Hungary Employer of Record Overview

Daily working time for full time employees is 8 hours and the work schedule must  meet health and safety regulations effective in Hungary. Based on an agreement between the employer and employee, full time working hours per day can be extended. However, such total hours cannot exceed 12 hours a day. On average the full time hours per week would be 40 and cannot exceed 60 hours.

Rules relating to work schedules:

• Work will be allocated for a five day work week (Monday to Friday)
• Daily working time will not exceed 12 hours or 24 hours in the case of stand by jobs
• Weekly working time of such employees shall not exceed forty eight hours or seventy two hours in the case of stand by jobs

Rest breaks:

If the scheduled daily working time or the duration of overtime work performed

• Exceeds six hours, a twenty minute break will be provided
• Exceeds nine hour s, an additional twenty five minutes will be provided

Daily rest period shall be as follows:

• At least seven hours of uninterrupted rest period
• At least eight hours of daily rest shall be provided to employees working on
  • Split shifts
  • Continuous shifts
  • Multiple shifts
  • Seasonal jobs
  • Stand by jobs

Weekly rest period shall be as follows:

• Two rest days per week
• After six days of continuous work, one rest day shall be provided

On call and stand by duty:

Duration may not exceed 24 hours per day. Duration of the stand by duty may not exceed 168 hours which shall be taken as the average in the event that banking of working time is used.

Overtime work shall be ordered in writing. For full time jobs, two hundred and fifty hours of over time work can be ordered in a given calendar year.

If Sunday work is carried out during regular working hours the employee must receive 150% of their regular daily salary and be granted another day off.

Employers shall inform their employees with regard to processing personal information. Employers are permitted by law to disclose personal information of their employees in cases specified by law.

Personal rights of employees falling within the labour code shall be respected. Employees are protected for minimum wages, labour conditions, young workers, personal data,  and protection of personal rights etc.

Annual leave is 20 days. Additional holidays may be granted on special circumstances.

• Employees younger than 18 years of age – 5 days
• Parents with children – upto 7 days depending on the number of children

Maternity leave is provided upto 24 weeks.

If the employment has been for more than 2 years the rate of sick pay is 60% and if it has been less than 2 years the sick pay is 50%. The employer is required to pay 70% of wages for a maximum of 15 work days in the event of illness.  However, the maximum amount of sick pay cannot exceed two times the minimum wage.

Employees are entitled to 20 days of basic annual leave. They are also entitled to additional annual leave based on their age.

• one working day over the age of twenty-five;
• two working days over the age of twenty-eight;
• three working days over the age of thirty-one;
• four working days over the age of thirty-three;
• five working days over the age of thirty-five;
• six working days over the age of thirty-seven;
• seven working days over the age of thirty-nine;
• eight working days over the age of forty-one;
• nine working days over the age of forty-three;
• ten working days over the age of forty-five

Allocation of annual leave shall be as follows:

• Allocate 7 working days of vested time in a given year of not more than 2 parts
• Vacation shall include at least 14 consecutive days at a time

Employees are entitled to the following additional annual leave as well.

• Two working days for one child, four working days for two children, a total of seven working days for more than two children
• Paternity leave: Father will be entitled to five days of vacation in case of the birth of one child, seven working days for the birth of twins
• Young workers (until they reach the age of eighteen) will be entitled to five extra days of vacation each year
• Employees working permanently underground will be entitled to five extra days of annual leave each year

15 days of sick leave per calendar year

Mothers will be entitled to 24 weeks of maternity leave

Employees will be entitled to unpaid leave if the employee requests leave to take care of the child until the child reaches 3 years of age

An employment relationship can be terminated:

• By mutual consent
• By notice
• By dismissal without notice

Employees can terminate their employment contract by giving written notice.

Severance pay shall be the sum of the absentee pay due for;

• one month, for up to three years;
• two months, for up to five years;
• three months, for up to ten years;
• d) four months, for up to fifteen years;
• e) five months, for up to twenty years;
• f) six months, for up to twenty-five years of employment

Employees can terminate their employment contract by giving written notice.

