed through an Employer of Record in Hungary?

Yes, employees in Hungary receive all their rights and benefits when employed through an Employer of Record (EOR) like Rivermate. An EOR ensures compliance with local labor laws and regulations, which is crucial for protecting employee rights and benefits. Here are some key aspects:

Employment Contracts: An EOR will provide employment contracts that comply with Hungarian labor laws. These contracts will outline the terms of employment, including job responsibilities, salary, working hours, and other essential details.
Wages and Salaries: Employees will receive their wages and salaries in accordance with Hungarian standards, including adherence to minimum wage laws and timely payment schedules.
Social Security and Taxes: The EOR will handle all necessary social security contributions and tax withholdings, ensuring that employees are covered under Hungary's social security system, which includes healthcare, pensions, and unemployment benefits.
Paid Leave: Employees are entitled to paid leave, including annual leave, sick leave, and maternity/paternity leave, as stipulated by Hungarian labor laws. The EOR will manage these entitlements and ensure employees can take their leave as required.
Working Hours and Overtime: The EOR will ensure compliance with regulations regarding working hours and overtime. In Hungary, the standard workweek is 40 hours, and any overtime must be compensated according to legal requirements.
Health and Safety: The EOR is responsible for ensuring that the workplace meets health and safety standards as required by Hungarian law. This includes providing a safe working environment and necessary training.
Termination and Severance: In the event of termination, the EOR will handle the process in compliance with Hungarian labor laws, which include specific notice periods and severance pay requirements.
Employee Benefits: The EOR can also manage additional employee benefits, such as private health insurance, meal vouchers, and transportation allowances, ensuring that employees receive a comprehensive benefits package.

By using an EOR like Rivermate, companies can ensure that their employees in Hungary receive all the rights and benefits they are entitled to under local laws, while also simplifying the complexities of international employment compliance.

What legal responsibilities does a company have when using an Employer of Record service like Rivermate in Hungary?

When a company uses an Employer of Record (EOR) service like Rivermate in Hungary, the EOR assumes many of the legal responsibilities associated with employment. However, the company still retains certain obligations and must ensure compliance with Hungarian labor laws. Here are the key legal responsibilities and considerations:

Employment Contracts:
- The EOR is responsible for drafting and maintaining employment contracts in compliance with Hungarian labor laws. These contracts must include terms such as job description, salary, working hours, and other conditions of employment.
Payroll and Tax Compliance:
- The EOR handles payroll processing, ensuring that employees are paid accurately and on time. This includes calculating and withholding the appropriate taxes and social security contributions, and remitting them to the Hungarian tax authorities.
Social Security and Benefits:
- The EOR ensures that employees are registered with the Hungarian social security system and that all mandatory contributions are made. This includes health insurance, pension contributions, and other statutory benefits.
Labor Law Compliance:
- The EOR ensures compliance with Hungarian labor laws, including regulations on working hours, overtime, rest periods, and leave entitlements. They also handle any necessary reporting to labor authorities.
Employee Rights and Protections:
- The EOR is responsible for ensuring that employees' rights are protected, including adherence to anti-discrimination laws, health and safety regulations, and other statutory protections.
Termination and Severance:
- The EOR manages the termination process in compliance with Hungarian labor laws, including providing the required notice period and calculating any severance pay or other termination benefits.
Record Keeping:
- The EOR maintains accurate records of employment, including contracts, payroll records, and any other documentation required by Hungarian law.
Legal Representation:
- In case of any legal disputes or issues related to employment, the EOR may represent the company and handle legal proceedings in accordance with Hungarian labor laws.
Data Protection:
- The EOR ensures compliance with data protection regulations, including the General Data Protection Regulation (GDPR), which applies in Hungary. This involves safeguarding employees' personal data and ensuring proper data handling practices.
Local Expertise:
- The EOR provides local expertise and guidance on employment practices, helping the company navigate the complexities of Hungarian labor laws and regulations.

While the EOR takes on many of the day-to-day responsibilities of employment, the company must still ensure that it selects a reputable EOR provider and maintains oversight of the employment relationship. This includes regular communication with the EOR to ensure that all legal obligations are being met and that the company's interests are protected.

What are the costs associated with employing someone in Hungary?

Employing someone in Hungary involves several costs that employers need to consider. These costs can be broadly categorized into direct salary expenses, mandatory social security contributions, and other employment-related costs. Here is a detailed breakdown:

Gross Salary: This is the base salary agreed upon with the employee. It is subject to taxation and social security contributions.
Employer's Social Security Contributions: Employers in Hungary are required to make several contributions based on the gross salary of the employee:
- Social Contribution Tax: As of 2023, the rate is 13%.
- Vocational Training Contribution: This is 1.5% of the gross salary.
Employee's Social Security Contributions: While these are deducted from the employee's gross salary, they are important for the employer to calculate the total cost of employment:
- Pension Contribution: 10% of the gross salary.
- Health Insurance and Labor Market Contribution: 8.5% of the gross salary.
Personal Income Tax: Employees are subject to a flat personal income tax rate of 15%. This is also deducted from the gross salary but is part of the overall employment cost structure.
Other Employment Costs:
- Holiday Pay: Employees are entitled to paid annual leave, which varies based on age and years of service.
- Sick Leave: Employers must cover a portion of the employee's salary during sick leave.
- Severance Pay: In case of termination, employees may be entitled to severance pay, which depends on the length of service.
Administrative Costs: These include costs related to payroll processing, compliance with local labor laws, and other HR administrative tasks.
Additional Benefits: Depending on the company's policy, additional benefits such as health insurance, meal vouchers, transportation allowances, and bonuses may also be provided.

Using an Employer of Record (EOR) like Rivermate can help manage these costs effectively. An EOR handles all aspects of employment, including payroll, tax compliance, and benefits administration, ensuring that the company remains compliant with Hungarian labor laws. This can save time and reduce the administrative burden on the company, allowing it to focus on its core business activities.

Hungary

Hire in Hungary at a glance