17 September 2015

In this short summary we sum up the 7 most important things that an employer needs to know before hiring an employee in Hungary.

Hungary; hiring an employee; employment in HungaryWork permit

If your employee is  EU-citizen (or family member), no work permit is needed to employ him. Although on the first day of the employment, the employer has to report it to the employment centre.

On the contrary, in case of hiring a non-EU citizen, a valid work permit will be required. In this case before recruiting the workforce you have to file an application for work permit to the employment centre, or alternatively, the employee has to file a consolidated application for residence and work permit to the immigration authority.

In case of employing foreign workforce without permit the labour inspectorate may apply severe sanctions.

Practical advice: The employment centre will issue the work permit for non-EU citizens for maximum 2 years and after that it can be prolonged.

Employment contract – written form

In Hungary the employment contract shall be concluded in writing. It means that the contract shall be printed and signed by both parties. The absence of written form does not affect the validity of the employment relationship but it is a risk for the employer, because the labour inspectorate may apply sanctions (among other prohibits the further employment, imposes penalty).

Practical advice: Not only the employment contract, but the modification of the contract shall be in a written from.

Employment contract – base content

The employment contract sets out the basic rights, duties and responsibilities of both parties. At least the basic wage and the position have to be agreed in the employment contract.

It is very important that in Hungary workers must not be paid less than the statutory minimum wage which is specified by the government and reviewed annually.

Practical advice: the trial (probation) period shall be expressly agreed in the contract, and it cannot be longer than 3 months. During the probation period you can fire the employee without reasons and notice period.

Medical examination

An employer is responsible for providing their employees with a safe and secure environment to work in.

Therefore among other requirements, prior to beginning to work the employee shall be examined by a doctor who issues a medical certificate, attesting that the employee is medically fit to perform its work duties.

Practical advice: The medical examination is not only required before the beginning of the employment, but periodically (e.g. in case of some dangerous workplaces in every six months).

Reporting to the tax authority

You shall report your employee to the tax authority on the first working day. You shall also report the termination of the employment relationship within 8 days.

Practical advice: keep your reporting obligations to the tax authority seriously, so that you avoid penalties imposed by the tax authority.

Informing the employee

You shall inform your employee in writing within 15 days from the beginning of employment about the following conditions: the daily working time, the parts of the wage, time-off and leave, termination of the contract, collective agreements.

Practical advice: It is very useful to issue a handbook on employment terms and conditions, in which you can set forth all the rules which you consider as important in connection with the employment relationship.

Non-competition clause

If you would like to prevent your employee from competing with your business you will have to include a non-competition clause in the contract.

The non-competition obligation cannot be longer than 2 years after the end of labour contract and you have to pay an appropriate compensation to the employee.

Practical advice: The compensation for the non-compete obligation shall not be less than 33 % of the base wage for the same period.