Hungary

When using an Employer of Record (EOR) in Hungary, the EOR handles the filing and payment of employees' taxes and social insurance contributions. This includes the calculation, withholding, and remittance of income tax, social security contributions, and any other mandatory deductions required by Hungarian law. The EOR ensures compliance with local tax regulations and deadlines, thereby relieving the client company of the administrative burden and complexities associated with payroll and tax compliance in Hungary. This service helps companies avoid potential legal issues and penalties related to non-compliance, allowing them to focus on their core business activities.

Setting up a company in Hungary involves several steps and can vary in duration depending on the complexity of the business structure and the efficiency of the processes. Here is a detailed timeline for setting up a company in Hungary:

1. Preparation Phase (1-2 weeks):

   • Business Plan and Strategy: Develop a comprehensive business plan and strategy.
   • Legal Consultation: Engage with a local legal advisor to understand the specific requirements and regulations.
   • Choose a Company Type: Decide on the type of company you want to establish (e.g., Limited Liability Company - Kft, Private Company Limited by Shares - Zrt, etc.).

2. Company Name Reservation (1-2 days):

   • Name Check: Conduct a name check to ensure the desired company name is available.
   • Reservation: Reserve the company name with the Hungarian Company Registry.

3. Drafting and Signing Incorporation Documents (1 week):

   • Articles of Association: Draft the Articles of Association and other necessary documents.
   • Notarization: Have the documents notarized by a Hungarian notary public.

4. Opening a Bank Account (1-2 weeks):

   • Bank Selection: Choose a bank and open a corporate bank account.
   • Deposit Capital: Deposit the required initial capital into the bank account.

5. Registration with the Company Registry (1-2 weeks):

   • Submission: Submit the incorporation documents to the Hungarian Company Registry.
   • Registration: The registry processes the application and registers the company.

6. Tax Registration (1 week):

   • Tax Number: Obtain a tax number from the Hungarian Tax Authority (NAV).
   • VAT Registration: If applicable, register for VAT.

7. Social Security Registration (1 week):

   • Social Security Number: Register the company with the Hungarian Social Security Authorities.

8. Additional Licenses and Permits (Varies):

   • Industry-Specific Licenses: Obtain any additional licenses or permits required for your specific industry.

9. Operational Setup (1-2 weeks):

   • Office Space: Secure office space and set up the physical infrastructure.
   • Hiring Employees: Begin the process of hiring employees and setting up payroll.

In total, the process of setting up a company in Hungary can take approximately 6-10 weeks, depending on the efficiency of each step and the specific requirements of your business. Using an Employer of Record (EOR) service like Rivermate can significantly streamline this process, as they handle many of the administrative and compliance-related tasks, allowing you to focus on your core business activities.

HR compliance in Hungary refers to the adherence to the country's labor laws, regulations, and standards that govern employment practices. This includes ensuring that all employment contracts, workplace policies, and HR practices align with Hungarian labor legislation. Key aspects of HR compliance in Hungary include:

1. Employment Contracts: Hungarian labor law mandates that employment contracts must be in writing and include specific details such as job description, salary, working hours, and duration of employment.

2. Working Hours and Overtime: The standard working week in Hungary is 40 hours. Employers must comply with regulations regarding overtime, which is generally capped and requires additional compensation.

3. Minimum Wage: Employers must ensure that employees are paid at least the national minimum wage, which is periodically adjusted by the government.

4. Leave Entitlements: Hungarian law provides for various types of leave, including annual leave, sick leave, maternity leave, and parental leave. Employers must ensure that employees receive their entitled leave and that it is properly documented.

5. Health and Safety: Employers are required to maintain a safe working environment and comply with occupational health and safety regulations. This includes conducting regular risk assessments and providing necessary training and equipment.

6. Termination and Severance: Termination of employment must comply with Hungarian labor laws, which include specific notice periods and, in some cases, severance pay. Employers must follow proper procedures to avoid wrongful termination claims.

