Hire in Hungary through our Employer of Record (EOR)

Hungary's employment landscape is characterized by a well-educated and competitive workforce of approximately 4.5 million individuals. The country boasts a strong service sector, a developed industrial base, and a tradition of excellence in STEM fields. However, Hungary faces challenges due to an aging population and persistent gender gaps in certain sectors. The workforce is known for its technical skills and widespread English proficiency, particularly among younger generations.

Overview of Labor Laws

Hungary's labor laws are designed to protect both employees and employers, ensuring fair working conditions and rights. Key aspects include:

• A standard 40-hour workweek with provisions for overtime
• Minimum wage regulations that are regularly reviewed and adjusted
• Mandatory social security contributions from both employers and employees
• Generous paid leave entitlements, including annual leave and public holidays
• Strong protections against discrimination and unfair dismissal

Cultural Considerations

When operating in Hungary, it's crucial to understand and respect local cultural norms:

• Family-oriented culture: Hungarians often prioritize family obligations
• Direct communication: Clear and concise communication is valued in professional settings
• Hierarchical structure: Respect for seniority and experience is important in the workplace
• Work-life balance: Employees are encouraged to utilize their vacation time
• Formality: Initial interactions in the workplace tend to be formal, with titles and surnames used

Challenges of Direct Hiring

Direct hiring in Hungary can present several challenges for foreign companies:

1. Complex labor laws: Navigating Hungary's labor regulations can be difficult without local expertise
2. Language barrier: While English proficiency is widespread, official documentation and legal processes are often in Hungarian
3. Administrative burden: Employers are responsible for various administrative tasks, including payroll, tax withholding, and social security contributions
4. Cultural nuances: Understanding and adapting to local work culture can be challenging for foreign companies
5. Talent competition: With a skilled workforce, there can be significant competition for top talent in certain sectors
6. Compliance risks: Ensuring full compliance with local employment laws and regulations can be complex and time-consuming

To overcome these challenges, many foreign companies choose to partner with local experts or consider alternatives such as working with an Employer of Record (EOR) service to simplify their operations in Hungary.

Hungary's payroll and tax system is a comprehensive framework that outlines the financial responsibilities of both employers and employees. This system is designed to support the country's social welfare programs, healthcare system, and other public services. Understanding the intricacies of payroll and taxes in Hungary is crucial for businesses operating in the country and for employees working there.

In Hungary, the payroll process involves calculating gross salaries, deducting the required taxes and contributions, and arriving at the net salary that employees receive. The tax system is structured to ensure that both employers and employees contribute their fair share to the country's social and economic development.

The Hungarian tax year aligns with the calendar year, running from January 1 to December 31. Employers are responsible for withholding and remitting taxes on behalf of their employees, while employees have certain tax obligations and potential benefits based on their individual circumstances.

Employer Contributions

Employers in Hungary are required to make several contributions to support various social programs and services. These contributions are calculated based on the employee's gross salary and are paid in addition to the employee's wages.

The primary employer contribution is the Social Contribution Tax, known as "Szocho" in Hungarian. As of 2024, this tax stands at 13% of the employee's gross salary. This contribution funds public healthcare, pension systems, and other social welfare programs.

Interestingly, the Vocational Training Contribution, which was previously a separate 1.5% contribution, has been incorporated into the Social Contribution Tax since 2022. This change simplifies the contribution process for employers while still supporting skills training and labor market programs.

Employers with a workforce exceeding 25 employees may face an additional financial responsibility. If less than 5% of their employees have disabilities, these companies are required to pay a rehabilitation contribution. The amount is calculated based on the number of employees, the minimum wage, and the shortfall in employing individuals with disabilities.

It's important to note that there may be caps or limits on certain contributions, depending on factors such as the employee's salary level. Employers must stay informed about these limits to ensure accurate calculations and compliance with Hungarian tax laws.

Employee Contributions

Employees in Hungary also have financial obligations in the form of tax deductions and social security contributions. These are typically withheld from their gross salary by their employer.

The primary deduction for employees is Personal Income Tax (PIT). Hungary employs a progressive tax system, with a standard rate of 15% as of 2024. This means that employees contribute 15% of their taxable income to support government operations and public services.

In addition to income tax, employees are required to contribute to social security. The current rate for employee social security contributions is 18.5% of their gross salary. This contribution covers various benefits, including pensions, healthcare, and other social welfare programs.

Employees may also be eligible for certain tax benefits and deductions that can reduce their overall tax liability. For instance, the Family Tax Benefit is available to employees with dependent children. The amount of this benefit varies based on the number of children in the family.

First-time homebuyers in Hungary may also be entitled to a tax benefit, which can significantly reduce their tax burden when purchasing their first property. Additionally, contributions to certain pension plans and insurance products may be tax-deductible, up to specified limits.

It's crucial for employees to be aware of these potential deductions and benefits, as they can have a substantial impact on their net income. However, it's equally important to note that these deductions and benefits often come with specific eligibility criteria and maximum allowable limits.

Understanding the intricacies of payroll and taxes in Hungary is essential for both employers and employees. By staying informed about their respective obligations and potential benefits, both parties can ensure compliance with Hungarian tax laws while optimizing their financial positions.

