Contributed by Baker McKenzie.
The primary source of Hungarian labor law is Act I of 2012 on the Labor Code (Labor Code). In addition to the Labor Code, collective bargaining agreements, work agreements, and other Hungarian legislation concerning labor matters, health and safety, and social benefits and immigration issues may also govern certain employment relationships.
In Hungarian labor law, the central element of establishing an employment relationship is the employment contract. The Labor Code clearly states that an employment relationship is deemed established by entering into an employment contract. The Labor Code also requires that employment contracts be concluded in writing, which is to be arranged by the employer. An employment contract not concluded in writing can be cited as invalid by the employee within a period of 30 days from the commencement of work.
An employment contract shall be regarded to have been concluded in writing if it includes the names of the parties and the details relevant to the performance of the contract and has been signed by the parties. According to the Labor Code, a legal statement (such as the employment contract) is also deemed to have been made in writing:
- if executed by means of an electronic document with facilities for retrieving the information contained in the legal statement unaltered, and for identifying the person making the legal statement and the time when it was made (electronic document) or
- in certain specified cases if published by means considered customary for, and commonly known in, the area.
The employee’s base salary and position must always be defined in the employment contract. The place of work also shall be defined in the employment contract or failing this, the place where work is normally carried out shall be considered the workplace. The place of work can be a permanent location or a wider geographic area as specified in the employment contract.
Upon concluding the employment contract, the employer must inform the employee of certain important information related to the working conditions and must confirm those in writing within seven days.
The Labor Code does not explicitly require an employment contract to be concluded in Hungarian if the employee understands the English language. However, in order to avoid interpretation issues and potential labor law disputes, it is always recommended that a Hungarian version is prepared.
Besides the employment contract, the following important statements and actions are required to be made in writing
- informing the employee in certain cases – processing of personal data and data obtained from criminal records, restriction of personality rights, monitoring the employee by technical means,
- determining the starting and finishing date of the working time frame,
- determining work schedules,
- ordering overtime work (or, according to the terminology of the Labor Code, “extraordinary work”),
- ordering stand-by duty for the employee and determining the duration of the availability,
- determining the performance requirements and performance-based wage factors.
Upon concluding an employment contract, a probationary period may be agreed upon between the employer and the employee. The probationary period cannot be longer than three months, except in the case of a collective bargaining agreement, which can stipulate a probationary period of six months. A probationary period that is shorter than three months can be extended once, provided that together with the extension the total term does not exceed three months. Extension of the above-mentioned probationary periods is prohibited and will be deemed null and void.
In case of the extension of fixed-term employment or the re-establishment of fixed-term employment within six months of the termination of the previous fixed-term employment, no probationary period can be agreed upon if the employee is being employed in the same or in a similar position as before.
Typical and atypical employment relationships
Full-time employment concluded for an indefinite period of time is considered the typical employment relationship. Full-time means that the working time is eight hours per day (regular daily working time) and 40 hours per week.
Any employment relationship which is not typical is considered an atypical employment relationship. The most important atypical relationships are the following.
- Fixed-term employment: The period of fixed-term employment shall be determined according to the calendar or by other appropriate means. The duration of a fixed-term employment relationship may not exceed five years, including the duration of an extended relationship and that of another fixed-term employment relationship concluded within six months of the termination of the previous fixed-term employment relationship.
- Part-time employment: Parties may agree to work part-time, which is less than the regular full-time employment of eight hours per day. The fact that the employee works part-time must be stipulated in the employment contract.
- Call for work: Part-time workers whose daily working time does not exceed six hours a day may establish a call for work, where they perform work at times the employer deems necessary to best accommodate the function of their jobs.
- Teleworking: see Section 1.4. – Home office
- Outworkers: Outworkers are employed in jobs to be performed independently and remunerated exclusively on the basis of the work done. The employment contract must define the work performed by the employee, the place where work is carried out, and the method and extent of covering expenses. The place construed as the place of work is either the employee’s home or another place designated by the parties. Unless otherwise agreed, the employer’s right of instruction is limited to specifying the technique and work processes to be used by the employee. In the absence of an agreement to the contrary, the employee carries out the work using their own means.
- Job sharing: The employer may conclude one employment contract with two or more employees for carrying out the tasks pertaining to one position. Where any of the employees to the contract is unavailable, another employee to the contract will fill in and perform the functions of the position. Job-sharing employees work in a flexible working arrangement. The job share employment relationship terminates when the number of employees is reduced to one.
- Employee sharing: Two or more employers may conclude one employment contract with one employee for carrying out certain tasks. The employment contract must clearly indicate which employer is responsible for paying the employee’s wages. The liability of employers in respect of the employee’s employment claims is joint and several. The employment relationship may be terminated by either of the employers or by the employee unless otherwise agreed. The employment relationship terminates if the number of employers is reduced to one.
A special mention should be made for executive employees because in their case parties are entitled to derogate from the statutory provisions of the Labor Code to a much larger extent than in the case of other employees.
For the purposes of the Labor Code, an executive employee includes:
- the head of an employer, i.e., the managing director(s), in the case of a limited liability company, and the members of the board of directors, in the case of a company limited by shares;
- their deputies who perform their work under their supervision and have certain substitution rights.
In addition, an employee may qualify as an executive employee if this fact is explicitly included in their employment contract and if the employee is in a position considered to be of material importance for the employer’s operations, or holds a position of trust, and their salary is at least seven times the mandatory minimum wage at any time.
The specific provisions of the Labor Code relating to executives are as follows:
- collective bargaining agreements do not apply to executives;
- the employment of an executive may be terminated by notice without providing any reasons for the termination, provided the executive is not (i) pregnant, (ii) on maternity leave, or (iii) undergoing treatment related to in vitro fertilization procedures;
- the employment of an executive may be terminated by notice with immediate effect within three years following the occurrence of the cause of action, instead of the one-year limitation applicable under the general rules;
an executive may not validly establish further employment or another legal relationship aimed at the performance of work;
- An executive may not acquire an ownership interest in any business organization – except for public companies – whose business activities are the same or similar to those of the employer or which maintains a regular business relationship with the employer;
- an executive may not enter into any contract in favor of themselves within the employer’s scope of business;
- an executive is required to notify the employer if any of their next of kin (as defined in the Labor Code) acquires equity in a company whose business activities are the same or similar to those of the employer or that maintains a regular business relationship with the employer or establishes an employment relationship with such company as an executive.
If the requirements of the final item of the above are violated by the executive employee, the employer is entitled to terminate the executive’s employment.
Save as set out above, the executive and the employer may derogate from the provisions of the Labor Code (even in a manner less favorable to the employee) and the executive employee’s employment contract is subject to the parties’ agreement.
Executives may determine, at their sole discretion, their working schedule (i.e., the executive has a flexible working schedule). However, because executives have a flexible working schedule, they are not entitled to compensation for overtime work.
Executives are also liable for the total amount of damages caused within the scope of their executive activities in accordance with the applicable provisions of civil law and have unlimited liability for damages caused by their negligent conduct.
General Background checks before contracting
According to Hungarian and EU legislation, the background check of potential or already hired employees (employee) may be carried out in accordance with the principles of necessity and proportionality and subject to certain legal conditions. The necessity and proportionality of screening must be assessed individually for each job.
In connection with the background check, the employer may only require the employee to make a statement or provide personal data that is relevant for the establishment or fulfillment of the employment relationship or for the enforcement of the employer’s claims under the Labor Code.
The employee may be asked to provide certain documents during the background check, but in the vast majority of cases, copies of the documents cannot be made nor requested (e.g., the employee’s ID card or university degree cannot generally be copied, or the document cannot be requested to be sent by e-mail).
The employer bears the burden of proving that the request for the employee’s personal data is necessary and proportionate having regard to the employee’s duties and responsibilities, and objectively suitable for the purpose. Provided that all data protection provisions are complied with, the background check may include the following elements:
- Checking social media profiles: subject to the above-mentioned principle of necessity and proportionality and purpose limitation, the employee’s social media profiles can be checked if the employee has not restricted the disclosure of personal data on them (e.g., data cannot be collected from closed groups). Based on the related practice of the Hungarian Data Protection Authority (NAIH), the employer may not save, store, or transmit to others data from the social media profile page of the employee.
- Checking professional licenses: it is permitted to check from the relevant public registers whether the employee has the professional licenses indicated in their CV.
- Checking litigation proceedings of the employee: in Hungary, the details of the parties to the litigation proceedings are not public, but information on barred persons is publicly available.
