Similar to other Central and Eastern European countries such as Ukraine or the Czech Republic, Hungary is a very popular outsourcing destination with regard to IT services. The current number of available IT professionals is estimated to be around 150,000 and every year nearly 6,000 graduates join the country’s IT workforce.
Their English skills are said to surpass those of their colleagues from Ukraine and the country’s low wages make hiring highly qualified workers affordable. Plus: Hungary’s geographic proximity to the rest of Europe eliminates challenges related to time differences.
It is required to draft a written employment contract upon the conclusion of the employment agreement. The written contract should include at least the following information:
- Identification of both parties – the employer must figure in person
- Job position, duties and responsibilities
- Reference to a separate document specifying the employee’s detailed job description
- Basic salary as well as other compensation or benefits
Unless stated otherwise, employment contracts in Hungary are considered to be of unlimited duration. Fixed-term contracts are possible as long as they don’t exceed 5 years of length.
Employer and employee may agree on a probation period of up to 3 months. During this time, the employment can be terminated without notice and without indicating a reason for the dismissal.
Working Hours and Breaks
Full-time employees usually work 8 hours a day over a five-day week. Employees working more than 6 consecutive hours must take a 20-minute lunch break – 25 minutes for employees with shifts longer than 9 hours. The length of the lunch break may be amended in the employment contract – the maximum, however, is 60 minutes.
Employees should have at least 11 hours of rest between two working days. The weekly rest period mustn’t be shorter than 2 days, one of which should fall on a Sunday – at least once per month.
Overtime work is allowed as long as the daily maximum of 12 working hours is respected. Furthermore, employees are not allowed to work more than 48 hours per week. Within one year, employees can work 250 additional hours – 300 under some collective agreements. Overtime work must be remunerated with a 50 percent wage supplement.
Payroll in Hungary is run once a month. It is common to pay employees on the 10th of the following month.
Currently (2021), the minimum wage in Hungary is fixed at HUF 167,400 per month. The hourly minimum which must be paid to workers is HUF 963. For positions requiring special training or higher qualifications, the minimum monthly remuneration must be HUF 219,000.
Employers in Hungary are obliged to provide sick pay to absent employees for a duration of 15 days. Sick pay should be equal to 70 percent of the employee’s usual wages. After 15 days, payments are made by Hungarian social security for a duration of up to one year.
There are no legal provisions for a 13th salary but it is common to offer employees a performance-based bonus.
Taxes and Social Security Contribution
Employees and employers in Hungary are subject to the following tax and social security contribution rates (as of 2021):
9% corporate tax rate
27% VAT (standard rate)
Individual income tax rate:
15% flat rate
17% of employee’s salary:
15.5% social security
1.5% fund for vocational training
18.5% of employee’s salary:
7% health insurance
10% pension fund
1.5% unemployment insurance
Every employee is entitled to at least 20 paid vacation days per year. An employee’s annual leave entitlement increases with age:
- From 25 years of age: 1 additional day
- From 28 years of age: 2 additional days
- From 31 years of age: 3 additional days
- From 33 years of age: 4 additional days
- From 35 years of age: 5 additional days
- From 37 years of age: 6 additional days
- From 39 years of age: 7 additional days
- From 41 years of age: 8 additional days
- From 43 years of age: 9 additional days
- From 45 years of age: 10 additional days
In addition, the country observes 11 public holidays on which employees don’t have to work. It is common practice to grant employees additional days off on special occasions such as St Stephen’s Day.
Maternity Leave and Paternity Leave
Maternity leave in Hungary lasts 24 weeks during which the employee receives a statutory allowance equaling 70 percent of her normal wages. The leave can begin up to 4 weeks before the expected delivery date.
Fathers can take 5 days of paid paternity leave within the first two months after their child’s birth.
After maternity leave, either mother or father can go on childcare leave until the child reaches 2 years of age – extension possible until the child’s 3rd birthday. During this time, they receive benefits equal to 70 percent of their usual salary from the National Health Insurance Fund – capped at twice the minimum wage.
Additional Leaves and Benefits
Employees with several children can claim up to 7 additional days off each year – depending on the number of children.
In addition to employment termination by default – i.e. in case of a fixed-term contract – resignation and mutual agreement, the employment may be terminated due to one of the following reasons (non-exhaustive list):
- Redundancy due to restructuring and staff reduction
- Summary dismissal due to gross misconduct and unacceptable behavior
- Personal reasons such as employee’s underperformance
Employers must give their employees at least 30-day notice – longer notice periods of up to 90 days apply for employees with a length of service exceeding 3 years. Summary dismissals enter into effect immediately but must be exercised within 15 days – starting from the day on which the employer realized the reason for dismissal.
All employees whose length of service exceeds 3 years and who are dismissed for operational or medical reasons must receive severance pay equaling at least one month’s wages – up to 6 months’ pay for 25 years of service.
Women on maternity leave, parents on childcare leave as well as employees on special leave for voluntary military service are protected from dismissal.
Hiring in Hungary?
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