Employer of Record in Hungary

Expanding your business into Hungary in 2025 presents a strategic opportunity to tap into a skilled workforce and a dynamic European market. However, successfully hiring employees in Hungary requires a thorough understanding of the country's specific labor laws, social security contributions, and tax regulations. Navigating these requirements can be complex and time-consuming for companies unfamiliar with the local landscape.

When considering hiring employees in Hungary, companies typically have three main approaches. You can establish your own legal entity in the country, which involves significant setup costs and ongoing administrative responsibilities. Alternatively, you might engage individuals as independent contractors, though this carries risks of misclassification if the working relationship resembles employment. A third, increasingly popular option, is to partner with an Employer of Record (EOR).

How an EOR Works in Hungary

An Employer of Record service in Hungary acts as the legal employer for your staff, handling all local employment responsibilities while you retain full control over day-to-day management. This allows your business to operate compliantly without establishing a local entity. A robust EOR, such as Rivermate, typically takes care of:

• Payroll processing and tax filings: Ensuring timely and accurate payment of salaries, social security contributions, and income taxes in accordance with Hungarian law.
• Compliance with Hungarian labor laws: Managing employment contracts, working hours, leave entitlements, and ensuring adherence to all local regulations.
• Benefits administration: Setting up and managing legally required and supplemental employee benefits packages, including health insurance and pension schemes.
• HR documentation: Preparing and maintaining all necessary employment-related paperwork, in line with Hungarian legal standards.
• Termination processes: Handling employee offboarding, including notice periods, severance, and final pay, in full compliance with local regulations.

Benefits of Using an EOR in Hungary

For companies looking to hire talent in Hungary without the overhead and complexity of establishing a local entity, an EOR offers several key advantages:

• Rapid market entry: Onboard employees in Hungary quickly, often within days or weeks, bypassing the lengthy process of entity registration.
• Reduced compliance risk: Mitigate the risks associated with navigating complex Hungarian labor laws, payroll, and tax regulations.
• No need for a local entity: Eliminate the financial and administrative burden of setting up and maintaining a legal presence in Hungary.
• Access to talent: Hire the best talent in Hungary without geographical limitations or administrative constraints.
• Cost efficiency: Avoid the significant costs associated with entity formation, legal fees, and ongoing administrative staff required for local operations.

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in Hungary includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in Hungary.

In Hungary, employers must fulfill several tax obligations, including paying social security contributions, vocational training, and rehabilitation contributions. For 2025, employer contribution rates are 13% for social security, 1.5% for vocational training, and variable for rehabilitation based on employee count and minimum wage. These are calculated on gross salaries and paid monthly.

Employers are responsible for withholding a flat 15% personal income tax (PIT) from employees' salaries and remitting it to NAV. Employees benefit from deductions such as family allowances, first-time homebuyer benefits, voluntary pension contributions, and other specific expenses, which can reduce taxable income.

Compliance involves timely monthly reporting (by the 12th of the following month), annual tax reconciliation, and providing employees with income statements (M30). Foreign workers and companies must consider double taxation treaties, residency rules, social security agreements, and potential permanent establishment implications to ensure proper tax compliance.

Hungary's salary landscape varies by industry, role, and region, with Budapest offering higher compensation levels. Typical annual gross salaries range from HUF 3.5 million for customer service roles to HUF 13 million for project managers, with IT roles like software engineers earning between HUF 6 million and HUF 12 million. Employers must comply with statutory minimum wages, which in 2025 are set at HUF 266,800 gross per month for full-time roles and HUF 346,000 for roles requiring secondary education.

Compensation packages often include bonuses such as a 13th-month salary, annual performance bonuses, and allowances for transportation, meals, or language training. Salaries are paid monthly, primarily via bank transfer, with detailed payslips required. Wage growth is expected to continue gradually in 2025, driven by labor shortages in sectors like IT and engineering, alongside evolving remote work practices and regulatory adjustments.

Hungarian employees are entitled to a minimum of 20 days of paid annual leave, increasing with age up to 30 days for employees over 45. Employers must grant at least seven consecutive days annually, with leave timing generally agreed upon mutually but subject to employer approval. Public holidays in Hungary for 2025 include ten days such as New Year's Day, National Day, Easter Monday, Labour Day, and Christmas, with paid time off typically granted on these days.

Sick leave allows for 15 days per year at 70% of earnings, with additional days potentially covered by the National Health Insurance Fund at around 60%. Parental leave includes 24 weeks of maternity leave (70% pay), 5 days of paternity leave (full pay), and parental leave (GYED) until the child turns two or three, with approximately 70% pay capped at a certain amount. After GYED, parents can access childcare allowance (GYES) until the child's third birthday, which is a fixed lower amount. Other leave types include bereavement, study, and sabbatical leave, with the latter two often depending on employer policies.