7. Data Protection: Compliance with data protection laws, including the General Data Protection Regulation (GDPR), is crucial. Employers must ensure that employee data is collected, processed, and stored in accordance with these regulations.

Importance of HR Compliance in Hungary:

1. Legal Protection: Adhering to HR compliance helps protect the company from legal disputes and potential lawsuits. Non-compliance can result in significant fines, legal penalties, and damage to the company's reputation.

2. Employee Satisfaction and Retention: Compliance with labor laws ensures fair treatment of employees, which can lead to higher job satisfaction and retention rates. Employees are more likely to stay with a company that respects their rights and provides a safe and fair working environment.

3. Operational Efficiency: Proper HR compliance ensures that the company operates smoothly without interruptions caused by legal issues or disputes. This allows the company to focus on its core business activities.

4. Reputation Management: Companies that comply with labor laws and treat their employees well are viewed more favorably by customers, investors, and potential employees. This can enhance the company's reputation and attract top talent.

5. Risk Management: By adhering to HR compliance, companies can mitigate risks associated with non-compliance, such as financial penalties, legal actions, and loss of business licenses.

Using an Employer of Record (EOR) like Rivermate can significantly simplify HR compliance in Hungary. An EOR takes on the responsibility of ensuring that all employment practices comply with local laws and regulations. This includes managing payroll, taxes, benefits, and other HR functions, allowing companies to focus on their core business activities while minimizing the risk of non-compliance.

Yes, it is possible to hire independent contractors in Hungary. However, there are several important considerations to keep in mind when doing so.

1. Legal Framework: Independent contractors in Hungary are governed by the Hungarian Civil Code, which outlines the terms and conditions under which they can operate. Unlike employees, contractors are not subject to the Hungarian Labor Code, which means they have more flexibility but also fewer protections.

2. Contractual Agreement: It is crucial to have a well-drafted contract that clearly defines the scope of work, payment terms, duration, and other relevant conditions. This contract should explicitly state that the relationship is one of an independent contractor and not an employment relationship to avoid any legal ambiguities.

3. Taxation: Independent contractors are responsible for their own taxes, including social security contributions and VAT if applicable. They must register with the Hungarian tax authorities and comply with all tax filing requirements. Employers do not withhold taxes for contractors, which simplifies payroll but requires contractors to be diligent about their tax obligations.

4. Misclassification Risks: One of the significant risks of hiring independent contractors is the potential for misclassification. If a contractor is found to be functioning more like an employee (e.g., working under direct supervision, using company equipment, having set working hours), Hungarian authorities may reclassify the relationship as employment. This can result in back taxes, penalties, and other legal issues for the hiring company.

5. Benefits and Protections: Independent contractors do not receive the same benefits and protections as employees, such as paid leave, health insurance, and severance pay. This can be a cost-saving measure for companies but may also affect the attractiveness of the position to potential contractors.

6. Intellectual Property: Ensure that the contract includes clauses related to intellectual property (IP) rights. Typically, any IP created by an independent contractor should be assigned to the hiring company, but this needs to be explicitly stated in the contract to avoid disputes.

7. Termination: The terms for terminating the contract should be clearly outlined. Unlike employees, independent contractors do not have the same protections against unfair dismissal, but having clear termination clauses can help prevent potential conflicts.

Using an Employer of Record (EOR) service like Rivermate can simplify the process of hiring independent contractors in Hungary. An EOR can handle the complexities of local compliance, tax regulations, and contractual agreements, ensuring that your business remains compliant with Hungarian laws while mitigating the risks associated with misclassification and other legal issues. This allows your company to focus on core business activities while leveraging the expertise of local professionals.

Rivermate, as an Employer of Record (EOR) in Hungary, ensures HR compliance through a comprehensive understanding of local labor laws, regulations, and best practices. Here are several ways Rivermate achieves this:

1. Local Expertise: Rivermate employs local HR professionals who are well-versed in Hungarian labor laws and regulations. This local expertise ensures that all employment practices are compliant with national standards, including hiring, contracts, payroll, and terminations.

