Blog » SMART WAYS TO INCREASE EMPLOYEE WAGES IN HUNGARY
SMART WAYS TO INCREASE EMPLOYEE WAGES IN HUNGARY
29 May 2019
Remuneration is one of the cornerstones of an employment relationship for both parties. It is not a new practice that employers seek other ways to increase the consideration of workers without modifying the base wage. The so-called “semi-official” solutions can be dangerous for the employer, because an employment ending badly can easily be the beginning of a labour dispute. In our article, we will show you smart salary solutions compliant with the Hungarian labour law.
Base wage from the employer's perspective
As the name implies, the base wage is the starting point of the wage paid. It is a mandatory element of the employment contract and it must be paid in the form of money. For employers, however, raising the base wage may be unfavourable in many ways:
- May not be amended unilaterally
According to the Labour Code (LC.), the terms of the employment contract, so as the base wage, can only be modified bilaterally by mutual agreement. This can be a problem for the employer if they want to raise the employee's salary only temporarily (for example, for the performance of surplus tasks), as they cannot later unilaterally reset the previous wage.
- Wage supplements also increase
Another important role of the base wage that it serves as a basis for the calculation of most wage supplements, such as overtime, shift premium, night work, work on holidays. Furthermore, the absentee fee paid for the period of sick leave or holiday is also calculated considering the base wage. Hence, raising the base wage also increases the amount of wage supplement to be paid, so consider the above before announcing a nice-sounding raise.
What are the other options?
All other benefits (bonus, cafeteria, public transport pass) provided in addition to the base salary and wage supplements are considered as fringe benefits. Despite the fact that the LC. does not expressly regulate these, as an employer, you cannot apply benefits as you like.
In respect of the remuneration of work, the principle of equal treatment must be strictly considered. According to the LC., ‘wage’ shall mean any remuneration provided directly or indirectly in cash or in kind, based on the employment relationship.
Equal treatment does not mean that all employees shall be provided with the same benefits. For example, a distinction can be made between employees in different groups or departments. In contrast, you cannot treat workers differently based on their “protected characteristics”, thus it is unlawful if you announce a bonus program only for female employees, or surprise workers under the age of 30 with a Sziget Festival ticket.
Bonus and reward
Flexible wage development can be accomplished by setting bonus tasks. You can do it with publishing a prospectus, however, we suggest signing a mutual agreement with the employee. According to the judicial practice, you must pay attention to the following in order to have a compliant bonus system.
- Task must be defined and assessed objectively
As we mentioned above, you will not find the regulation of “bonus” in the legislation, so it is particularly important that you define the rules of your bonus system in detail and clear, to prevent misunderstandings. The criteria must be related to the employment relationship and objectively measurable.
Therefore, bonus condition can even be for the employee to be present during most working days. On the contrary, the general formulation of the task, like "good work" or "achievement of expected performance" is inadequate. In such cases, the assessment become subjective on the part of the employer, which violates the rights of the employee.
- employee's right to the bonus
Judicial practice also protects the employee from being deprived of the possibility to achieve bonus. In this regard, the employer may not withdraw from the announced bonus program if the performance of the tasks has already started.
A bonus scheme or reward that has been applied regularly in previous years (thus became a practice) may not be cancelled without a legitimate reason. In addition, the employee may also claim the bonus if the goal could not be met due to external reasons.
It is also possible for the employer to pay a bonus advance during the year, so an instalment can be added to the monthly wage. If the bonus requirements are not met, the advance can be reclaimed.
Based on our article you can see the practical benefits of wage increase with fringe benefits and the uncertainties related to the system. A well-constructed and applied reward system can be an effective wage development tool as well. In order to protect the interests of both parties, we recommend the involvement of legal experts in the process.
LUXEMBOURG RULED: MESSI DRIBBLED PAST EVEN THE EUROPEAN TRADEMARK OFFICE
Messi hit the legal news again, this time not because of his tax issues. In September, the match between the EUIPO and the world-famous football player, which was ongoing since 2011, finally ended. Messi won the match, as the European Court of Justice ruled that because of his significant reputation, his name can be registered as a trademark despite the fact that it is similar to several earlier trademarks, which is otherwise a ground for exclusion. In our short article, we summarise the details of the case and the legal significance of the decision.Read more »
7 MUST-KNOWS ABOUT FIXED-TERM EMPLOYMENT IN HUNGARY
The parties usually establish the employment relationship for an unlimited period. However, in certain cases, for various reasons, like business or organisational considerations, it seems to be better to conclude a fixed-term labour contract. In this article we summarize what you as an employer shall consider in Hungary in case you would hire someone for a fixed period.Read more »
CAN THE CHOICE OF COURT AMOUNT TO THE CHOICE OF LAW? – THE SUPREME COURT DECIDED
Shall it be considered as the choice of the English law if the party first starts a litigation in England regarding to a Hungarian project? How much of a role do the procedural acts of the parties play in relation to the choice of law applicable to a contract? In this article we analyse the fresh judgement of the Supreme Court, in which, among others, the highest court addressed the issue of the tacit choice of law.Read more »