Planning to hire employees in Hungary? Here’s a quick guide

Hungary has emerged as an attractive destination for businesses aiming to expand their workforce in Central Europe. In addition to a highly skilled talent pool, Hungary offers competitive labor costs and a strategic location at the heart of the EU. 

However, to hire in Hungary, employers must have a solid understanding of local labor laws, employment regulations, and tax obligations in the country. The employment regulations in Hungary are governed by the Labor Code (Act I of 2012). The National Employment Service (NFSZ) serves as the main authority. 

This guide explores how a workforce management platform like Payoneer Workforce Management can support you in hiring employees in Hungary, navigating compliance, managing payroll, and more. 

How to hire employees in Hungary?

Employers can choose from the following three options when they want to engage talent in Hungary:

1) Set up a legal entity in Hungary

The first step towards setting up a legal entity in Hungary is selecting the company type and a unique company name. The Limited Liability Company is the most common choice. The process involves mandatory electronic registration with the Hungarian Court of Registration.

The employer has to open a Hungarian bank account and deposit the capital amount. Post-registration, the employer will obtain a tax number, an EU VAT number, and a statistical ID. 

2) Hire independent contractors

Hiring independent contractors in Hungary is primarily governed by the Civil Code (Act V of 2013), under the National Employment Service (NFSZ). Contractors work autonomously in the country, using their own tools. They are also responsible for their own taxes. 

Employers must be aware of misclassification risks, as this can lead to fines, heavy penalties, and back payments for social security and taxes. 

3) Partner with a workforce management platform

Employers can use a workforce management platform for support to hire employees in Hungary. Payoneer Workforce Management helps in streamlining the whole process of employment in Hungary. 

Right from handling employee onboarding, payroll management, leave entitlements, termination, compliance with labor laws and regulations, and more. 

Where to find employees in Hungary

Employers can find employees in Hungary from the following places:

1) Online job portals

There are numerous online job portals where employers can find employees matching the exact job profile. Here are the most popular options in the country:

• Indeed Hungary
• Profession.hu
• Jobline.hu
• LinkedIn Hungary

2) Public employment service

Hungary’s Public Employment Service (NFSZ) helps employers connect with employees free of charge. 

3) University recruitment

When employers are seeking fresh graduates, they can partner with the leading universities and higher education institutions in the country. 

4) Recruitment agencies

Local recruitment agencies in Hungary are updated on the current job market in the country. These agencies help streamline hiring for specialised roles. 

However, recruitment agencies charge a huge fee and take a lot of time.

5) Recruitment with the support of a workforce management platform

A workforce management platform can support the hiring process in Hungary, including onboarding,  taxation, payroll, benefits, regulation compliance, employment contracts, and more. This gives you time to focus on identifying the right candidates for your requirements.

One of the best ways to engage talent in Hungary is via a workforce management platform like Payoneer Workforce Management.

Onboarding employees in Hungary

A smooth onboarding process is mandatory for employees in Hungary. Similar to Denmark, employers must stay compliant with all employment regulations in Hungary. 

Here are the details of the onboarding process:

• Employees must be given a written employment contract, usually in a bilingual format in Hungarian and English. The contract must contain details in accordance with the Hungarian Labor Code. 
• New employees must be registered with the National Tax and Customs Administration (NAV) before their first day. This is done by using the employee’s tax identification number. 
• Employers must collect the Social Security number and bank details from employees. 
• The employee must be enrolled in the payroll system. 
• Employers have to conduct an occupational health and safety orientation before the onboarding process. 
• In Hungary, employees may have to complete a pre-employment occupational medical examination. 
• The employee should receive detailed information on company policies and other important documents. They must also be informed about workplace regulations, codes of conduct, etc. 

Key employment laws in Hungary

The Labor Code (Act I of 2012) is the foundational legislation covering all aspects of employment relationships in Hungary, including contracts, hiring, working conditions, and termination. 

Other prominent employment laws and regulations in the country are as follows:

• Act LXXX of 1997 – Social Security Hungary – It regulates employer and employee social security contributions, covering healthcare, pension, and other social security benefits. 
• Act CXXV of 2003 – Equal Treatment and the Promotion of Equal Opportunities – Primary anti-discrimination legislation in Hungary, guaranteeing equal dignity and treatment for all. 
• Act XCIII of 1993 – Labor Safety Act – The primary Hungarian legislation governing occupational safety and health, ensuring safe working conditions, employee training, and risk evaluation. 

Along with these employment regulations in Hungary, employees and employers must keep other points in mind as well. 

Employment contracts

The employment contracts in Hungary are governed by the Labor Code. Here are some of the common kinds of employment contracts in Hungary:

• Indefinite term contracts – These contract terms do not have an end date and are considered permanent employment. 
• Fixed-term contracts – Fixed-term contracts come with a fixed start and end date of employment. If required, fixed-term contracts can be renewed after expiry of the initial contract period. 

According to the Labor Code, the employment contract must be in writing. 

Here are the key components that must be present in the employment contract. 

• Personal details of the employee and the employer
• Probationary period
• Employment contract type and date of commencement of the contract
• Daily working hours with overtime hours (if any)
• Job functions, roles and responsibilities of the employee
• Wages/salary of the employee, along with other benefits and allowances
• Leave entitlements of the employee
• Notice period
• Termination

Employee benefits

Employment in Hungary provides certain benefits to employees. Some of the important ones are as follows:

Working hours in Hungary

According to the Labor Code, the general working hours in Hungary are 40 hours per week. 

Typically, work begins at 9 AM, followed by a rest break at 1 PM fr 2 hours. Work is then resumed from 3 PM till 7 PM.

Overtime in Hungary

Employees in Hungary get paid for working overtime hours. However, there are some conditions that all employees have to follow:

• Employees cannot work more than 250 hours of overtime per year. 
• The employee must be paid 50% over the gross salary for the number of overtime hours worked. 
• Employers might allow an additional 150 hours of overtime. However, this has to be with mutual agreement and in writing between the employee and the employer. 

Employer’s tax obligations

Employers in Hungary have certain taxation and social security obligations. As an employer, when you think about how to hire in Hungary, you must keep this point in mind. 

• In Hungary, there is a flat tax rate of 15% for individual income tax on all taxable income. 
• The gross income paid to the employee is the base for the social security contributions in Hungary. 

Termination and severance pay in Hungary

Employers can terminate employees in Hungary on valid grounds. In case an employee feels that the dismissal is unfair, the employer can face serious legal consequences. 

The employer might be fined or penalized. The termination case varies from one individual to another, and thus each case needs to be handled with precision. 

Here are some common termination scenarios in Hungary:

• Termination during the probationary period
• Resignation of the employee
• Termination of the employee by the employer on grounds such as performance issues, misconduct, property theft, absence without leave, etc. 
• Mutual agreement between the employer and the employee

Notice period

Employees in Hungary do not have to serve any notice period if they are within the probationary period. 

After the probation period, an employee has to serve a notice period of a minimum of 30 days. The notice period extends depending on the employment duration. 

However, both the employer and the employee can mutually agree and extend the notice period to almost 6 months. Here are the details:

Severance pay

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

Explore Payoneer Workforce Management in Hungary

Payoneer Workforce Management can offer support when you hire employees in Hungary. 

Our unified platform not only streamlines the hiring process in Hungary but also assists with navigating compliance, payroll management, leave entitlements, and more. If you are looking for efficient workforce management in Hungary, this platform can be of great help, offering services in more than 160+ countries. 

Book a demo now!