Labor code prohibits employers from terminating the employment relationship by ordinary notice if

• Employee is unable to work due to illness, and during a maximum of 1 year period following the expiration of the sick leave period
• Unable to work due to an accident or an occupational disease
• On sick leave to take care of a sick child
• On leave of absence to take care of a close relative
• Pregnant or on maternity leave for a period of 3 months after giving birth
• On unpaid leave to take care of children until the child reaches 3 years of age
• Absent due to regular or reserve army service
• Absent due to disability with reception of rehabilitation benefits

Employers cannot terminate workers during these leave periods plus 15 days thereafter for periods exceeding 15 days. If this period exceeds 30 days, no termination may occur during the 30 day period.

Under the Labor code, a minimum of 30 day notice period maybe extended depending on the duration of employment.

The period of notice will be 30 days.

Where the employment is terminated by the employer, the notice period shall be extended

• by five days after three years;
• by fifteen days after five years;
• by twenty days after eight years;
• by twenty-five days after ten years;
• by thirty days after fifteen years;
• by forty days after eighteen years;
• by sixty days after twenty years

By agreement notice period can extend up to 6 months

Collective redundancies:

A collective redundancy means when an employer, based on the average statistical workforce for the preceding six-month period, intends to terminate the employment relationship:

• of at least ten workers, when employing more than twenty and less than one hundred employees,
• of 10 per cent of the employees, when employing one hundred or more, but less than three hundred employees,
• of at least thirty workers, when employing three hundred or more employees, inside a period of thirty days, for reasons in connection with its operations

At least 7 days before the discussions, the employer should inform the works council, in writing, the following details pertaining to the redundancy:

• the reasons for the projected collective redundancies
• the number of workers to be made redundant broken down by categories
• the period over which the projected redundancies are to be effected, and the timetable for their implementation
• the criteria proposed for the selection of the workers to be made redundant
• 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

Employers may not terminate the employment relationship by notice:

• During pregnancy
• During maternity leave
• During a leave of absence taken without pay for caring for a child

Employers are required to justify their dismissals. An employee may be dismissed for reasons in connection with his/her behaviour in relation to the employment relationship, with his/her behavior in connection with the employer’s operations.

Employer may terminate a fixed term employment relationship by notice:

• In the event of liquidation or bankruptcy
• For reasons related to the worker’s ability
• Due to unavoidable external reasons

An employer may terminate an employment relationship without notice if:

• willfully or by gross negligence commits a grave violation of any substantive obligations arising from the employment relationship
• otherwise engages in conduct that would render the employment relationship impossible

Right of termination without notice may be exercised without giving reasons:

• by either party during the probationary period
• by the employer during fixed term relationships

Probationary period may not exceed 3 months. However, if the probationary period is less than 3 months parties to the employment agreement may extend the probationary period up to 3 months.

The term of the probationary period of a collective agreement cannot extend 6 months. An employment contract can be terminated by either party without giving prior notice during the probationary period.

Employer and Employee contributions:

Employer social security contributions total 19.5% of gross monthly compensation, and employees contribute 18.5% (10% pension, 7% health, 1.5% unemployment) from their salary.  There is an exemption for non-EU expats and their employers, as well EU citizens whose country has a tax treaty with Hungary.

Retirement benefits:

This is operational under a compulsory governmental pension fund scheme. The basis is the average monthly salary earned since 1988 multiplied by an inflation adjustment rate. Minimum pension fund benefit is HUF 28,500 per month.

Private benefit plans:

Includes voluntary schemes provided by Voluntary Mutual Pension Funds (VMPS). Members of a voluntary pension fund can decide to take either of the following actions after a 10 year waiting period.

• Continue make contributions
• Withdraw partial or full savings from their account

Voluntary pension fund contributions can be made by the employee as well as the employer. 27% of the contributions paid by the employer are transferred to the state pension system and 10% contributions paid by the employee are transferred to the compulsory private pension fund.