2. Employment Contracts: Rivermate ensures that employment contracts are drafted in accordance with Hungarian labor laws. This includes specifying terms of employment, job descriptions, compensation, benefits, and termination conditions. These contracts are regularly updated to reflect any changes in legislation.

3. Payroll Management: Rivermate handles payroll processing in compliance with Hungarian tax laws and social security regulations. This includes accurate calculation of wages, deductions, and contributions to social security, health insurance, and other statutory benefits.

4. Tax Compliance: Rivermate ensures that all tax obligations are met, including income tax withholding, corporate taxes, and value-added tax (VAT) where applicable. They stay updated on tax law changes to ensure ongoing compliance.

5. Benefits Administration: Rivermate manages statutory benefits such as health insurance, pension contributions, and other mandatory benefits. They also offer guidance on additional benefits that can help attract and retain employees while remaining compliant with local laws.

6. Labor Law Adherence: Rivermate ensures compliance with Hungarian labor laws regarding working hours, overtime, leave entitlements (such as annual leave, sick leave, and maternity/paternity leave), and workplace safety regulations.

7. Employee Onboarding and Offboarding: Rivermate manages the entire employee lifecycle, from onboarding to offboarding, ensuring that all processes comply with Hungarian labor laws. This includes proper documentation, notice periods, and severance payments where applicable.

8. Data Protection: Rivermate ensures compliance with data protection regulations, including the General Data Protection Regulation (GDPR), which is applicable in Hungary. They implement robust data security measures to protect employee information.

9. Dispute Resolution: Rivermate provides support in handling employee disputes and grievances in accordance with Hungarian labor laws. They ensure that any disciplinary actions or terminations are conducted legally and fairly.

10. Continuous Monitoring and Updates: Rivermate continuously monitors changes in Hungarian labor laws and regulations. They proactively update their policies and practices to ensure ongoing compliance, reducing the risk of legal issues for their clients.

By leveraging Rivermate's services, companies can confidently expand their operations in Hungary, knowing that all HR and employment-related matters are handled in full compliance with local laws and regulations. This allows businesses to focus on their core activities while minimizing legal and financial risks.

In Hungary, employers have several options for hiring workers, each with its own set of legal, administrative, and financial considerations. Here are the primary options available:

1. Direct Employment:

   • Permanent Employment Contracts: This is the most common form of employment in Hungary. It involves hiring an employee directly under an indefinite-term contract. The employer is responsible for all aspects of employment, including payroll, taxes, social security contributions, and compliance with Hungarian labor laws.
   • Fixed-Term Contracts: Employers can hire workers for a specific period or project. These contracts must comply with Hungarian labor regulations, which include limitations on the duration and renewal of fixed-term contracts.

2. Temporary Employment:

   • Temporary Agency Work: Employers can hire workers through temporary employment agencies. The agency acts as the employer, handling payroll and compliance, while the worker performs tasks for the client company. This option provides flexibility but can be more expensive due to agency fees.

3. Freelancers and Independent Contractors:

   • Freelancers: Hiring freelancers or independent contractors can be an option for specific projects or tasks. However, it is crucial to ensure that the working relationship does not resemble an employment relationship, as this could lead to reclassification and legal issues.
   • Consultants: Similar to freelancers, consultants can be hired for their expertise on a contractual basis. This arrangement is suitable for short-term or specialized projects.

4. Outsourcing:

   • Outsourcing Services: Employers can outsource certain functions or projects to third-party service providers. This can include IT services, customer support, or manufacturing. The outsourcing company handles the employment and compliance aspects.

5. Employer of Record (EOR):

   • Employer of Record Services: Using an EOR, like Rivermate, allows companies to hire workers in Hungary without establishing a legal entity in the country. The EOR acts as the legal employer, managing payroll, taxes, benefits, and compliance with local labor laws. This option is particularly beneficial for companies looking to expand quickly and efficiently without the administrative burden of setting up a local subsidiary.