Hungary offers a comprehensive benefits package for employees, combining mandatory and optional benefits to create an attractive employment environment. As an Employer of Record (EOR), Rivermate expertly manages these benefits, ensuring compliance with local regulations while providing valuable support to both employers and employees. By handling the complexities of benefit administration, an EOR allows companies to focus on their core business activities while offering competitive packages to attract and retain top talent in Hungary.

Mandatory Benefits

• Social Security Contributions

  • Pension: 10% contribution from both employer and employee
  • Healthcare: 7.5% employer contribution and 4.5% employee contribution

• Retirement Benefits

  • State pension based on contribution history and earnings

• Paid Time Off (PTO)

  • Annual Leave: Minimum 20 days, increasing to 30 days for employees over 45
  • Public Holidays: Several paid holidays throughout the year
  • Sick Leave: 15 days of paid sick leave annually, with extended leave for serious illnesses

• Parental Leave

  • Maternity Leave: 24 weeks of paid leave at full pay, with optional extended leave up to three years
  • Paternity Leave: 5 days of paid leave for fathers

• Other Mandatory Benefits

  • Occupational Health and Safety training
  • Mandatory medical examinations for new hires and periodic check-ups

Optional Benefits

• Cafeteria Plans (tax-efficient benefits)

  • SZÉP Card for leisure activities (annual limit around 450,000 HUF)
  • Transportation allowances (public transit passes or fuel vouchers)
  • Education contributions (childcare, kindergarten fees, language courses)
  • Cultural benefits (event tickets, museum entries, book vouchers)

• Supplementary Benefits

  • Private health insurance
  • Life and accident insurance
  • Company perks (flexible working arrangements, on-site gyms, wellness programs, free meals)

By offering a mix of mandatory and optional benefits, employers in Hungary can create attractive compensation packages that cater to diverse employee needs and preferences. As an EOR, Rivermate ensures seamless administration of these benefits, helping companies navigate the complexities of Hungarian employment regulations while providing valuable support to their workforce.

The process of termination and offboarding in Hungary is governed by specific regulations outlined in the Hungarian Labour Code. Understanding these rules is crucial for both employers and employees to ensure a smooth and legally compliant separation process.

Grounds for Dismissal

In Hungary, employers can terminate an employment relationship based on several valid grounds:

1. Employee conduct or capability issues
2. Operational reasons, such as redundancies or economic difficulties
3. Employee's health status affecting their ability to perform duties

Notice Requirements

When terminating employment, specific notice periods must be observed:

• The minimum notice period is 30 days
• For employer-initiated dismissals, the notice period increases based on the employee's length of service
• Employers and employees can mutually agree on a different notice period, not exceeding six months

Severance Pay

In certain termination scenarios, particularly for employer-initiated dismissals, severance pay is required:

• For operational reasons, employees with less than ten years of service may receive one to three months of wages
• Employees with ten or more years of service receive an amount based on their length of employment
• Severance pay is also applicable if termination is due to health-related incapacity

It's important to note that severance pay may not apply in cases of serious employee misconduct or disciplinary action.

Offboarding Process

The offboarding process in Hungary typically involves the following steps:

1. Formal communication of termination
2. Observance of the required notice period
3. Calculation and payment of any outstanding wages, severance pay, and unused vacation days
4. Return of company property
5. Cancellation of access to company systems and facilities
6. Completion of necessary paperwork, including providing the employee with required documentation

By following these guidelines and adhering to the Hungarian Labour Code, employers can ensure a legally compliant and professional termination and offboarding process. It's always advisable to consult with local legal experts or an Employer of Record service like Rivermate to navigate the complexities of employment termination in Hungary.

Hungary, a vibrant Central European country, attracts foreign workers with its rich culture and growing economy. For those considering employment in Hungary, understanding the visa and work permit requirements is crucial. Here's a concise overview of what you need to know:

Visa Requirements

Most non-EU/EEA citizens require a visa to enter Hungary for work purposes. The type of visa needed depends on the duration of stay:

• Short-term stays (up to 90 days): Schengen visa
• Long-term stays (over 90 days): National visa (Type D)

Work Permit Process

1. Job Offer: Secure a job offer from a Hungarian employer.

2. Work Permit Application: Your employer must apply for a work permit on your behalf with the local labor office.

3. Single Permit: For stays exceeding 90 days, apply for a single permit, which combines the residence and work permit.

4. Document Submission: Provide necessary documents, including:

   • Valid passport
   • Passport-sized photos
   • Proof of accommodation
   • Employment contract
   • Proof of qualifications

5. Processing Time: The process typically takes 60-70 days.

Special Cases

• EU/EEA citizens don't need a work permit but must register their residence if staying longer than 90 days.
• Some professions or highly skilled workers may be eligible for simplified procedures.

Renewal and Changes

Work permits are usually valid for up to two years and can be renewed. Any changes in employment must be reported to the authorities.

Understanding these requirements will help smooth your transition to working in Hungary. Always check with the Hungarian embassy or consulate in your country for the most up-to-date information, as regulations may change.