In Voluntary Mutual Pension Funds (VMPF) employers contribute 2%-6% of salary to the funds and employees are required to make half of the employer’s contribution.

Please contact us for a quote

AtoZ Serwis Plus pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

Hungarian Forint (HUF)

Yes

Employers must file monthly tax returns for tax computed and remitted.

Foreign nationals are subject to Hungarian social security contributions only if:

• They are employed locally by a Hungarian employer
• They work in Hungary as employees of a non-Hungarian employer and are nationals of an EU member state

Employer social security contributions total 19.5% of gross monthly compensation, and employees contribute 18.5% (10% pension, 7% health, 1.5% unemployment) from their salary.  There is an exemption for non-EU expats and their employers, as well EU citizens whose country has a tax treaty with Hungary

Minimum monthly wage is used to calculate social security contributions and also cover work injury benefits, sickness and maternity benefits and unemployment benefits.

Employee contributions are 18.5% of covered monthly earnings. Since January 1 2014 resident non-citizens are exempt from paying contributions for up to 2 years. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.

A remote payroll in Hungary is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Hungary.

Thus a non-resident company is permitted to process payroll for Hungary residents who are on its payroll. Another option for a non-resident company to payroll its employees in Hungary would be to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

In some cases, a company will register their business in Hungary under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Larger companies with a commitment to Hungary may wish to run their own local payroll for all employees, foreign and local.  In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.  There will be a need for in country human resources personnel who have the background needed to manage a Thai payroll, and can fulfil all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations.  The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Thai employment laws.

Companies can outsource the employment and payroll of their staff in Hungary to a GEO, like  AtoZ Serwis Plus. This is possible for both foreign workers and Hungary nationals. This is the easiest, fastest and safest way to payroll staff in Hungary.

AtoZ Serwis Plus manages all aspects of payroll for workers in Hungary, including taxes, withholding, social security payments and other statutory requirements. AtoZ Serwis Plus becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. AtoZ Serwis Plus will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. AtoZ Serwis Plus provides the employees with payslips.

Hungarian Forint (HUF)

• Personal information (name, date of birth, postal address, place of relevant details)
• Passport
• Bank statements proving sufficient funds are available for the stay
• Proof of health insurance coverage
• Statement of permission to stay in your residential property, from the land owner. A signed tenancy agreement is acceptable

A foreign national working in Hungary is liable to pay personal income tax. For personal income tax purposes the following individuals are considered as tax residents.

• A Hungarian resident
• A European Economic Area resident whose stay in Hungary exceeds 183 days
• Third country citizen who has permanent residence status

Tax residents will be taxed on their worldwide income while non tax residents will be taxed on the domestic source of income or income as per the double tax treaty.

Foreign nationals and Hungarians working in Hungary must register with the competent tax authority and obtain a personal tax identification number to pay taxes and file a tax return (tax card number).

The tax forms can be obtained through the National tax and customs administration in Hungary

Foreign nationals are subject to Hungarian social security contributions only if:

• They are employed locally by a Hungarian employer
• They work in Hungary as employees of a non-Hungarian employer and are nationals of an EU member state

Employer must contribute 27% of gross monthly payroll in the form of social contribution tax. As of 1^st of January 2014, Employers of non Hungarian citizens are exempt from paying social security contributions for such employees. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.

Minimum monthly wage is used to calculate social security contributions and also cover work injury benefits, sickness and maternity benefits and unemployment benefits.

Employee contributions are 8.5% of covered monthly earnings. Since January 1, 2014 resident non-citizens are exempt from paying contributions for upto 2 years. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.

Employment contract

Tax card number

Address card registration

Social security registration

Corporate income tax rate is 19%. But a rate of 10% is applicable to the part of the tax base which does not exceed HUF 500 million.

A foreign taxable person is eligible to recover Hungarian input VAT if the following conditions are met.