- Checking if an employee holds a position as an executive officer in a company: the Hungarian Trade Registry provides publicly available information regarding this.
- Passport validity check: in the case of a third-country national, the employer has the right and the obligation to obtain the employee’s passport and to submit it to the competent Government Office as part of the process of obtaining a work permit for the said employee.
- Qualifications check: the employee can be asked to provide the certificate of their qualifications (e.g., university degree) required for the position to which they applied. However, the institution issuing the certificate cannot be contacted, because these institutions are not authorized to disclose such information to third parties.
- Checking previous workplaces: the employer cannot visit previous employers to obtain information about the employee. Requests for performance appraisals from previous employers may only be made with the employee’s prior permission and a related authorization from the employee (provided that the conditions for requesting a performance appraisal are met and it is relevant to the establishment of the employment relationship, e.g., similar job title).
- Verification of identity: the employer may ask the employee to prove their identity, which can be done by means of an identity card, driving license, or passport.
Criminal history check
Under Hungarian law, the employer can only check the criminal record of the employee in connection with the employment relationship by obtaining a certificate of good conduct, but it is important to note that the processing of personal data obtained from the criminal record is only lawful if one of the conditions set out in the legislation is met.
As a result of the above, the employer may require the employee to provide a certificate of good conduct if the job is restricted or excluded on the basis of the criminal record for one of the following reasons:
- by law (e.g., in the case of an executive officer); or
- based on the decision of the employer, which it bases on the fact that in the absence of a restriction on the occupation of the position there would be a risk:
- of harming the employer’s substantial monetary interest (e.g., the employees in the job hold a substantial amount of money or work with high-value assets),
- that legally protected secrets (e.g., trade secrets, know-how, personal data) would be violated, or
- of harming legally protected interests [e.g., the position in question involves (i) the guarding of firearms, ammunition, or explosives, (ii) the guarding of toxic or dangerous chemicals, or (iii) biological materials or nuclear materials].
The employer may restrict the occupation of a position on the basis of the above only if such restriction is necessary and proportionate. The lawfulness of such restrictions must be examined on an individual basis.
A pre-employment medical check-up must be conducted for each new person the employer wishes to hire before they commence work. It is prohibited to oblige the employee to undergo pregnancy testing.
Foreign employers in Hungary
Under Hungarian law, there are no specific restrictions on foreign entities hiring employees in Hungary. There is also no legal requirement for the foreign employer to establish a legal entity in Hungary in order to hire employees.
1.2. Employees versus independent contractors
Under Hungarian law, an employee is a natural person who performs work on the basis of an employment contract. The employment relationship is governed by labor law – mainly the Labor Code, collective bargaining agreements, and the employment contracts concluded between individual employees and the employer.
Contrary to the above an independent contractor performs work under a contract governed by civil law – mainly Act V of 2013 on the Civil Code (Civil Code). In general, it can be said that this is a much more flexible legal arrangement than an employment relationship for various reasons and has numerous advantages and disadvantages for both sides.
The two legal relationships are not always easy to differentiate from each other. According to judicial practice, the authorities and the courts examine so-called “qualifying marks” concerning the relationship between the parties. Two types of qualifying marks are distinguished: primary and secondary. Primary qualifying marks are given more weight in determining the nature of the legal relationship. However, it is important to stress that one or more qualifying marks alone do not necessarily classify the relationship between the parties into one or the other type of relationship. Thus, the qualification will always depend on all the circumstances of the case.
The way how the parties define the work to be performed under the contract is considered a primary qualifying factor. In the case of an employment relationship, this is usually a repetitive activity that is connected to the position of the employee. An independent contractor is usually contracted to perform one specific task or to achieve one specific result through work.
Another primary qualifying mark is that in an employment relationship, the employee is required to perform their work personally, whereas an independent contractor does not have a such obligation.
A further primary qualifying mark is that the employer has an employment obligation, i.e., it must provide the employee with work. At the same time, the employee has a stand-by duty, the obligation to be ready to do the work. In addition, in an employment relationship, there is a strict hierarchy between the employer and the employee. The employee, being subordinate to the employer, is integrated into the employer’s organizational units. Whereas in the case of an independent contractor, the client does not have an employment obligation and the parties are on the same level, not subordinate to each other.
Secondary qualifying marks are including the extent of the right to instruct and control, who determines the working hours, where the work is carried out, whose equipment is used, whether there is a written contract, and whether the work is regularly remunerated.
In an employment relationship, the employer’s right to give instructions is usually extensive, the work is carried out with the employer’s equipment, the working hours are allocated by the employer and the employee receives regular remuneration for the work. In the case of an independent contractor, the contractor usually performs the work with their or her own equipment and schedules their or her own working hours, the client has a limited right to give instructions and the work is usually not regularly remunerated.
Differences between the contents of the two legal relationships
One of the most important reasons for the differentiation is that labor law regulations are much stricter than civil law ones and much more protective towards the employees (i.e., protection of the wages, reasoning obligation in case of termination of employment).
The main legal concepts of the Labor Code that significantly protects the rights of employees are known as the “cogency” and “unilateral cogency” employment rule. Cogency means that parties cannot derogate from the statutory provisions of the Labor Code at all, while unilateral cogency provides that the parties to an employment contract may only agree on terms different from the statutory provisions of the Labor Code when this is expressly allowed by the Labor Code, and only if such terms are more favorable for the employee than the statutory provisions. Civil law is based on the concept of contractual freedom, so the parties can basically agree on any terms in a contract, if not explicitly prohibited by the Civil Code.
The employment relationship creates a mandatory insurance relationship under Act CXXII of 2019 and because of this, it is obligatory to report it to the Hungarian National Tax Authority (NAV). In the case of an independent contractor, the contractual relationship does not necessarily create an insurance relationship (only in certain cases) so not all of these relationships must be reported to the NAV.
The amount of the public charges and the taxes can differ significantly between the two legal relationships, generally speaking, employees tend to pay more. The administrative and tax burdens of the employers are usually also much higher in an employment relationship while in the case of a civil law contract, the client has to bear almost none of these.
From the above, it follows that the differentiation of the two legal relationships arises mostly in the context of tax and labor audits, and partly in labor disputes.
Miscategorizing employment and independent contractor relationships
Due to the more favorable taxation, public charges, and more flexible regulations, sometimes parties stipulate a civil law contract in order to try to disguise that they in fact entered into an employment relationship. This is called a sham contract.
If, for example, a person working under a civil law contract (as an independent contractor) works in the company’s customer service department during fixed working hours, from 8 a.m. to 4.30 p.m., and uses the company’s tools and IT databases in such a way that if they work overtime, they are entitled to a wage supplement and also receives holiday leave on the basis of their or her work, the civil law contract is, in fact, an employment contract.
This is problematic, because – as mentioned above – the “independent contractor” in this case pays less tax and public charges and also does not have the same protections as an employee would have.
In case of a sham contract, the competent authority may impose a fine, the amount of which depends on the duration of the unlawful situation, its frequency, the number of employees concerned, and the amount of unpaid public contributions.
1.3. Foreign employees
Hungarian immigration legislation provides different solutions to help employers of foreign nationals and assist foreign nationals entering the country for business purposes.
Depending on their nationality, as well as the purpose and length of their stay in Hungary, foreign nationals may need a specific visa or residence permit to enter the country. However, some foreign nationals do not need a visa or residence permit.
Key Government Agencies
If the foreign national must obtain a visa, the application must be processed in accordance with the Visa Code adopted by the European Parliament and the Council in July 2009 (Visa Code). This regulation aims to unify all European legislation on visa matters into one document, therefore, increasing transparency, enhancing the rule of law and the equal treatment of visa applicants, and harmonizing the rules and practices of Schengen countries where common visa policy is applicable.
Pursuant to the Visa Code, the visa application must generally be submitted at the Hungarian embassy (Nagykovetseg) or consulate (Konzulatus) where the foreign national resides abroad. The visa application can also be processed by various forms of cooperation among Member States, such as limited representation, co-location, common application centers, recourse to honorary consuls, and cooperation with external service providers.
The application for a residence permit is forwarded to the regional office of the National Directorate-General for Aliens Policing (Orszagos Idegenrendeszeti Foigazgatosag), which is authorized to issue such permits in Hungary.
