Your guide to payroll in Hungary

Managing Hungary payroll requires a clear understanding of the country’s statutory contributions, tax framework, and employment regulations, which are strictly governed by the Labor Code (Act I of 2012). 

Whether you are a locally operating business or a foreign business entering the Hungarian market, you have to ensure payroll compliance in Hungary. The country has a flat income tax rate along with mandatory social security contributions from the employee and the employer. 

This guide walks you through everything you need to know to pay employees in Hungary efficiently and accurately. 

Explore how a workforce management platform, such as Payoneer Workforce Management, streamlines the procedure of payroll management in Hungary and eases payroll processing. 

Hungary payroll: Wages and other payments

Employers have to comply with the Labor Code (Act I of 2012) when it comes to national minimum wages rules, regulations governing bonuses, overtime, and other benefits, sector-specific rates, and so on. 

This ensures that employers pay employees in Hungary after accurate calculations, and non-maintainence of payroll compliance in Hungary can cause legal hassles for the employer. 

Payroll cycle in Hungary

The payroll cycle in Hungary is monthly. The pay date in the country is the 10th of the following month. 

Minimum wage

The payout currency in Hungary is the Forint (HUF). 

• The minimum wage in Hungary is 290.800 HUF. The hourly wage is 1.672 HUF. 
• The qualified minimum wage in Hungary is 348.800 HUF. The hourly wage is 2.005 HUF. 

Overtime pay

In Hungary, employees cannot work more than 250 hours of overtime per year. The overtime pay in the country is 50% on top of the gross salary for overtime hours worked. 

In certain cases, employers allow an additional 150 hours of overtime per year. However, the overtime hours and overtime pay are agreed to by the employee and the employer in writing. 

Sick pay

Employees in Hungary are entitled to sick pay. The National Health Insurance Fund of Hungary (NEAK) is responsible for sick pay in the country. 

Employees are entitled to 15 days of sick leave in Hungary. During this period, the employer provides sick pay at the rate of 70% of the employee’s average salary for the first 15 days. This can be used only in the same calendar year. 

Employees are entitled to sickness benefit for a maximum of 1 year, starting from the 16th day of illness, when the person is insured validly. The amount of this benefit is 60% of the gross salary

Maternity pay

In Hungary, female employees are entitled to maternity leave of 24 weeks, 4 of which can be taken before the delivery date. 

Paternity pay

In Hungary, paternity leave is for 10 working days, typically paid by social security. 

• 100% of the pay for the first 5 days. 
• The next 5 days are paid at 40% of the pay. 

Severance pay

Employees are entitled to severance pay in Hungary after completing 3 years of service. The severance pay in the country varies between 1 and 6 months’ salary. The pay also depends on the age of the worker and the length of the service. 

Payroll in Hungary: Contributions and deductions

Payroll management in Hungary includes a well-defined set of tax deductions and social security contributions. This is similar to that of Greece. The contributions and deductions are shared between the employees and employers. Right from salary tax in Hungary to employer taxes in Hungary, everything is calculated for Hungary payroll processing. 

Income tax

Employees have to pay individual income tax in Hungary. The country has a flat tax rate of 15% on all taxable income of employees. 

Social security contributions in Hungary

Social security contributions in Hungary are mandatory for both employees and employers and depend on the gross income. 

These contributions must be calculated, withheld and submitted to the Hungarian Tax and Customs Administration (NAV) monthly. 

• The employees have to contribute a part for the gross salary, and it covers healthcare, pension insurance, and labor market contributions.
• Employers also contribute on top of the gross wages, typically towards pension and health insurance.

Both employees and employers can use our cost calculator for a breakdown of deductions and contributions. 

Other employee benefits

As part of Hungary payroll, there are various benefits that employees enjoy in the country. Some of the most prominent ones are as follows:

Public health insurance

In Hungary, public health insurance is mandatory. The insurance is overseen by the National Health Insurance Fund of Hungary (NEAK). 

The insurance offers coverage to employees and is a basic right in Hungary. Employees contribute 7.5% of the gross income, whereas, employer contribute 15.5% of the gross income.

The insurance extends to every child who goes to school and university. However, other relatives of the employee have to be insured in their own right. 

Earned or annual leave

Employees in Hungary are entitled to basic 20 days of earned or annual leave in the country. The number of days of leave increases with age. Here are the details:

• From 25 year + 1 day
• From 28 year + 2 days
• From 31 year + 3 days
• From 33 year + 4 days
• From 35 year + 5 days
• From 37 year + 6 days
• From 39 year + 7 days
• From 41 year + 8 days
• From 43 year + 9 days
• From 45 year + 10 days

If the employee has children, the employee is entitled to additional annual leave. 

• 1 child + 2 days
• 2 children + 4 days
• More than 2 children + 7 days

Annual bonus

In Hungary, it is not mandatory to pay the 13th-month salary to employees. However, in many organizations, it depends on the employer’s discretion if the employee will get an annual bonus. 

Hungary payroll compliance best practices

Employers have to ensure payroll compliance in Hungary to reduce penalties and fines, along with legal consequences. They must follow the rules and regulations mentioned in the Labor Code for compliance. 

Here are some of the best practices for Hungary payroll compliance:

• Employers must register with the Hungarian Tax and Customs Administration (NAV) before any payroll processing in Hungary. 
• All employment contracts must be in writing as per the Hungarian Labor Code.
• Apply the 15% flat income tax in Hungary to all employee earnings. Withhold the employee’s social security contributions from the gross wage. Calculate the employer’s social security contributions and submit all declarations to the Hungarian Tax and Customs Administration (NAV) every month. 
• Ensure minimum wage compliance and leave and holiday entitlements for employees. 
• There should be immaculate record-keeping and recording for all employees for audits and inspections. 
• Stay updated on amendments and changes in laws and regulations in the country for compliance. 

Your options for payroll in Hungary

Employers looking to engage talent in Hungary while streamlining employment costs in Hungary can choose from some of the ways listed below. This also helps in effective payroll management in the country. 

• Setting up a local entity in the country: While engaging Hungarian talent, If you want a legal business presence in Hungary, consider setting up a local entity in the country. However, this process is time-consuming and requires a lot of effort. 
• Workforce management platform: If you want seamless Hungary payroll, you can seek assistance from a workforce management platform. 
• Hiring independent contractors: If you want a particular task or project completed in Hungary, you can hire independent contractors in the country. Employers do not have any liability towards the contractors. However, beware of misclassification risks. 

For instance, Payoneer Workforce Management not only helps pay employees in Hungary, but it also assists with onboarding, benefits administration, compliance, support with taxation, leave entitlements, and termination. 

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