• The business does not have Hungarian residency
• The business does not have any taxable supplies in Hungary
• Tax exempt cross border transportation from/to third countries
• Tax exempt cross border passenger transportation
• Supplies for which the reverse charge mechanism applies
• Electronically provided supplies where the foreign taxable person opted for application of the special regime for non-established taxable persons supplying electronic services to non-taxable persons

The standard VAT rate is 27%. While the reduced VAT rates are 18% and 5%. It’s not necessary to appoint a Hungarian fiscal representative to claim a VAT refund based on Directive 2008/09/EC or the 13th Directive.

There is no withholding tax levied on dividends paid to foreign companies. However, dividends paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.

Hungary does not levy withholding tax on interest paid to foreign companies. However, interest paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.

There is no withholding tax levied on royalties paid to foreign companies. However, dividends paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.

Hungary does not levy tax on branch profits.

A personal income tax allowance is granted through a family allowance ( (Családi Adókedvezmény). The total allowance is equal to the individual allowance multiplied by the number of beneficiary dependent children. For the first and second child an allowance of HUF62,500 is granted while an allowance of HUF206,250 is granted in the case of 3 or more children.

277 hours

7 days

Wages should be paid in cash or by way of transfer to the employee’s bank account.

Wages may not be paid in the form of vouchers or any other means of substitute payment instruments.

In the absence of an agreement, wages should be paid retrospectively accounted for atleast once a month. Wages should be paid by the tenth of the month following the month to which it pertains.

A salary slip is required. A payroll statement of wages paid shall be made available in writing by the tenth day of the following month.

HUF 105,000 as of 1^st January 2015

Documents required:

1. A work permit
2. An employment contract
3. A document certifying occupancy in Hungary
4. A certificate indicating how the applicant will make a living until he or she receives the work permit (bank account statement, employer’s certificate etc.)

Or

5. Articles of Association
6. Resolution on the court registration of the enterprise
7. A document certifying the occupancy in Hungary
8. A certificate on the acquisition of the qualifications necessary to fill the vacancy
9. Declaration of expected yearly income (certificate)
10. A certificate of the amount of money at the person’s disposal in Hungary
11. Simplified balance sheet of the prior year
12. A certificate declaring that the firm does not have public debt
13. If the firm has Hungarian employees: their employment contract
14. In case of a new enterprise: a brief business plan

Fee for residence permit: EUR 60

Time taken to process the application: 30 days

Seasonal work can be undertaken for agriculture, horticulture, animal husbandry, and fishing in possession of a work permit and a seasonal work visa. This visa entitles the holder to a single or multiple entry. It facilitates the applicant to be employed for longer than 3 months and less than 6 months. The validity of the visa is limited to 1 year. The permit has to define the exact time and work place. In case of multiple employments, the seasonal employment permit must define the detailed information of every employment.

A seasonal work visa maybe issued to a third country citizen who:

• Has a valid travel document
• Has a permit enabling return or outward travel
• Certifies the purpose of entry and stay
• Has financial means to cover the cost of the stay
• Has health insurance for the period of stay

Documents required:

*Documents evidencing the purpose of stay
• Work permit
• Temporary employment booklet
• A document certifying a legal relationship for employment

*Documents supporting the financial conditions necessary for living in Hungary

• A bank certificate guaranteeing financial means
• Income tax certificate issued by the tax authority with respect to the previous year
• A certificate of income issued by the employer
• A certificate issued by the employer and/or tax authority with respect to regular income from abroad
• A declaration made before a notary public by a family member having a residence permit, a permanent residence card or the legal status of an immigrant or settled person giving assurance to maintain and support the applicant

*Documents evidencing the existence of Hungarian accommodation

• A rental agreement certifying a rental relationship
• A document on the use of the flat by courtesy
• A document evidencing the availability of a reserved and paid accommodation
• A valid letter of invitation supplied with the authority’s consent
• A contract of sale and purchase of real estate and a copy of the decision of the competent county government office granting permission for the acquisition of the real estate.