The issuance of a visa or residence permit is only a preliminary requirement for entry and does not ensure automatic entry for foreign nationals. At the Hungarian border, foreign nationals must prove that they meet the specific requirements set out in the 2016/399/EU (i.e., they hold a valid passport and visa, can justify the purpose of their stay, the cost of their living in Hungary is covered by sufficient financial resources, no alert has been issued in the Schengen Information System (SIS) for the purposes of refusing entry for them and they are not considered to be a threat to public policy, internal security, public health or the international relations of Hungary).
If the purpose of a foreign national’s entry into Hungary is to work, a work permit or joint work and residence permit (joint permit) is required provided that the performance of such activities is not exempted from work permit requirements. Usually, no work permit is required if the foreign national is an executive officer or a member of the supervisory board of a Hungarian company operating with foreign participation.
Foreign nationals from a privileged or semi-privileged country (for which the European community has abolished or simplified the visa requirement) may enter Hungary without a visa and submit the application for a residence permit/joint permit directly to the regional office of the National Directorate-General for Alien Policing. Notwithstanding this, the foreign national cannot work until a work permit/joint permit has been issued.
Foreign nationals from non-privileged countries must obtain a visa for a short-term stay in Hungary. These are generally issued within 15 calendar days but may take up to 30 days if the application is scrutinized or a diplomatic delegation processes the visa application and consults certain authorities of Hungary. In exceptional situations where additional documentation is necessary, the period may be extended up to 60 days.
For long-term residence in Hungary, non-EEA nationals must obtain a residence permit/joint permit. There are various residence permits depending on the purpose of stay in Hungary (i.e., work, intra-group transfer, study, reunification, start business, training). Applicants can easily choose a category that accommodates their stay in Hungary. Additionally, the applicable laws also contain specific provisions for foreign nationals intending to work seasonally or whose residence is related to the care or study of the Hungarian language, culture, or family relations (except in the case of family reunification).
Currently, foreign nationals seconded within the same group of undertakings can only obtain a residence permit in Hungary are an executive, expert, or trainee. If seconded employees are not employed in any of the above positions, or if the secondment is not intra-group, they must have a local employment contract with the Hungarian receiving entity in order to be issued work and residence permits
As of January 1, 2019, family members of EEA nationals (who are not themselves EEA nationals) must obtain a residence permit to reside within Hungary. They also must have a work permit if they want to work in Hungary. Prior to January 1, 2019, they enjoyed the same rights as EEA citizens.
Summary procedures are available for certain limited immigration procedures. However, if the background facts and documents for an application are clear and the administrative deadline is less than two months (60 days), the immigration bureau will decide whether to grant the permit within eight days which can accelerate certain residence permit procedures.
In line with Council Directive 2009/50/EC of May 25, 2009, regarding conditions of entry and residence of foreign nationals for the purposes of highly qualified employment, the National Directorate-General for Aliens Policing issues EU Blue Cards for foreign nationals to work and reside within Hungary, especially those that are highly skilled.
As of January 1, 2019, residence permit applications can be submitted electronically unless the application is filed with the Hungarian embassy or consulate abroad.
From January 1, 2023, Act II of 2007 on the entry and residence of third-country nationals and Act I of 2007 on persons with the right of free movement and residence will be amended. According to the amendment, applications for the issue or renewal of national and EC permanent residence permits, applications for the renewal of residence permits, registration certificates, residence cards for family members of EEA nationals, and applications for permanent residence cards can only be submitted electronically, after electronic registration via the electronic platform called Enter Hungary.
In addition to the above, in the case of a change of residence of third-country national and other application procedures, if the third-country national’s proxy is a legal representative or a legal person, the application can only be submitted via the Enter Hungary platform.
The European Travel Information and Authorization System (ETIAS) is also expected to be operational from November 2023. ETIAS will be an electronic system that allows and keeps track of non-EEA citizens who do not need a visa to enter the Schengen Zone. Visa-free non-EEA citizens will need to make a registration electronically by filling out a form, uploading their passports, and paying a fee before they can travel to the Schengen Zone.
1.4. Home office
Teleworking employees perform their job duties at a place other than the employer’s office. In the employment contract, the parties shall agree that the employee performs their job duties by means of teleworking.
Employers cannot unilaterally order teleworking but are obligated to inform the employees if teleworking is an available form of employment for them. Except during the first six months of employment, employees may request the amendment of their employment contract to teleworking on the basis of the aforementioned information. Except during the first six months of employment, employees may also request the change of their form of employment to teleworking up to the age of eight of their child.
Employees shall give reasons for their above requests in writing and also indicate the planned date of the change. At the employee’s request, the employer shall provide a written statement for the employee’s request of change to teleworking within fifteen days. If the employers refuse the employees’ request for change in their statement, they are obligated to give the reasoning for the refusal. In the event of an unlawful refusal or failure to provide a statement, the court shall replace the employer’s statement of consent.
In the absence of an agreement to the contrary in a teleworking employment relationship:
- the employer’s right of instruction is limited solely to the definition of duties to be discharged by the employee, including specifying the technique and work processes to be used by the employee, unless otherwise agreed;
- the employer exercises the right of supervision remotely, via computing equipment;
- the employee can only perform work from the employer’s facilities in no more than one-third of all working days in a given year;
- the employee is entitled to enter the employer’s premises and to communicate with other employees.
If the employer exercises the right of supervision at the place of teleworking, the inspection may not bring unreasonable hardship on the employee or on any other person who is also using the property designated as the place of teleworking. The employer is obligated to provide all information to persons employed in teleworking as is provided to other employees.
Subject to an agreement with the employer, work equipment for teleworking may be provided by the employee as well. As regards such work equipment, the employer shall conduct a risk assessment in order to ascertain that the work equipment is in a safe state from the perspective of occupational safety and health. To that end, the responsibility to ensure that the work equipment is in a safe state at all times from the perspective of occupational safety and health lies with the employee.
If teleworking is carried out by means of computer equipment, the employer must inform the employee in writing of the rules on safe working conditions. In such cases, the employee may choose the place of work in such a way that the working conditions set out in the information are met. The employer can also monitor compliance with the health and safety rules remotely using a computerized device unless otherwise agreed with the employee.
In case teleworking is carried out using non-computerized means, the place of teleworking may only be a place that has been previously certified by the employer as suitable for safe and healthy work. In this case, the parties must agree in writing on the place of teleworking. The employee may not change the working conditions at the place of work without the employer’s consent. The employer or its representative is obligated to routinely inspect work conditions at the place of teleworking and ensure that they conform with requirements and that the employees have knowledge of and observe the provisions pertaining to them. Apart from the aforementioned inspection, the employer or its representative is entitled to gain admission to and remain on the property where teleworking is performed for the purpose of risk assessment, the investigation of accidents, and checking working conditions. The workers’ representative for occupational safety may enter the property where teleworking is performed upon the employee’s consent.
According to the Labor Code, the employer is obliged to reimburse the employee for expenses reasonably incurred in the performance of the employment relationship (i.e., internet usage, rental fees, heating, and energy costs. This reimbursement can happen through itemized billing or with flat-rate reimbursement. In the case of itemized billing, the employee must justify the costs incurred with invoices. In the case of flat-rate reimbursement, the monthly amount of reimbursement can be up to a maximum of 10 percent of the monthly minimum wage on the first day of the tax year (23,000 HUF/per month in 2023).
2. Contract Modification
The Labor Code states that employment contracts may be amended only by the mutual consent of the parties. The provisions on the conclusion of employment contracts shall be duly applied for the amendment thereof.
The parties are free to decide on the amendment of the employment contract, neither the employer nor the employee can oblige the other party to do so. The amendment of the employment contract must include the clear and unambiguous expression of the parties’ mutual understanding and intention to modify the contract. This must be proved by the party who invokes the fact of the amendment (i.e., during a labor law dispute). The amendment of the employment contract must not be made by deceiving the employee or by abuse of rights.
An employer cannot terminate an employee’s employment relationship on the grounds that the employee has not accepted the employer’s offer to amend the employment contract.
Formalities of amending the employment contract
As mentioned in Section 1.1., the Labor Code states that the provision on the conclusion of the employment contract must be applied for the amendment as well. Employment contracts must be concluded in writing, but an employment contract not concluded in writing can be cited as invalid only by the employee and only within a period of 30 days from the commencement of work.
As it was also mentioned in Section 1.1, the employment contract shall be regarded to have been concluded in writing if it includes the names of the parties and the details relevant to the performance of the contract and has been signed by the parties. A legal statement (such as the employment contract) is also deemed to have been made in writing if executed by means of an electronic document with facilities for retrieving the information contained in the legal statement unaltered, and for identifying the person making the legal statement and the time when it was made (electronic document).
