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Practical issues relating to the written employment contract and the commencement of employment

News, Employment, labour law / / , ,

According to Act I of 2012 on the Labour Code (“Labour Code“) an employment relationship is established by an employment contract, which shall be made in writing by the parties. Thus, the establishment and existence of an employment relationship can be clearly established if there is a written employment contract. But what happens if the agreement is not concluded in writing or is concluded later? What happens if one party wants to withdraw after the written offer but before the signing of the employment contract? It is worth being aware of the detailed rules to ensure that your employer’s practices comply with the provisions of the law. Since a new ruling by the Curia on the subject was published in March 2025, we summarise the most significant information regarding the written form and the establishment and duration of employment relationship.

The importance of concluding in written form

As a general rule, an employment relationship is established by an employment contract. According to the Labour Code, the employment contract must always be concluded in writing, and it is enough for the parties to agree on the employee’s base wage and job. However, it is worth noting that in practice there are many examples where an employment relationship is established in the absence of a specific employment contract. For example, if an employer makes an offer containing the essential terms and conditions (job and base wage) and the employee accepts it, the employment relationship is deemed to have been established by the employee’s acceptance, without the parties signing the employment contract.

Failure to put it in writing does not result in the non-existence of an employment relationship. The Labour Code stipulates that the legal consequence of not having a written contract is invalidity, which can only be invoked by the employee, and only within 30 days of commencing employment relationship.

This interpretation was also confirmed by the Curia in its recent decision. In the case in question, the employee was employed for a fixed term but continued to work after the expiry of the fixed term, to which the employer did not object, and continued to fulfil its obligations to provide work for the employee and to pay wages. In the meantime, the parties wanted to settle their employment relationship, and the employer sent the employee an offer for an employment contract of indefinite duration, which the employee accepted, but the parties did not sign. In the meantime, the employer gave termination of notice to the employee, who claimed that it was unlawful on the grounds that, in the absence of a written employment contract, they were not in an employment relationship and therefore termination was not conceptually possible. The employee claimed that the employment contract was only signed after the termination of notice was given, so in in its view its employment relationship was established from that time.

In the case, the Curia ruled that the employee’s employment relationship had existed since the beginning of the fixed-term contract, which, after its expiry, had become an employment relationship of indefinite duration due to the parties’ implied conduct and which the employer was therefore entitled to terminate. This ruling also shows that the existence of an employment relationship is not solely determined by the written employment contract of the parties, in the absence of which the existence of an employment relationship can be established on the basis of the circumstances of the case.

The question legitimately arises: why then is there a need for a written employment contract? As an employment law counsellor, the answer is simple: to prevent disputes. In our experience, neither party wants to argue in court what kind of cafeteria allowance an employee is entitled to, what limits apply to the home office and how the annual leave can be granted. In addition, failure to conclude a written contract may result in sanctions applied by the Hungarian Labour Authority as a result of the inspection.

Important stages of the establishment of employment and a possibility of withdrawing

In addition to the written form of the employment contract, the dates – periods – at which the employment relationship is established are of paramount importance, as the parties have different rights and obligations at different stages.

At the time the employment relationship is established, we differentiate between the time when the employment relationship is established and the time when the employment relationship commences.

  • Establishment of the employment relationship

The employment relationship is established on the date of conclusion of the employment contract or on another date specified in the contract (offer). From that time onwards, the parties may not engage in any conduct that would prevent the employment relationship from being established. The question may arise as to what conduct can prevent the employment relationship from being established. On the employee’s side, for example, failure to attend compulsory medical examinations by the private induvial can be such case.

  • Commencement of the employment relationship

The commencement of the employment relationship is the date on which the employee starts to work. In the absence of a specific provision in the employment agreement, that is the day following the conclusion of the employment contract. From this point on, the “active” phase of the employment relationship begins, during which the parties can exercise their rights and must fulfil all the obligations arising from the employment relationship. If the parties have agreed on a probation period, the duration of the probation period also starts at the commencement of the employment relationship. Last but not least, this day is also significant from a social security point of view, as the start of the insurance relationship aligns with the commencement of the employment relationship.

The parties have the possibility to set an alternative start date in the employment contract, thus allowing the actual employment and availability obligation to be delayed by up to several months (e.g. in view of the employee’s previous notice period).

  • Right of withdrawal

Between the establishment and the commencement of the employment relationship, either party has the right to unilaterally withdraw from the employment contract, which will terminate the legal relationship between them with retroactive effect. This right can be exercised if, after the employment contract was concluded, there has been a material change in the circumstances of the party whereby carrying out the employment relationship is no longer possible, or it would result in unreasonable hardship.

It should be emphasised that only circumstances arising after the conclusion of the employment contract may entitle the parties to withdraw and that the parties must settle their claims against each other retroactively to the date of the conclusion of the employment contract.

Summary

It can be seen that, as an employer, there are a number of important aspects to consider and communicate when making an offer to ensure that the procedure complies with the law and to avoid disputes later on, such as:

  • When does the employee start work?
  • Are there any other conditions to starting work?
  • How long is the employer’s offer valid?
  • Are there any conditions to the offer that, if not accepted, will invalidate the whole employment relationship?
  • In what cases can either party withdraw from the offer?