*Documents supporting an all-inclusive health insurance

*Documents evidencing the conditions of exit

• A valid passport and/or the permits required for entry into the country indicated
• A valid return air ticket

Visa fee: EUR 40
Time taken to process the application: 15 days

Entitled persons:

• Perform work for a compensation based on a legally defined employment relationship
• Perform work individually for a compensation
• Perform business activities as the owner, leading office holder or member of a managing, representative or supervisory body of a business association, co-operative created for the profit purposes

Foreigners need to have a work permit to work in Hungary.

Single permit: A residence permit which authorizes a third country national to establish an employment relationship with a Hungarian employer.
Single application procedure: Authorizes the third country national to stay in Hungary for more than 90 days and less than 180 days based on employment relationship with a Hungarian employer on the basis of an application submitted by a third country national.

Documents required:
• Photo and fingerprints (biometric information)

Documents supporting legal employment:
• Temporary work booklet
• Business plan for business activity
• Individual business card/registration number
• Agriculture permit (for primary producers)
• Agency/business/user contract signed by a private individual
• A deed for a business association, co-operative, or any other legal person created for the purpose of making profits has legally employed atleast 3 Hungarian citizens or persons having rights for free movement and residence for atleast 6 months on a continuous basis
• Foreign applicant’s stay in Hungary is indispensable for the business association and it’s based on the attached business plan

Documents supporting the financial conditions necessary to live in Hungary:
• A bank certificate issued by a Hungarian or foreign bank
• A certificate of income issued by the employer
• A certificate issued by the employer and/or the tax authority with respect to regular income from abroad
Documents supporting the existence of Hungarian accommodation:

• A rental agreement
• A document approving the use of the flat by courtesy
• A document evidencing the availability of a reserved and paid place of accommodation
• Certificate proving the place in a dormitory
• A document evidencing the ownership of a flat
• A contract of sale and purchase of a real estate and state approval for acquiring the real estate

Documents supporting the existence of an all inclusive health insurance:
• Must provide evidence of full health coverage
Documents supporting the existence of provisions to leave the country:
• A return air ticket
• A valid passport or necessary permit allowing the third country national to return to his/her country of origin

Visa extension:

Visa extension is allowed provided that at least 30 days prior to the expiration of the visa the applicant submits the required documentation to the respective regional directorate of the Office of Immigration and Nationality. Moreover, the passport must be valid for at least 3 months at the time of visa extension.
*Please check Single application procedure for the respective process to apply for the visa.
Validity: A residence permit for employment is issued for a 3 year period and can be extended up to 3 years occasionally. In case if the permit is issued for a maximum of 2 years, then it can be extended for a maximum of 2 years occasionally.

Visa fee: EUR 60
Time taken to process the visa: 21 days

Single application procedure

Enables a third country national to stay in Hungary for a period exceeding 90 days and enables the applicant to establish a legal employment relationship with a specific employer.

Eligibility for single application procedure:
• Third country nationals submitting an application for residence permit for gainful activities with the aim of a legal employment relationship
• Third country nationals who intend to establish a legal employment relationship and submits a residence permit application for family reunification or submits an application for EU Blue card
• Third country nationals who intend to establish a legal employment relationship and possesses a residence permit application for family reunification or posseses an application for EU Blue card
• Special cases
From an employment/business perspective, the single application procedure is NOT applicable to the following personnel.
• Those who stay in Hungary with a seasonal work visa
• Third country nationals who are transferred as intra-corporate employees and who already stay or intend to stay in the territory of Hungary
• Personnel whose purpose of residency is to perform independent gainful activities (private entrepreneurs, small scale agriculture producers etc.)
• Third country nationals who are eligible to carry out gainful activities during their stay in a period between 90 days and 180 days.

*Applicant is required to submit the application in person. Moreover, a valid travel document/passport along with the submission of biometric information such as fingerprints and a photo is required.

Documents verifying the establishment of an employment relationship:
• Valid employment contract
• Certified copies of educational qualifications
• In the case of EU Blue card, certified copies of the proof of higher professional qualification

Employment agreement should include:
• Scope of duties
• Specification of professional qualifications required to perform duties
• Amount of remuneration payable to third country nationals
• Determination of the employment relationship
• Expected duration of the employment relationship

*If the residence permit is issued as a single permit such permits are valid upto two years and can be extended for a maximum of two years, occasionally.