As a consequence of the above, if an offer to amend the employment contract is made through e-mail and the e-mail correspondence includes the employer’s and the employee’s clear, unambiguous, and mutual intent to amend the employment contract, then it is possible to amend the employment contract this way. This is, however, subject to the condition that the e-mail correspondence fully complies with the three requirements of the electronic document (unalterable traceability, identifiability of the parties, and of the date of the declaration).
In addition to the above, as an employment contract not concluded in writing can be cited as invalid only by the employee, it is technically also possible to amend the employment contract verbally if it is not challenged by the employee, but this form of modification is considered unusual and not advisable.
Temporary changes to the employee’s tasks
Under Hungarian labor law, employers are entitled to temporarily reassign their employees to jobs and workplaces other than what is contained in the employment contracts, or to another employer. This does not require an amendment to the employment contract.
The reassignment cannot exceed a total of 44 working days or 352 scheduled hours during a calendar year. This proportionately applies if the employment relationship commenced during the year if it was entered into for a fixed term or in the case of irregular daily working time and part-time work.
The employee affected must be informed of the expected duration of work in derogation from the employment contract. There are also situations when the employee cannot be reassigned (i.e., from the time her pregnancy is diagnosed until her child reaches three years of age).
Permanent changes in the employee’s tasks
Whether the permanent changes in the employee’s tasks require an amendment to the employment contract is based on multiple factors.
The first thing to consider is where the tasks to be performed are indicated. If they are included and detailed in the employment contract itself, they are forming part of the contract and because of this modifying them also means modifying the employment contract, which needs the mutual consent of the parties.
If only the name of the position is included in the employment contract, but the tasks to be performed are indicated in a separate job description, then the job description and the tasks as well can be unilaterally modified to a certain extent. Tasks can be removed and new tasks can be added to the job description, but with the limit that the new task(s) must connect to the position, cannot be in conflict with the nature of the position.
For example, if the employee’s position is secretary, then their job description cannot be amended to include the task of cleaning the office building, because cleaning is not connected to the normal tasks of a secretary.
Employer policies/internal regulations
The employers’ policies and internal regulations are considered unilateral statements of the employer. The judicial practice generally differentiates between those policies and internal regulations which contain statements of the employer on the management of the work (for example, mandatory specifications for the performance of a work process) or other statements (i.e., information) and orders of the employer, and those policies containing the employer’s unilateral commitment (i.e., bonus payment and vacation).
It is generally accepted that the former can be modified unilaterally by the employer (i.e., the orders of the employer), but as for the latter (especially for bonuses and other benefits) it has to be pointed out that the judicial practice is not uniform. The common practice among employers is that they stipulate in the policies and regulations that they are based solely on the employer’s discretion and provide only for the possibility that the employer may, from time to time and within its sole discretion, pay bonuses to the employees in addition to their salaries, furthermore also they retain the right to withdraw the bonus or modify the terms of the policy or regulation anytime.
3.1. Termination types
3.1.1. Main termination types in Hungary
In Hungary, employment may be terminated by a) mutual consent b) termination notice, or c) termination notice with immediate effect.
The reasons for the termination shall be indicated clearly in the termination notice. The reality and reasonability of the reasoning indicated in the termination notice shall be proved by the party that issued the termination notice. It is a main rule in Hungary to provide real, reasonable, and clear reasoning when terminating employment by either party if it is not expressly excluded by the law (e.g., termination during the probation period).
Even if it is not required by the law, the employee may request the employer to provide reasoning for its termination notice, if the termination of the employment
a) was based on Section 55 (1) l) of the Labor Code;
b) was performed during the term of paternity leave;
c) was performed during the term of parental leave;
d) was performed during the term of unpaid childcare leave;
e) was performed due to the unsuccessful modification request of the employment agreement by the employee pursuant to Section 61(2)(4) of the Labor Code.
The reasoning may be requested by the employee within 15 days from the date when the employer communicated the termination notice to the employee. The employer shall provide the reasoning within 15 days from the receipt of the employee’s request.
3.1.2. Termination ground categories in Hungary
i) Termination by the employer
The employer may terminate their employment agreement based on the termination grounds specified in the Hungarian Labor Code. The ground of the termination by the employer may be a) the employee’s behavior in relation to the employment relationship, b) the employee’s ability to perform work, or c) the employer’s operation.
The employer may terminate the employment relationship without providing any reasons in the case a) the probation period has not expired yet or b) a definite term of employment.
If the employer terminates the employee’s definite term employment relationship, the employer shall pay an absentee fee in an amount of 12 months. If the term of the definite period is shorter than 12 months, the absentee fee due for the remaining time shall be paid to the employee.
ii) Termination by the employee
The employee is not obliged to provide reasons for their termination notice in case of an employment relationship is established for an indefinite period. The termination of a definite period employment relationship may be terminated by the employee only if it was justified by the employee. The reason given for termination may only be of such a nature as would render the maintaining of the employment relationship impossible or that would cause unreasonable hardship in light of their circumstances.
The employee shall not justify the termination of the employment if the termination notice was provided during the term of their probation period.
iii) Termination with immediate effect
An employer or employee may terminate an employment relationship without a notice period if the other party
a) willfully or by gross negligence commits a grave violation of any substantive obligations arising from the employment relationship; or
b) otherwise engages in conduct that would render the employment relationship impossible.
The right of termination without notice may be exercised within a period of 15 days of gaining knowledge of the grounds therefore, in any case within not more than one year of the occurrence of such grounds, or in the event of a criminal offense up to the statute of limitation for criminal liability. If the right of termination without notice is exercised by a body, the date of gaining knowledge shall be the date when the body, acting as the body exercising the employer’s rights, is informed regarding the grounds for termination without notice.
3.1.3. How easy it is to terminate an employment relationship?
Generally, we may argue that it is much easier for the employee to terminate their employment relationship than for the employer. Whilst the Labor Code makes it easier for the employee to terminate the employment relationship, there are several rules and case laws that must be taken into consideration by the employer before providing a termination notice to the employee.
3.1.4. Notice period
Once the employment relationship is terminated by either party, the 30-days notice period shall commence, if not otherwise agreed by the parties. The parties may extend the notice period up to six months.
If the employee was terminated by the employer, the notice period shall be prolonged with further:
a) five days after three years;
b) 15 days after five years;
c) 20 days after eight years;
d) 25 days after 10 years;
e) 30 days after 15 years;
f) 40 days after 18 years;
g) 60 days after 20 years.
The period of notice for the termination of a fixed-term employment relationship by termination notice may not go beyond the fixed term.
In case of termination with immediate effect, the provisions relative to the notice period shall not apply.
3.1.5. Severance pay
An employee shall be entitled to severance pay if their employment relationship is terminated a) by the employer, b) upon the dissolution of the employer without succession, or c) in case of a change of employer if the new employer does not operate under the provisions of the Labor Code.
Severance pay shall be the sum of the absentee pay due for:
a) one month, in the case of at least three years;
b) two months, in the case of at least five years;
c) three months, in the case of at least 10 years;
d) four months, in the case of at least 15 years;
e) five months, in the case of at least 20 years;
f) six months, in the case of at least 25 years
The amount of severance pay shall be increased by one to three months of absentee pay if the employment relationship is terminated as specified under B) inside the five-year period before the date when the employee reaches the age limit for old-age pension.
The employee shall not be entitled to receive severance pay if:
a) they are recognized as a pensioner at the time when the notice of dismissal is delivered or when the employer is terminated without succession, or
b) they are dismissed for reasons in connection with their behavior in relation to the employment relationship or on grounds other than health reasons.
In the event of dismissal, the employer shall excuse the employee concerned from work duty for at least half of the notice period. Any fraction of a day shall be applied as a full day. The exemption from work duty shall be allocated in not more than two parts, at the employee’s discretion.
For the period of being excused from their duties, the employee shall be entitled to absentee pay, except if he would not be eligible for any wages otherwise. The wages already paid out may not be reclaimed, if the employee was excused from their duties permanently and the circumstance precluding payment of wages occurred subsequent to having the employee excused from their duties.
The employee, upon termination (cessation) of employment, shall relinquish their position as ordered and settle accounts with the employer. Upon termination of the employment relationship by notice, the employee shall be paid their work wages and other emoluments from the last day of work, in any case on the fifth working day at the latest after the termination of the employment relationship, and shall be supplied the statements and certificates prescribed by employment regulations and other relevant legislation.
The employer shall issue a certificate proving the term of the paternity leave or parental leave in which the employer indicates the term of the paternity leave or parental leave provided by the former employer.
