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Termination and Severance Policies

Learn about the legal processes for employee termination and severance in Hungary

Notice period

In Hungary, the Labour Code (Act I of 2012) stipulates the legal requirements for notice periods during employment termination.

Statutory Minimum Notice Period

The law requires a minimum notice period for both employers and employees intending to terminate an indefinite employment contract. This minimum notice period is determined by the employee's length of service:

  • 0-3 years: 30 days
  • Up to 5 years: 45 days
  • Up to 10 years: 50 days
  • 10-15 years: 55 days
  • 15-18 years: 60 days
  • 18-20 years: 70 days
  • Over 20 years: 90 days

Notice Period in Employment Contracts

Employers and employees can agree on a different notice period in the employment contract. This period can be shorter (but not less than seven days) or longer than the statutory minimum, with a maximum of six months.

Exceptions to Notice Periods

There are exceptions to the notice period requirements:

  • Termination for Cause: If an employee is dismissed due to a serious breach of contract, the employer doesn't need to provide a notice period.
  • Mutual Agreement: If both parties agree to terminate the employment immediately, a notice period can be waived.

Important Notes

The notice period begins on the day the notice is delivered to the other party. During the notice period, the employee remains obligated to perform their work duties unless exempted by the employer.

Severance pay

In Hungary, severance pay serves as a form of compensation for employees whose employment is terminated under specific circumstances as outlined in the Labour Code (Act I of 2012).

Eligibility for Severance Pay

To be eligible for severance pay in Hungary, an employee must have been employed under a continuous contract for at least three years. Additionally, the employee must be dismissed by the employer's notice, which includes reasons such as redundancy or changes in the employer's ability to continue the employment relationship.

Calculation of Severance Pay

The amount of severance pay an employee receives is based on their length of service with the employer. For instance, an employee who has been with the company for 3-5 years is entitled to one month's salary, while an employee who has been with the company for over 25 years is entitled to six months' salary. It's important to note that severance pay is calculated based on the employee's average gross earnings and is due in addition to any outstanding salary or benefits.

Circumstances Where Severance Pay is Not Payable

There are certain situations where an employee is not entitled to severance pay. These include termination due to misconduct or lack of ability unrelated to their health, termination upon the employee reaching retirement age, the employer ceasing operations without a legal successor, and the employee being re-employed by the company or its legal successor within a certain period.

Termination process

In Hungary, the termination of employees is regulated by the Labor Code (Act I of 2012), which provides strict legal guidelines to ensure a fair and lawful process.

Types of Termination

There are three main types of termination:

  • Termination by Notice (Ordinary Termination): This is the most common form of termination. Both the employer and employee can terminate the employment contract by giving a written notice specifying the termination date.

  • Termination for Cause (Extraordinary Termination): In cases of serious misconduct by the employee or if the employee is unable to perform their duties due to reasons beyond their control, the employer may terminate the employment immediately, without a notice period.

  • Mutual Agreement: The employer and employee can mutually agree to terminate the employment at any time.

Steps for Termination with Notice

The process for termination with notice involves three key steps:

  1. Issuing Notice: The party terminating the contract must provide a written notice stating the clear intent to terminate the employment relationship, the date of termination, and legitimate and verifiable reasons for the termination (in case of employer's notice).

  2. Notice Period: The notice period must be adhered to as outlined in the Labor Code or the employment contract. During this time, the employee may be granted time off for job hunting purposes.

  3. Final Payment: Upon termination, the employer must settle all outstanding payments within the timeframe specified by the Labor Code. This includes wages due for work performed and compensation for unused annual leave.

Important Considerations

There are several important considerations to keep in mind during the termination process:

  • Protection of Certain Employees: Some employees, such as pregnant women, those on parental leave, or employee representatives, enjoy additional protection against dismissal. Specific requirements outlined in the Labor Code must be followed.

  • Documentation: Employers should thoroughly document the reasons for termination, particularly in cases of performance or misconduct related termination.

  • Challenging a Dismissal: Employees can challenge a dismissal considered unlawful before a labor court.

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