EU Blue card is issued to a third country national who has been issued a residence permit for work that requires advanced skills (high skilled workers) by an European Union (EU) member country. The applicant must be able to prove at least 18 months of lawful stay in an EU member state and meets the following conditions.

• Possess a valid travel document
• Certify the purpose of entry/exit
• Meet legal employment conditions
• Possess a full coverage on health insurance
• Report a valid address for the Hungarian accommodation

A third country national is not a Hungarian citizen nor stateless persons except for persons with the right for free movement and residence (EEA nationals and accompanying family members of EEA citizens and Hungarian citizens).

Application procedure:
• Submit a valid passport
• Submit biometric data (fingerprints, photograph)
• The application for the EU Blue card must be submitted to the Consular Officer or at other authorized locations
• A statement certifying that the applicant will leave the EU territory voluntarily if the application is rejected
• Follow the single application procedure to obtain the EU Blue card
• Once the EU Blue card has been approved, the regional Directorate grants permission to issue the residence permit visa at the consular representation of Hungary and notifies the Consular Officers.
Extension of EU Blue card: Application for an extension can be submitted 30 days in advance to the expiration of the right of residence. At the submission the applicant must have a valid passport with atleast 3 months of validity.

Documents required:

Documents certifying the purpose of residence:
• A valid employment contract requiring a higher education qualification between the third country national and the employee upto a 4 year tenure
• Documents providing proof of the higher education qualification

Documents supporting the financial conditions necessary to live in Hungary:
• Preliminary agreement for employment requiring advanced skills or,
• A valid employment contract

Documents supporting the existence of an all exclusive health insurance
• A full health coverage insurance

Term: EU Blue card is usually issued for a 1 year period. However, if the employment tenure is for less than 1 year, the EU Blue card will be issued for a period up to 3 months post the expiration of the employment contract. The maximum tenure for an EU Blue card is 4 years and can be extended for another 4 year period.

Visa fee: EUR 60
Time taken to process the visa: 90 days

This visa is issued to non-European citizens who wish to travel to a Schengen area on a short term basis for a business specification purpose on a single or multiple entry. Schengen Business visa holders can stay in a Schengen country for a 90 day period during a period of 6 months.

Documents required:
• Passport sized photo (less than 6 months old, 35 X 40 mm, taken in a light clear background)
• Return air ticket
• Travel medical insurance policy
• Passport valid for atleast 3 months from the date of departure
• Cover letter explaining the purpose of visit
• Profile of the applicant’s company/organization
• Memorandum and Article of Association in original certified copy (registered with joint stock companies)/ Trade License (first issued and present renewal)/ Proprietorship/Partnership documents
• Current bank statements
• Employer letter specifying the purpose of the business travel and the business itinery
• invitation letter from the partner company in the Schengen zone, faxed also to the corresponding consulate
• Coverage of applicant’s expenses during the stay
• Hotel reservation document
• Proof of prior trade relations between the two companies (if relevant)
Applicant needs to attend the Schengen visa interview in person.

Visa fee: EUR 60
Time taken to process the visa: Atleast 15 days

Non-European citizens who intend to travel to a Schengen area for a short term for an employment specification should obtain an Employment Schengen visa.

Documents required:
• Passport sized photograph (less than 6 months old, 35 X 40 mm, taken in a light clear background)
• A passport valid for atleast 3 months after the departure date along with all the copies of your previous visas
• Return air ticket
• Travel medical insurance policy
• Two application forms should be filled
• Employment contract between the applicant and the potential employer in the Schengen area
Applicant needs to attend the Schengen visa interview in person.

Term of the visa: Schengen Employment visas are issued for a long term based on the term of employment

Visa fee: Long stay visa (more than 90 days) EUR 99, short term stay visa (less than 90 days) EUR 60
Time taken to process the visa: 3 months