It is mandatory to include in the mutual termination the followings:
a) the parties’ unconditional, explicit, unambiguous, and real intention to terminate the employment relationship;
b) the parties’ agreement on material matters or matters which is considered to be material by any of the parties;
c) the date of the termination of the employment relationship.
The parties may include in the mutual termination any other agreement relative to the employment relationship (e.g., severance pay, termination period, etc.) if it is not prohibited by the law.
As a main rule, the employee may not conduct any activity which is against the employer’s economic interest if not otherwise provided by the law. However, this provision does not prohibit the employee to be employed by another employer if it does not harm the economic interest of the employer. Therefore, the employer may prohibit the employee’s employment at another employer if it is against its economic interest. With reference to the executive employees, they are not allowed to establish another employment relationship other than the employer.
The parties may agree that the employee will not establish another employment relationship following the termination of the employment with the employer (non-compete agreement). The non-compete agreement may be concluded either at the establishment or the termination of the employment relationship. The parties shall determine the term, which cannot be longer than two years, geographical area, and job covered by the non-compete agreement. The employer shall pay an agreed amount as consideration for the employee which cannot be lower than one third of the monthly base salary for the same period.
Non-compete considerations included in monthly salaries are not applicable under the Hungarian Labor Law, however, the employer may pay more salary to the employee in order to ensure that they do not change their job. However, paying a non-compete consideration during the employment relationship is not typical.
3.2. Collective dismissal
The collective dismissal is a set of procedural rules which establish information and consultation obligations against the employees by the employer in the event of dismissal of employees in a number set forth below.
Collective dismissal shall mean when an employer, based on the average statistical workforce for the preceding six-month period, intends to terminate the employment relationship:
a) of at least 10 employees, when employing more than 20 and less than 100 employees,
b) of 10% of the employees, when employing 100 or more, but less than 300 hundred employees,
c) of at least 30 employees, when employing 300 or more employees,
in accordance with the provisions of the Labor Code, within a period of 30 days, for reasons in connection with its operations.
The employer shall consult with the work council in the event it plans to execute a collective dismissal. The work council shall be informed by the employer eight days prior to the commencement date of the consultation regarding:
a) the reason for the collective dismissal;
b) the number of employees to be made redundant broken down by categories; or
c) the number of employees employed during the preceding six-month period;
d) the period over which the projected dismissals are to be affected, and the timetable for their implementation;
e) the criteria proposed for the selection of the employees to be made redundant;
f) the conditions for and the extent of benefits provided in connection with the termination of employment relationships, other than what is prescribed in employment regulations.
The employer’s obligation of consultation shall apply until the conclusion of an agreement, or failing this for a period of fifteen days after the beginning of negotiations.
In order to reach an agreement, the negotiations shall, at least, cover:
a) the possible ways and means of avoiding collective dismissals;
b) the principles of redundancies;
c) the means of mitigating the consequences; and
d) the reduction of the number of employees affected.
The employer shall notify the government employment agency of its intention regarding collective dismissals, and its details and aspects, and shall supply a copy thereof to the works council.
The employer shall notify in writing the employees affected of its decision regarding collective dismissals at least thirty days prior to delivering the notice of dismissal or the dismissal without notice. The notice of dismissal or the dismissal without notice may be delivered after thirty days following the time of notification.
3.3. Unlawful termination
3.3.1. Consequences of unlawful termination by the employer
In the event of unlawful termination by the employer, the employer shall pay compensation for damages that occurred in connection with the termination of the employment relationship.
On the basis of unlawful termination, the employee may demand the employer to pay the employee’s salary as lost income in an amount not more than 12 months base salary. When calculating the amount of lost income, any income shall be deducted that the employee has earned or could reasonably have earned in the given situation, and any severance payment paid at the termination of the employment. The basis of the lost income is the employee’s absence fee.
Severance pay must be made by the employer if a) the employee’s employment relationship was wrongfully terminated by means other than termination notice or b) the employee did not receive any severance pay pursuant to Paragraph b) of Subsection (5) of Section 77 of the Labor Code at the time their employment relationship was terminated.
At the request of the employee, the court may reestablish the employment relationship of the employee if
a) the employment relationship was terminated in violation of the principle of equal treatment;
b) the employment relationship was terminated in violation of the prohibition of abuse of rights;
c) the employment relationship was terminated in violation of the prohibition of the termination of the employment relationship;
d) the employment relationship of an employee holding an elected trade union position was terminated in violation of the consultation obligation with the trade union;
e) if the employee served as an employee’s representative at the time their employment relationship was terminated;
f) if the employee successfully challenged the termination of the employment relationship by mutual consent or their own legal statement therefor.
The period between the termination and the re-establishment of the employment relationship shall be deemed as time spent in employment.
3.3.2. Consequences of unlawful termination by the employee
The employee, if having terminated their employment relationship unlawfully, shall be liable to pay compensation in the sum of absentee pay due for the notice period when the employment relationship is terminated by the employee.
The employee, if having terminated their fixed-term employment relationship unlawfully, shall be liable to pay compensation in the sum of absentee pay due for the time remaining from the fixed period, up to three months of absentee pay at most.
Employers shall be entitled to demand payment for damages if such are in excess of the amount described above. However, these sums in total may not exceed the employee’s absentee pay due for twelve months.
The reference income comprises of:
a) the unpaid salary; and
b) the regular allowance to which the employee is entitled based on its employment relationship provided that it was regularly received prior to the damage occurring.
Generally, damages granted by the court or agreed upon by the parties are paid without the deduction of personal income tax or any other contributions.
However, if the damages are granted to the employee to supplement the employee’s income, personal income tax shall be deducted by the employer before paying it.
In case of lost income, all contributions shall be deducted and paid from the amount of damages.
The dismissal may be revoked unilaterally until it arrives to the addressee (e.g., when it was sent by post and it was not delivered yet). Once the addressee received the dismissal, it may be revoked only with the addressee’s consent.
3.3.3. Restriction of Termination
Pursuant to the Labor Code there are two categories of restrictions of termination: A) Prohibition of termination and B) Restriction of termination
A) Prohibition of termination
In case of prohibition of termination, the employer may not provide the employee a termination notice due to reasons based on the employee’s legitimate personal interest. Pursuant to the Labor Code, the employer may not terminate the employment relationship:
(a) in case of the employee’s pregnancy;
(b) during the term of maternity leave;
(c) during the term of paternity leave;
(d) during the term of parental leave;
(e) during the term of leave of absence taken without pay for caring for a child;
(f) during the term of any period of actual voluntary reserve military service; and
(g) in the case of women, while receiving treatment related to a human reproduction procedure, for up to six months from the beginning of such treatment.
We may consider the regulation of collective dismissal as a means of prohibition of termination. Namely, the employer may not provide a termination notice or, in case of an employment relationship established for a definite period, termination notice with immediate effect to the employee for 30 days from the date of making a decision regarding collective dismissal.
In the case of executive employees, paternity leave is the only one which does not protect them against the employer’s termination notice
In the event of A), the employer may not legally terminate the employment relationship at all.
B) Restriction of termination
There are three main types of restrictions of termination in the Labor Code: a) when the employment relationship may be terminated only if further conditions are met, b) third party’s approval is necessary for the termination, or c) the notice period is delayed until an exact event.
a) The Labor Code also establishes circumstances in which case the termination may be permitted by the law, however, the employer may refer to only specific grounds for termination set forth in the Labor Code as follows.
(i) The employer shall be permitted to terminate the employment relationship of employees, other than pensioners, concluded for an indefinite duration inside the five-year period before the date when the employee reaches the age limit for old-age pension on the grounds of the employees’ behavior in relation to the employment relationship only for the following reasons:
(a) the employee willfully or by gross negligence commits a material violation of any substantive obligations arising from the employment relationship;
(b) the employee otherwise engages in conduct that would make the maintenance of the employment relationship impossible.
(ii) The employment relationship of the employees referred to in (i) hereof may be terminated in connection with the employees’ ability or for reasons in connection with the employer’s operations if the employer has no vacant position available at the workplace suitable for the employee affected in terms of skills, education, experience required for their previous job, or if the employee refuses the offer made for their employment in that job.
(iii) Where the employment relationship of a mother or a single father is terminated by notice provisions set forth in (i) and (ii) shall apply until the child reaches the age of three, if the employee is not taking up maternity leave or leave of absence without pay for the purpose of caring for the child.