Hungary's employee benefits are governed by legal requirements and evolving employee expectations. Employers must provide mandatory benefits such as at least 20 days of paid annual leave, paid public holidays, sick leave, social security contributions covering pensions, healthcare, and unemployment, as well as maternity and paternity leave with income replacement. These benefits ensure basic employee protections and compliance with Hungarian labor law.

In addition to statutory benefits, many employers enhance their packages with optional perks like supplementary health insurance, life insurance, private pension contributions, wellness programs, transportation allowances, meal vouchers, and flexible work arrangements. These supplementary benefits serve as competitive tools to attract and retain talent.

Key data points include:

Understanding these mandatory and optional benefits allows employers to develop competitive packages tailored to industry and company size, supporting talent attraction and retention in Hungary.

Employment agreements in Hungary are governed by the Labour Code, requiring clarity and compliance to ensure legal protection. Employers must understand the different contract types, mandatory clauses, and regulations on modifications and terminations to avoid legal issues and foster positive employee relations.

There are several contract types:

Mandatory clauses include details on job description, duration, salary, working hours, confidentiality, non-compete, and termination conditions. Contracts must also specify probation periods, which are regulated by law, and include provisions for contract modifications and termination procedures. Ensuring these elements are properly addressed helps employers maintain compliance and protect their interests in Hungary's legal framework.

Remote work in Hungary is increasingly adopted, with legal and practical frameworks evolving to support flexible arrangements. Employers should formalize remote work agreements in writing, covering working hours, data protection, and performance expectations, while ensuring occupational safety through ergonomic assessments and equipment provision. Although there is no universal legal right to remote work, agreements are encouraged to foster productivity and compliance.

Key legal obligations include providing a safe remote workspace and adhering to data protection laws. Flexible work options such as telecommuting, part-time remote work, and hybrid models are common, helping companies attract talent. The Hungarian Labor Code underpins these practices, emphasizing employer responsibilities and employee rights.

In Hungary, employment termination must comply with specific legal procedures, including minimum notice periods based on employee tenure. These notice periods range from 30 days for less than 1 year of service to 150 days for over 20 years, with the possibility of longer terms specified in contracts or collective agreements.

Severance pay is generally required for employees terminated by the employer, calculated according to their length of service. The entitlement varies as follows:

Employers must adhere to these regulations to avoid legal disputes, costly litigation, and reputational damage. Proper understanding of notice and severance rules is essential for managing employee separations effectively in Hungary.

Hungary is experiencing a shift towards flexible work arrangements, with many opting for freelance or independent contractor roles. This trend is driven by the demand for specialized skills, the desire for autonomy, and companies' need for agile workforce solutions. Employers must understand the legal distinctions between employees and independent contractors to avoid misclassification, which can lead to significant legal and financial repercussions. Hungarian law emphasizes the substance of the relationship over contractual labels, focusing on factors such as control, integration, and risk.

Independent contractors often operate as sole proprietors or through limited liability companies, with agreements covering scope, payment terms, and intellectual property rights. Contractors retain IP rights unless contracts specify otherwise, requiring clear provisions for rights transfer. Tax obligations vary by legal form, with options like General Income Tax, KATA, and KIVA. Contractors must handle their own tax filings and insurance, including professional indemnity and general liability. Common sectors utilizing freelancers include IT, creative industries, consulting, and healthcare, where project-based work and specialized skills are in demand.

Hungary requires non-EU/EEA citizens to obtain both a visa and a work permit for employment, while EU/EEA nationals can work freely with residence registration. The most common work permit is the Single Permit, which combines residence and work authorization for stays over 90 days. Other options include the EU Blue Card for highly qualified professionals and ICT permits for intra-company transfers. Short-term visas (up to 90 days) may suffice for brief assignments but generally do not permit employment.

The application process involves a labor market test to prove no suitable local or EU/EEA candidates are available, followed by submission of comprehensive documentation to the Immigration and Asylum Office. Processing times can vary from several weeks to months. Key requirements include a valid passport, employment contract, proof of qualifications, accommodation, health insurance, and employer registration documents. Employers must ensure compliance with immigration laws, including verifying work permits and maintaining accurate records, while employees must adhere to permit conditions and renew them timely.

Foreign nationals can apply for permanent residency after three years of continuous residence, provided they meet criteria such as a clean criminal record, sufficient financial resources, and basic Hungarian language skills. Family members of foreign workers may qualify for dependent visas by providing proof of relationship, residence permit, and health coverage.