WHAT TO KNOW ABOUT EMPLOYING EXECUTIVES IN HUNGARY

16 February 2024

In Hungary, executives are a special group among the employees with a special labour-law regime. The reason for these different rules is that these employees play an important role in the life of a company and have a much greater responsibility. In this article we summarise the must-knows before hiring an executive.

1. When can we talk about an executive employee?

The manager of the employer and the employee who is directly under the instruction of the manager and is entitled to replace the manager shall be regarded as an executive employee.

Furthermore, the parties can agree in the employment contract that the employee shall be regarded as an executive employee if he has a significant or highly confidential job in connection with the employer’s operation and his salary is at least as much as seven times the statutory minimum wage.

2. Deviation from the provisions of the Hungarian Labour Code

Despite other employments the Hungarian Labour Code expressly allows to conclude a labour contract that differs from the Labour Code to the detriment of the employee.

Only a few provisions of the Labour Code (typically the ones that protect mothers and fathers) cannot be excluded by the labour contract.

It is also important that collective agreements shall not apply to executive employees, thus many benefits provided for ordinary employees are not available for executive employees.

3. Flexible working time

The executive employers' working hours are, by law, flexible. This means that the executive employers are entitled to organise their working hours themselves and decide independently how they use their rest periods.

The most important consequence of an informal working time is that the manager is not entitled to compensation for working extraordinary hours and does not have to keep records of his working time.

4. Non-compete

The executives are not allowed to enter any additional employment-related relationships at all – including personal service contracts in order to protect the rightful economic interests of the employer. It is also forbidden to conclude any transactions falling within the scope of the employer’s activities in their own name or on their own behalf.

The executive employee shall not acquire shares – with the exception of the acquisition of stocks in a public limited company – in a business association which is engaged in the same or similar activities.

5. Termination of the executive employee’s employment

The executive employees are granted a lower protection against dismissal compared to other employees, since the ordinary dismissal shall not be justified like in case of other employees. Thus, the risk of a wrongful-termination and a costly litigation is lower.

6. Higher labour law liability

Given that the work of the executive employee has a higher importance, it involves stricter labour law liability towards the employer, therefore an executive employee shall bear liability in cases when the damage was caused by recklessness (i.e. a simple inattention or negligence).

Strict rules also apply if the executive employee terminates the employment unlawfully. While ordinary employees shall pay compensation equivalent to 3 months’ salary, this ceiling increases to 12 months’ salary for executive employees.