(iv) The employer may terminate by notice the employment relationship of an employee who is receiving rehabilitation treatment or rehabilitation benefits due to the employee’s capacity related to medical reasons only if the employee can no longer be employed in their original position and no other job is available that is considered appropriate for their medical condition, or if the employee refuses to accept a job offered by the employer without good reason.
The employment relationship of employees described above may be terminated only if the conditions set forth in (i)-(iv) are met.
b) If a work council is established at the employer and there is an elected chairman of the work council or an employee holding a trade union position, these employees’ employment relationship may be terminated only with the prior approval of the work council or trade union.
c) Where employment is terminated by the employer, the notice period shall begin at the earliest on the day after the expiry of the following periods:
(i) duration of incapacity to work due to illness, not to exceed one year following the expiration of the sick leave period;
(ii) absence from work for the purpose of caring for a sick child;
(iii) leave of absence without pay for providing home care for a close relative.
The restrictions established above do not restrict the termination of employment by the employee or with mutual consent in general.
Once a warning was provided for misconduct, it may not serve as a basis for termination.
4. Wage And Hour
Under Hungarian labor, law employees are entitled to a salary. As a general rule, unless otherwise agreed by the parties or stipulated in labor regulations, the salary must be paid, at the latest, by the 10th day of the month following the relevant month.
In 2023 the minimum statutory gross salary for a full-time employee is HUF 232,000 per month. Employees employed in a position requiring medium-level education or technical qualification are entitled to receive a monthly salary of at least HUF 296,400. In the future, the government may establish different statutory minimum wages for certain groups of employees and certain geographical areas.
With the exception of work performed abroad or unless otherwise prohibited by the relevant legislation, salary shall be established and paid in forints. The employment contracts of the executive employees can derogate from this.
Fixed (time-related) salary
The employee may receive a fixed salary (e.g., monthly or weekly), which is not related to either their or the company’s performance.
The salary of an employee may also be linked to their performance. In this case, the performance requirements and factors for calculating the performance-related salary (Requirements and Factors) must be established.
The Requirements and Factors must be established in advance in a procedure that takes into account objective criteria and assesses whether the Requirements and Factors are achievable. When establishing the Requirements and Factors, conditions such as work organization and applied technology at the employer have to be considered.
Before establishing or amending the Requirements and Factors applying generally to employees, the employer must request the opinion of any relevant works council.
If an employee receives a performance-related salary, a guaranteed salary must be defined and paid, which must be at least half of the base salary of the employee.
The determination of whether a performance requirement is achieved must be objective and may not merely depend on the employer’s determination, at its discretion, as to such achievement.
Combination of fixed and performance-related salary
An employee’s salary may also be defined as a combination of fixed and performance-related salaries, as described above.
In exceptional cases, the employee may be required to perform extraordinary work. Extraordinary work is work beyond the normal scheduled working hours, or beyond the working hours that can be scheduled in a reference period; work performed on weekly days off and on public holidays; and work on stand-by at defined places for a specific period of time. Employees are entitled to wage supplements if they perform extraordinary work, these wages supplements must be paid in addition to the base salary.
In addition to regular wages, employees are entitled to a 50% wage supplement for extraordinary work performed on normal working days. However, in consideration for extraordinary work performed on normal working days, the employer may decide to grant additional days off work to the employee instead of a wage supplement if the employment contract allows, or the employee consents, or if it is compulsory according to the applicable regulations on the employment relationship. In consideration for working on the employee’s weekly days off, employees are entitled to a 100% wage supplement for extraordinary work for each additional day worked, or if the employee receives additional days off, they are also entitled to a minimum supplement of 50% on their salary.
Instead of paying the applicable supplement after each and every hour of overtime, a lump sum compensation may be agreed upon by the employee and the employer, which is payable to the employee irrespective of the actual amount of extraordinary work. Said lump sum compensation must be indicated separately from the base salary. In the case of paying to an employee a lump-sum compensation for extraordinary work, the limitations on the maximum amount of extraordinary work must still be complied with.
The employer may grant an employee a bonus (premium) in addition to their salary. Usually, a bonus is granted in addition to a fixed salary. The granting of a bonus is normally at the employer’s sole discretion and may not be claimed by the employee, provided that the parties so agreed and the employer reserved the right to do so. However, if a bonus is promised in advance to an employee upon completing a specific task, such a bonus can be claimed by the employee.
The terms and conditions of the bonus may be included in the employment contract or a separate bonus policy. If the employer prefers to have a bonus system based solely on its discretion, the respective governing document should provide only for the possibility that the employer may, from time to time and within its sole discretion, pay bonuses to the employees in addition to their salaries and should retain the right to withdraw the bonus or modify the terms thereof (as mentioned above, the judicial practice is not uniform regarding the unilateral modification of the policy).
4.2. Working time
The general statutory limitation on the length of a normal working day is eight hours per day. However, the employer and the employee may agree on a shorter length of daily and weekly working time.
If the employee is required to carry out stand-by duties or is a close relative of the employer, the employer and the employee may agree on longer working hours not exceeding 12 hours per day or 60 hours per week.
Work Schedule (work pattern)
As a general rule, the rules relating to work schedules (work patterns) shall be laid down by the employer, but the employer may permit – in writing – the employee to schedule their working time in the interest of an autonomous work organization (flexible working arrangement).
Employers shall ensure that the work schedule of employees is drawn up in accordance with occupational safety and health requirements and in consideration of the nature of the work. The employer shall communicate the work schedule for at least one week in writing, at least 168 hours in advance before the start of the scheduled daily working time. In the absence of such communication, the last work schedule shall remain in effect.
If the employer schedules working for five days a week, from Monday through Friday, that is considered as the regular work pattern. Where working time is defined within the context of working time banking or payroll period arrangement, working time may be scheduled irregularly.
The work schedule shall be considered irregular if the employer schedules:
- the working time in derogation from the daily working time;
- the weekly rest day or period in derogation from the provisions of the Labor Code.
Working time banking
The employer may define the working time of an employee in terms of the “banking” of working time as well. When working time is defined within the framework of working time banking, the beginning and ending date shall be specified in writing and made public by the employer.
If working time banking is applied, the maximum working hours (without overtime) within the banking period shall be calculated on the basis of the standard daily working time (eight hours) and standard work patterns (five working days a week). Public holidays falling on working days according to the standard work patterns as well as the duration of absence (for example due to training provided by the employer, compulsory health check, breastfeeding, etc.) should not be taken into account.
As regards the actual working time arrangement within the banking period, the employer should ensure that daily working time is not shorter than four hours, and not longer than 12 hours, including overtime.
The maximum duration of working time banking is four months/16 weeks. The maximum duration of working time banking is six months/26 weeks in the case of employees:
- working in continuous shifts;
- working in shifts;
- employed for seasonal work;
- working in stand-by jobs; and
- in special jobs in aviation, road transport, carriers, and traffic control or harbors.
The maximum duration of working time banking if justified by technical reasons or reasons related to work organization and if there is a collective agreement in place is 36 months.
Should the daily working time or the duration of the overtime work exceed 6 hours, the employee is entitled to at least 20 minutes of rest. In addition to this, the employee is entitled to at least 25 minutes of continuous break after 9 hours of work. This can be increased to up to 60 minutes if the parties agree or this is stipulated in the collective bargaining agreement.
The employees must be allowed at least 11 hours of rest between the end of the daily work and the commencement of daily work on the next day. However, if the employee:
- is employed in a position where the working time is split up over the day;
- works for an employer that operates in continuous operation or applies a multiple shift operation; or
- is employed in seasonal work,
they are entitled to have at least eight hours of rest. Although a collective bargaining agreement or the agreement of the parties may depart from the above rule, a minimum of eight hours of rest must be provided to the employee.
Weekly days off
The employee is entitled to two days off weekly or 48 hours’ uninterrupted rest period (weekly rest period). As a general rule, at least one weekly day off per month must fall on a Sunday.
Generally, normal work may not be scheduled on Sundays. However, there are statutory exceptions to the Sunday work prohibition, i.e., in the case of employees employed:
- at an employer normally operating on Sundays due to the nature of its business;
- in seasonal work;
- in multiple shifts;
- in continuous operation;
- in an on-call position; and
- in part-time only on Saturday and Sunday.
In addition to the above, working on Sundays may also be allowed if the work of the employee is related to services performed by the employer overseas, the employee works overseas, or the employer performs public services or services overseas.