Benefits of Using an Employer of Record in Hungary

1. Compliance and Risk Management:

   • Legal Compliance: An EOR ensures that all employment practices comply with Hungarian labor laws, including contracts, working hours, termination procedures, and employee benefits.
   • Risk Mitigation: By handling all legal and regulatory requirements, an EOR reduces the risk of non-compliance, which can result in fines and legal disputes.

2. Cost Efficiency:

   • Reduced Overhead: Setting up a legal entity in Hungary involves significant time and financial investment. An EOR eliminates these costs, allowing companies to allocate resources more effectively.
   • Scalability: EOR services provide flexibility to scale the workforce up or down based on business needs without the long-term commitment of establishing a local entity.

3. Administrative Relief:

   • Payroll and Tax Management: The EOR manages payroll processing, tax withholding, and social security contributions, ensuring accuracy and timeliness.
   • Employee Benefits Administration: An EOR handles the provision and management of employee benefits, such as health insurance, pensions, and other statutory benefits.

4. Speed to Market:

   • Quick Onboarding: An EOR can facilitate the rapid hiring and onboarding of employees, enabling companies to start operations in Hungary quickly.
   • Focus on Core Business: By outsourcing employment administration to an EOR, companies can focus on their core business activities and strategic goals.

5. Local Expertise:

   • Knowledge of Local Market: An EOR has in-depth knowledge of the Hungarian labor market, cultural nuances, and employment practices, providing valuable insights and support.
   • Employee Support: The EOR can offer local support to employees, addressing their concerns and ensuring a positive employment experience.

In summary, while there are multiple options for hiring workers in Hungary, using an Employer of Record like Rivermate offers significant advantages in terms of compliance, cost efficiency, administrative relief, speed to market, and local expertise. This makes it an attractive option for companies looking to expand their operations in Hungary without the complexities of establishing a local entity.

Yes, employees in Hungary receive all their rights and benefits when employed through an Employer of Record (EOR) like Rivermate. An EOR ensures compliance with local labor laws and regulations, which is crucial for protecting employee rights and benefits. Here are some key aspects:

1. Employment Contracts: An EOR will provide employment contracts that comply with Hungarian labor laws. These contracts will outline the terms of employment, including job responsibilities, salary, working hours, and other essential details.

2. Wages and Salaries: Employees will receive their wages and salaries in accordance with Hungarian standards, including adherence to minimum wage laws and timely payment schedules.

3. Social Security and Taxes: The EOR will handle all necessary social security contributions and tax withholdings, ensuring that employees are covered under Hungary's social security system, which includes healthcare, pensions, and unemployment benefits.

4. Paid Leave: Employees are entitled to paid leave, including annual leave, sick leave, and maternity/paternity leave, as stipulated by Hungarian labor laws. The EOR will manage these entitlements and ensure employees can take their leave as required.

5. Working Hours and Overtime: The EOR will ensure compliance with regulations regarding working hours and overtime. In Hungary, the standard workweek is 40 hours, and any overtime must be compensated according to legal requirements.

6. Health and Safety: The EOR is responsible for ensuring that the workplace meets health and safety standards as required by Hungarian law. This includes providing a safe working environment and necessary training.

7. Termination and Severance: In the event of termination, the EOR will handle the process in compliance with Hungarian labor laws, which include specific notice periods and severance pay requirements.

8. Employee Benefits: The EOR can also manage additional employee benefits, such as private health insurance, meal vouchers, and transportation allowances, ensuring that employees receive a comprehensive benefits package.

By using an EOR like Rivermate, companies can ensure that their employees in Hungary receive all the rights and benefits they are entitled to under local laws, while also simplifying the complexities of international employment compliance.

