Blog » EMPLOYMENT VS ENGAGEMENT IN HUNGARY: 1.0
EMPLOYMENT VS ENGAGEMENT IN HUNGARY: 1.0
08 October 2018
When we talk about work, employment relationship comes to everyone’s mind first, although you can work for someone’s interest in other ways outside the “9-5”, monthly paid job system, for example by an engagement contract. Whether you are an employer or an employee, you need to know what the differences are between the two most common forms of working, especially because in some cases the employment authority or the court may re-classify the engagement as employment and may impose a significant fine on the principal.
Employment and engagement
The fundamental difference between the two types of work relationship is that while in the case of an employment relationship the employee’s interests are protected by strict rules of labor law, the engagement is a type of contract in the field of civil law, the content of which can be freely determined by the parties.
I guess you have an idea of what a jackpot would be for an employer if they could set the conditions freely: they could dismiss workers without reasoning and severance payments, the staff could work 10-16 hours a day without a problem, not to mention that in case of engagement the social security contributions are much more favorable.
Freedom of contract. Or not?
Before you tell your colleague at the HR that from now on, all the staff will work for the company under engagement contracts, you must know that if the employment authority establishes during an audit that the activity of the person on the assignment carries the characteristics of employment relationship, the engagement will be reclassified as employment, and the employer will have to pay the contribution difference, furthermore, a significant fine will be imposed on him.
Another source of danger is that if the relationship between the parties of the engagement deteriorate, the agent may file a lawsuit in court, that he is likely to win. The court re-qualifies the contract and the employer will have to reimburse the employee the benefits he would have been entitled to.
With this in mind, you need to be able to define when an activity is considered an employment relationship and when it is an engagement. Although a secretary's employment and a freelance photographer's assignment are easy to distinguish, in some cases, the situation is far from simple.
Aspects of the qualification
In the next section, we will examine the demarcation aspects that the authority and the court will follow in the classification of the relationship.
Situations are individually examined considering all the circumstances, so the classification can not be determined by one aspect alone.
The nature of the activity
In the case of employment, the employee continuously performs a certain set of duties. For example, a secretary takes over the mail every day, handles calls, carries out the actual tasks.
The emphasis is on continuity and availability, the conditions of work (place, time, specific tasks) are regulated in detail. By engagement, we mean the provision of a product or service that can be achieved through work. The engagement is rather a "project" type, such as taking a wedding photography and then delivering the pictures as a result. The focus is always on the result to be achieved.
Personal appearance, availability obligation
You know what the consequences are when an employee is late for work or decides to go home after lunch to take a nap. It would also be interesting if a colleague would send his best friend instead of him, as “replacement”. In the case of an engagement, the agent should only pay attention to keep the contract deadline, the elaboration of details is his business (although, for a wedding photographer, it's not a disadvantage to arrive at the event in time.)
It is a significant difference that an employee can be instructed in detail by his superiors and it is usually defined what and how to do, while the person working based on an engagement contract is significantly more independent. In the case of an engagement, the agent is not a subordinate, but an equal party, and the instruction determines the result to be achieved, not the methods or the steps of work.
The place and schedule of work
It is the characteristics of an employment relationship if the place of work is provided by the employer and the working time is defined, not only by setting daily working hours, but also by weekly and monthly schedule.
Remuneration for work
We have previously emphasized that an important sign of an employment is the continuous availability. Thus, the employee is also entitled to wage when the office is vacated in the middle of the summer "dry season" and hardly has to do anything for a week.
In contrast, in the case of an engagement contract, the remuneration is always rendered to the service provided. Therefore, if the price in the engagement is not rendered solely to the performance provided, the authority is likely to be suspicious.
Using the tools and resources of the employer
An employee usually only takes his workforce with him in the morning, the other tools and resources are provided by the employer. However, the wedding photographer we mentioned will not give you a professional impression if he asks you to get a camera he can work with.
Based on the above considerations, you can now decide in what cases you can conclude an engagement contract, however, if a number of aspects tip the balance towards the characteristics of an employment relationship, be sure to ask the opinion of a legal expert to avoid the risk of administrative or judicial proceedings and the possible fines.
DEBT COLLECTION IN HUNGARY -3 REASONS TO HIRE A LAW FIRM INSTEAD OF COLLECTION AGENCIES
One of the annoying things in business is when your invoices are not paid by your business partners. After getting bored of their excuses, there comes a time when you have to put pressure on your debtor. At that point, you either entrust a law firm or turn to one of the many debt collection agencies offering “simple and cheap, yet efficient” solutions. Are the latter solutions really that effective? Is it worth entrusting a debt collection agency in Hungary? In our article, we bring up three reasons why hire rather a law firm in Hungary instead collection agencies.Read more »
HOW TO INFORM DATA SUBJECTS ABOUT CCTV SURVEILLANCE IN A GDPR-COMPLIANT WAY?
Operating video surveillance in a GDPR-compliant way can be a real challenge for data controllers in Hungary. A key aspect of the compliance with the GDPR is how the controller informs the data subjects (e.g. employees or customers) about the CCTV surveillance. Luckily, the European Data Protection Board which is the data protection authority of the EU has recently published a guideline on this issue. Read our short summary so that you know what to include in your camera privacy notice.Read more »
CAN YOUR DEBTOR ESCAPE LIQUIDATION BY SETTING OFF CLAIMS IN HUNGARY?
The initiation of a liquidation procedure is an effective debt collection method, since the debtor may only avoid being liquidated by paying the claim if the conditions specified in the Act on Bankruptcy Proceedings and Liquidation (Bankruptcy Act) are met. For this reason, in the case of liquidation, one of the most common defences of the debtor is the reference to offsetting. But can the debtor refer to offsetting without limitation during liquidation? In our short article we answer this question.Read more »