Where the work schedule is determined on the basis of irregular work pattern, instead of permitting twi weekly rest days, the employer may permit 40 hours of uninterrupted weekly rest, which should include one full calendar day each week and at least one Sunday each month, in which case the employer must also ensure that the employee receives at least 48 hours of weekly rest calculated over the reference period.
Overtime (extraordinary work)
As mentioned in Section 4.1. – Wage supplements, extraordinary work is work beyond the normal scheduled working hours, or beyond the working hours that can be scheduled in a reference period; work performed on weekly days off and on public holidays; and work on stand-by at defined places for a specific period of time.
Even if the employer orders the employee to perform extraordinary work, the working time cannot exceed 12 hours per day and 48 hours a week. The employer may order up to 250 hours of extraordinary work unilaterally per annum (in case of a collective bargaining agreement it can be 300 hours), but the employer and the employee may agree in writing that an additional 150 hours of extraordinary working time can be ordered by the employer (voluntary extraordinary working time). If the collective bargaining agreement allows 300 hours of extraordinary working time, the maximum amount of voluntary extraordinary working time maybe 100 hours.
The law strictly defines when extraordinary work may be ordered. Employees may be required to do extraordinary work only under justified and unexpected extraordinary circumstances. Extraordinary work on public holidays can be ordered only if the employee can typically be required to work on such day, or in the interest of preventing or mitigating any imminent accident, natural disaster, serious damage, or danger to life, health, or physical integrity.
Extraordinary work cannot be ordered if it imposes any danger to the physical integrity or health of the employee, or if it causes any unreasonable hardship to the employee in respect of their personal, family, or other circumstances.
Extraordinary work cannot be required:
- from the time the employee’s pregnancy is diagnosed until her child reaches three years of age;
- in the case of a single parent until the child reaches three years of age;
- for any employee who works under conditions that may be harmful to their health as defined by the relevant employment regulations.
Annual leave (vacation)
Annual leave consists of base vacation, additional vacation, and public holidays. An employee is entitled to 20 days’ base vacation per year. Employees are entitled to extra vacation time from one to 10 days depending on the age of the employee (age 25 – one day, age 45 – 10 days) according to the Labor Code. Parents will receive supplementary leave depending on the number of children below the age of 16 (one child – two days, two children – four days, three children – seven days).
Fathers are entitled to 10 working days of leave (paternity leave), to be granted to them at the latest by the end of the second month following the birth of their child or, in the case of adoption, the finalization of the decision authorizing the adoption, in no more than two installments at the time requested by them. Fathers are also entitled to paternity leave if the child is stillborn or dies.
Mothers are entitled to 24 consecutive weeks of maternity leave, of which two weeks must be taken. In the absence of an agreement to the contrary, maternity leave shall be allocated to allow that not more than four weeks fall before the expected time of birth. The duration of maternity leave, except where entitlement is specifically connected to work, shall be recognized as time spent at work. Maternity leave is also provided to a parent who provides care for a child under a court decision or resolution of the guardian authority capable of enforcement on account of the mother’s health condition or death.
Parents are also entitled to 44 workdays of leave until their child reaches the age of three. To be eligible for parental leave, the employee must have been employed for at least one year at the same employer.
Allocation of vacation days
The general rule is that vacation time must be allocated in the year in which they are due, except the paternity and parental leave. Vacation time shall be allocated by the employer upon hearing from the employee. With the exception of the first three months of the employment relationship, employers shall allocate seven working days of vacation time in a given year in not more than two installments, at the time requested by the employee.
Unless otherwise agreed, vacation must be allocated to contain at least fourteen consecutive days once in a calendar year, where the employee is exempted from the requirement of availability and work duty. To this end, in addition to the vacation days allocated, the weekly rest day (weekly rest period), the public holiday, and any day off under an irregular work schedule must be taken into consideration. The employer is obliged to inform the employee concerning the scheduled vacation days 15 days in advance.
If the employee falls ill or if there is another personal and unavoidable reason for the employee, the vacation may be taken later, in which case the vacation must be taken within 60 days of the termination of the cause for the delayed vacation. If the employment started on or after October 1, the annual leave can be allocated until 31 March of the following year.
In the event of economic reasons of particular importance or any direct and consequential reason arising in connection with its operations, the employer:
- may postpone the granting of leave, except for paternity leave, for a maximum of 60 days;
- may recall the employee from vacation;
- may allocate one-fourth of the employee’s vacation time by March 31 of the following year if so stipulated in the collective agreement.
Upon termination of the employment relationship, the employee shall be compensated for the untaken vacation which is due (with the exception of paternity and parental leave). With the exception of the aforementioned, vacation time shall not be financially compensated.
Employees shall be entitled to 15 working days of sick leave per calendar year for the duration of time during which the employee is incapacitated to work. In respect of employment relationships beginning during the year, employees shall be entitled to sick leave as commensurate for the remaining part of the year.
Employees will be paid 70% of the so-called absentee fee (to be calculated on the basis of the base salary and the performance-based compensation and wage supplements received in the last six months) for the duration of sick leave. For a period of sick leave exceeding 15 days, employees are entitled to receive support from the social security authorities. The maximum period of sick leave is one year under the current social insurance system. Employees are required to submit a doctor’s certificate for the time of their illness.
5. Collective Labor Law
5.1. Trade unions
According to the Labor Code trade union shall mean:
- all organizations of employees whose primary function is the enhancement and protection of employees’ interests related to their employment relationship; and
- local trade union branch represented by the employer which means a trade union that, according to its statutes, operates an organization authorized for representation or has an office at the employer (local trade unions).
The rights afforded by the Labor Code to trade unions are, with the exception of the local bargaining agreements, due only to the local trade unions. Representation at the employer is the key requirement for trade unions to be able to exercise their rights provided by labor law. If a trade union does not have a local branch and thus has no representation at a certain employer, then generally it cannot exercise its rights.
Formation of trade unions
The formation of trade unions is regulated in Act CLXXV of 2011 on the Freedom of Association, on Public-Benefit Status, and on the Activities of and Support for Civil Society Organizations and in the Civil Code.
Under the above regulations, trade unions are considered associations and the rules on establishing associations are also applicable to forming trade unions. An association, and thus a trade union, shall be considered established upon the adoption of its statutes, for which the unanimous declaration of intent of at least 10 persons is required.
As trade unions are also considered legal persons it is obligatory for them to be registered to the public register by the competent court. The application for registration must be submitted to the court electronically, which the court will examine within 15 days of its receipt. After the registration, the trade unions’ details are available in a nationally standardized electronic public register, accessible free of charge to anyone.
Rights of the trade unions
- Trade unions have the right to provide information to employees relating to industrial relations or employment relationships.
- Employers – upon consulting the trade union – shall provide the means for the trade union to display information connected to its activities at the employer.
- Trade unions may request information from employers on all issues related to the economic interests and social welfare of employees in connection with their employment.
- Trade unions are entitled to express their position and opinion to the employer concerning any employer actions (decisions), or the draft of such decisions, and to initiate talks in connection with such actions.
- Trade unions have the right to represent their members before the employers or their interest groups concerning the employees’ rights and obligations relating to their financial, social, as well as living and working conditions.
- Trade unions are entitled to represent their members – under their authorization – before the court, the relevant authority, and other organs with a view to protecting their economic interests and social welfare.
- Trade unions have the right to use the employer’s premises after or during working hours, as agreed with the employer, for the purposes of interest representation activities.
- Trade unions are entitled to conclude collective bargaining agreements in accordance with the regulations set out in the Labor Code.
Protection of union officials
Trade unions are entitled to designate officials to the employer from among the union officials employed at a fixed establishment (see below at works council) of the employer that is considered independent if the average statistical number of employees – on the first day of the calendar year – employed during the previous calendar year is at least 500. Based on the number of employees the number of designated officials can be up to five.
These union officials are protected in a way, that the prior consent of the higher-ranking trade union body (specified in the statute of the trade union) is required for terminating their employment relationship by notice or reassigning them. The same protection is applicable to one other union official designated by the supreme body of the local trade union branch (also specified in the statute) represented at the employer.
Trade union officials are entitled to the above protection for the duration of their term in office and for a period of six months thereafter, provided that the officials held the office for at least 12 months.
Collective bargaining agreements
A trade union is entitled to conclude a collective bargaining agreement if its membership of employees at the employer reaches 10%:
- of all employees employed by the employer;
- of the number of employees covered by the collective agreement concluded by the employers’ interest group.
- The effect of a collective bargaining agreement shall apply to any employer who:
- is a party to the collective agreement; or
- is a member of the employers’ interest group that concluded the collective agreement.