When a company uses an Employer of Record (EOR) service like Rivermate in Hungary, the EOR assumes many of the legal responsibilities associated with employment. However, the company still retains certain obligations and must ensure compliance with Hungarian labor laws. Here are the key legal responsibilities and considerations:

1. Employment Contracts:

   • The EOR is responsible for drafting and maintaining employment contracts in compliance with Hungarian labor laws. These contracts must include terms such as job description, salary, working hours, and other conditions of employment.

2. Payroll and Tax Compliance:

   • The EOR handles payroll processing, ensuring that employees are paid accurately and on time. This includes calculating and withholding the appropriate taxes and social security contributions, and remitting them to the Hungarian tax authorities.

3. Social Security and Benefits:

   • The EOR ensures that employees are registered with the Hungarian social security system and that all mandatory contributions are made. This includes health insurance, pension contributions, and other statutory benefits.

4. Labor Law Compliance:

   • The EOR ensures compliance with Hungarian labor laws, including regulations on working hours, overtime, rest periods, and leave entitlements. They also handle any necessary reporting to labor authorities.

5. Employee Rights and Protections:

   • The EOR is responsible for ensuring that employees' rights are protected, including adherence to anti-discrimination laws, health and safety regulations, and other statutory protections.

6. Termination and Severance:

   • The EOR manages the termination process in compliance with Hungarian labor laws, including providing the required notice period and calculating any severance pay or other termination benefits.

7. Record Keeping:

   • The EOR maintains accurate records of employment, including contracts, payroll records, and any other documentation required by Hungarian law.

8. Legal Representation:

   • In case of any legal disputes or issues related to employment, the EOR may represent the company and handle legal proceedings in accordance with Hungarian labor laws.

9. Data Protection:

   • The EOR ensures compliance with data protection regulations, including the General Data Protection Regulation (GDPR), which applies in Hungary. This involves safeguarding employees' personal data and ensuring proper data handling practices.

10. Local Expertise:

    • The EOR provides local expertise and guidance on employment practices, helping the company navigate the complexities of Hungarian labor laws and regulations.

While the EOR takes on many of the day-to-day responsibilities of employment, the company must still ensure that it selects a reputable EOR provider and maintains oversight of the employment relationship. This includes regular communication with the EOR to ensure that all legal obligations are being met and that the company's interests are protected.

Employing someone in Hungary involves several costs that employers need to consider. These costs can be broadly categorized into direct salary expenses, mandatory social security contributions, and other employment-related costs. Here is a detailed breakdown:

1. Gross Salary: This is the base salary agreed upon with the employee. It is subject to taxation and social security contributions.

2. Employer's Social Security Contributions: Employers in Hungary are required to make several contributions based on the gross salary of the employee:

   • Social Contribution Tax: As of 2023, the rate is 13%.
   • Vocational Training Contribution: This is 1.5% of the gross salary.

3. Employee's Social Security Contributions: While these are deducted from the employee's gross salary, they are important for the employer to calculate the total cost of employment:

   • Pension Contribution: 10% of the gross salary.
   • Health Insurance and Labor Market Contribution: 8.5% of the gross salary.

4. Personal Income Tax: Employees are subject to a flat personal income tax rate of 15%. This is also deducted from the gross salary but is part of the overall employment cost structure.

5. Other Employment Costs:

   • Holiday Pay: Employees are entitled to paid annual leave, which varies based on age and years of service.
   • Sick Leave: Employers must cover a portion of the employee's salary during sick leave.
   • Severance Pay: In case of termination, employees may be entitled to severance pay, which depends on the length of service.

6. Administrative Costs: These include costs related to payroll processing, compliance with local labor laws, and other HR administrative tasks.

7. Additional Benefits: Depending on the company's policy, additional benefits such as health insurance, meal vouchers, transportation allowances, and bonuses may also be provided.

Using an Employer of Record (EOR) like Rivermate can help manage these costs effectively. An EOR handles all aspects of employment, including payroll, tax compliance, and benefits administration, ensuring that the company remains compliant with Hungarian labor laws. This can save time and reduce the administrative burden on the company, allowing it to focus on its core business activities.