The effect of the provisions of the collective bargaining agreement governing the means of communication of the parties is applicable to the undersigning parties of the collective agreement, but the effect of the provisions governing the employment relationships is applicable to all employees employed by the employer.
The collective bargaining agreement must be concluded in writing and enters into effect when published.
The scope of collective bargaining agreements may cover:
- the rights and obligations arising out of or in connection with employment relationships;
- the conduct of the parties relating to the conclusion, implementation, and termination of the collective agreement, and concerning the exercise of their rights and obligations.
In the absence of any provision to the contrary, in the collective bargaining agreement, derogations are allowed from the provisions of Part Two and Part Three of the Labor Code (Part Two covers the employment relationship, Part Three the industrial relations) either to the advantage or the disadvantage of the employees.
An employment contract may derogate from a collective bargaining agreement only for the benefit of the employee. If the content of the employment contract is affected by the collective bargaining agreement, the employer is obliged to amend the employment contract. The repeal of the benefits and advantages provided for in the collective bargaining agreement does not affect the benefits and discounts provided for in the employment contract.
5.2. Works councils
According to the Labor Code, the rights of the employees shall be represented by the shop steward or the works council (works council).
A shop steward or a works council must be elected if, during the half-year prior to the date when the election committee was established, the average number of employees at the employer or at the employer’s independent establishment or division (fixed establishment), is higher than 15 or 50, respectively. A fixed establishment of the employer shall be considered independent if the head of the establishment is vested with competence in respect of the works council’s rights of participation. The number of works council members is between three and 13 based on the number of employees.
The rules applicable to electing a works council are specifically detailed in the Labor Code. Works councils are elected for terms of five years. The justified expenses incurred in connection with the election and operation of the works council are borne by the employer.
Most important rights of works councils
- Works councils monitor compliance with the provisions of employment regulations.
- To the extent required for their responsibilities, works councils are entitled to request information and to initiate negotiations, with the reason indicated, which the employer may not refuse.
- The employer is obligated to notify the works council semi-annually regarding:
a) the issues affecting the employer’s economic standing;
b) changes in wages, liquidity related to the payment of wages, the characteristic features of employment, utilization of working time, and the characteristics of working conditions;
c) the number of employees in employment and the description of the jobs they perform.
- The works councils inform the employees concerning their activities semi-annually.
- The employer and the works council collectively decide concerning the appropriation of welfare funds.
- Employers are required to consult the works councils prior to passing a decision in respect of any plans for actions and adopting regulations affecting a largenumber of employees.
- In the case of transfer of employment upon the transfer of enterprise the transferring and the receiving employer are obligated to inform the works council, within fifteen days before the effective date of transfer, concerning:
a) the schedule or proposed date of transfer;
b) the reasons;
c) the legal, economic, and social consequences affecting the employees.
At the time referred to above, the transferring and the receiving employer must – with a view to the conclusion of an agreement – enter into negotiations with the works council concerning other proposed actions affecting employees.
The employer and the works council may conclude a works agreement for the implementation of the provisions of the Labor Code and for promoting their cooperation.
The works agreement may be concluded for a fixed term, extending up to the term of the works council’s mandate. The works agreement may be canceled by way of a three-month notice. The works agreement shall be terminated when the works council ceases to exist.
If the employer is not covered by a collective bargaining agreement that has been concluded by it, or there is no trade union at the employer entitled to conclude a collective agreement, the works agreement concluded by the works council and the employer may regulate the rights or obligations arising from or in connection with the employment relationship, with the exception of matters relating to the remuneration of work. The collective agreement is subject to the above rules referred to at the collective bargaining agreements.
6. Transfer Of Undertakings
Pursuant to the provisions of the Hungarian Labor Code, as amended, which implements the European Community’s Acquired Rights Directive, the employees shall be transferred to the acquiring employer in the event of a transfer of enterprise provided that all conditions set out in the Labor Code are met.
Therefore, it is not the right or entitlement of the employee to have transferred to the new employer but a legal consequence by the effect of the law.
If a work council is established at the employer, it is the transferor and the acquiring employer’s joint responsibility to inform the work council established at the acquiring employer in writing not more than fifteen days before the date of transfer regarding the following information:
a) the date or proposed date of the transfer of enterprise;
b) the reason for the transfer;
c) the legal, economic, and social implications of the transfer for the employees; and
d) any measures envisaged in relation to the employees.
With the same timing, the transferor and the acquiring employer shall initiate a consultation with the work council regarding the proposed measures affecting the workers. The consultation shall cover the principles of the measures, the way and means of avoiding the adverse consequences of the transfer, and the measures taken in order to mitigate the consequences of the transfer (I&C obligation).
If a work council is not established at the transferor employee, the I&C obligation shall be provided to the transferor employer’s employees concerned by the transfer.
Upon the transfer of enterprise, the receiving employer shall inform the employees concerned regarding the transfer of employment, changes in working conditions, and the receiving employer shall also disclose the employer’s identification data.
In case of non-compliance with the I&C obligation, the work council or the employee may initiate a civil proceeding before the court against the employer within five days. The court decides within 15 days and the parties may file an application of appeal within five days from the date of the court judgment. The court of appeal will decide within 15 days. The court can establish the violation, but cannot oblige the employer to consult.
As an objection, the employee may terminate its employment relationship in case of material and adverse changes in the working conditions due to the transfer of enterprise and the employee states that maintaining its employment relationship:
(i) would cause disproportionate damage; or
(ii) would be impossible with the current conditions.
The termination notice shall have reasoning which justifies that the above-mentioned conditions are met. The employee may exercise the right of termination within 30 days from the date of the transfer of enterprise.
If the employee decides to terminate the employment relationship on the basis of the transfer of enterprise, the employer shall exempt the employee from the obligation of performing work at least for half of the notice period.
The employee is entitled to an absence fee for the period of exemption. The employee will also be entitled to receive severance pay if the conditions set forth in the Labor Code, or in the employment agreement if the parties agreed otherwise, are met.
7. Labor Investigation
The Act CXXXV of 2020 on the Labor Inspection Authority (Labor Inspection Authority Act), as amended, establishes those minimum requirements of employment which might be considered as a blacklist of the most significant employment law violations in case of breaching them by the employer.
The most significant employment law violations are including but are not limited to:
(a) the breach of the prohibition on child labor;
(b) the breach of obligation of notification of the employment to the Hungarian Tax and Customs Authority;
(c) the breach of the law relative to the payment of consideration for the employee’s performance of work;
(d) the breach of the law relative to performing temporary work agency activities;
(e) the breach of the law relative to the employment of third-country nationals.
With respect to the consequences, those employers (i) breaching the obligation of notification of the employment to the Hungarian Tax and Customs Authority, (ii) the principle of equal treatment, or (iii) having been subject to a final and non-appealable fine imposed by the Labor Inspection Authority two years prior to applying for state aid for breaching:
(a) the prohibition on child labor;
(b) the law relative to the payment of the consideration for the employee’s performance of work;
(c) the law relative to the registration of a temporary work agency; or
(d) the law relative to the registration of being a qualified temporary work agency
are not compliant with the requirement of an appropriate employment relationship as defined in the Act CXCV of 2011 on Public Finance (Public Finance Act) pursuant to Government Decree No. 115/2021. (III. 10.) on the activity of the Labor Inspection Authority (Government Decree), as amended.
In addition to the exclusion from state aid, those employers having been subject to a final and non-appealable fine imposed by the Labor Inspection Authority not later than two years prior to the application for public procurement for breaching the laws of employing a third-country national shall be excluded from participating in a public procurement procedure.
The two significant authorities investigating the employment relationship established between the employer and the employee are the Labor Inspection Authority and the Occupational Safety and Health Authority.
The Labor Inspection Authority investigates whether the minimum requirements of the employment relationship are respected by the employer and it may apply sanctions set forth in the relevant laws in the event of non-compliance.
Failing to comply with the minimum requirements of the employment may result in a fine, which may range from HUF 30,000 (approximately USD 80) to HUF 10 million (approximately USD 26,000) depending on the circumstances of the case. There may be specific cases with other additional consequences of non-compliance.
The Occupational Safety and Health Authority investigates whether the conditions of occupational safety and health and the requirements relating thereto are met by the employer.
In general, an employer’s failure to comply with the applicable legislative provisions of occupational safety and health may result in a fine, which may range from HUF 50,000 (approximately USD 133) to HUF 10 million (approximately USD 26,000) depending on the circumstances of the case.