Image source: Pavel Danilyuk, Pexels.com

New forms of employment in the 21st century

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The digital revolution of the 21st century has led to the emergence of new forms of employment at global level. The common character of these employment relationships is that they provide more flexible working conditions than traditional employment relationships. These new forms of employment are characterised by different contractual relations, different rules on where, how and when work is performed, and increased use of information and communication technologies. In our article, we would like to present the three most typical types of new forms of employment.

Digital nomads

Digital nomads are people who can perform their work from anywhere – even a continent away – with the help of digital tools. Although the new trend is becoming more widespread, many people are not aware of its legal implications. Becoming a digital nomad has important employment, tax, social security and immigration consequences.

If the employment relationship has a cross-border element, questions arise as to which country’s employment rules apply, in which country the insurance obligation arises, how the tax liability is determined – especially on income from wages -, and whether there is a need to make a declaration or obtain a permit to stay legally in a country after a certain period of time

As an example, let’s take an employee who wants to establish an employment relationship with a company based in the UK by residing in Hungary on a permanent basis. In this case, in the absence of a choice of law, the parties must apply Hungarian labour law to the legal relationship, given that, as a general rule, the labour law of the country from which the employee usually works is applicable. Under current Hungarian labour law, employees may also work remotely, provided that the employee and the employer agree on this separately. In the case of teleworkers, the employee works part or all of the time at a place separate from the employer’s premises, even in a different country. In the example case, the parties determine the place of work in accordance with the residence in Hungary and may agree that the employee performs his/her obligations arising from the employment relationship through telework.

A different approach will apply to a temporary agreement where the worker is only temporarily (up to 1-2 years) going to a country other than the country of origin – the Posting of Workers Directive 96/71/EC will apply.. In this case, the labour law of the Member State where the work is carried out will apply on certain issues (e.g. minimum wage, paid leave, occupational safety and health), regardless of which Member State’s law applies to the employment relationship.

If the digital nomad is a third-country national, there is also an immigration aspect to his/her legal relationship, as he/she needs a residence permit to work and enter the country. In general, it can be stated that Hungary explicitly supports the entry and residence of third-country nationals as digital nomads. The Act XC of 2023 on the General Rules on the Entry and Stay of Third Country Nationals specifically provides for the so-called White Card, a residence permit that can be obtained through a preferential procedure, for digital nomads.

The correct assessment of the tax liability can only be determined by assessing the relevant legislation (e.g. the relevant double taxation convention) and the individual circumstances of the case. However, as a general rule, it can be stated that employees are liable to pay their taxes in the country where their centre of economic interest can be established. From a social security point of view, the place where the employee works is relevant.

Overall, these questions can be answered on a case-by-case basis, as different rules apply to the persons concerned depending on their nationality, the country in which they would work, the length of time they would work and the type of job they would perform.

Platform workers

Platform-work is a relatively new form of employment, which is based on matching the supply and demand of paid work through an online platform. So, the person who does the paid work is connected by the platform offering the service to the party who uses the service, i.e. the party who buys it. This type of work has grown in popularity in recent years, for example in the case of food delivery services or taxi services. It is estimated that the number of platform workers has now reached 43 million in the European Union. There are also a number of issues of relevance to labour law in relation to platform work.

The most significant is the issue of the qualification of the legal relationship. The vast majority of platform workers are self-employed, even though platforms have extensive powers of instruction, control and discipline. As a result, they are not guaranteed the broader protection of employment rights.

In Hungary there is no unified regulatory system for platform work yet. This means that courts examine the nature of the legal relationship individually in the event of litigation. In December 2023 uncertainty over the classification was increased by the judgment of the Curia on the qualification of a contract of a food delivery service provider, in which the body ruled that platform work does not constitute an employment relationship.

The European Union, recognising the vulnerability of platform workers, adopted Directive 2024/2831 on improving working conditions in platform work (“Directive“) in 2024 to improve the platform worker’s employment conditions.

In order to classify the relationship correctly, the Directive requires Member States to introduce measures to facilitate the definition of an employment relationship. To achieve this, Member States should provide rules to determine whether a relationship is an employment relationship or another contractual relationship for self-employment, regardless of how the parties have previously classified the contract between them. The Directive introduces a rebuttable legal presumption that the relationship between the platform and the person performing the work is an employment relationship if facts indicating control and direction are founded in accordance with the law, collective agreements or practice in force in the Member State concerned. Member States, including Hungary, must implement the Directive provisions by 2 December 2026; in the meantime, the general rules are applicable.

Guidance on the classification of employment relationships in labour law disputes – although now repealed – continues to be based on the FMM-PM Directive 7001/2005 (“FFM-PM Directive“). The FFM-PM Directive distinguish between primary (e.g., subordination) and secondary (e.g., determining the place and time of work) qualifying attributes. While primary qualifying attributes can be decisive on their own, secondary qualifying attributes can typically only lead to a reclassification of a legal relationship in combination with other attributes indicating the existence of an employment relationship. It is expected that the regulation to be developed under the Directive will contain similar criteria, which may replace the criteria under the FFM-PM Directive, which is no longer in force but is taken into account in practice.

In practice, the question of classification often arises in the activities of marketing agencies. Agencies typically employ freelancers, who are assigned to clients to carry out specific tasks. However, clients should be aware that if freelancers are fully “integrated” into their organisational system when carrying out their activities, they will be considered by the court as employees of the client in a possible classification litigation.

Platform work also has tax and social security implications. The reason for this is that platforms are not obliged to pay taxes or contributions after their employees in the absence of an employment relationship.

Employer of record („EoR”)

A new type of employment is the so-called Employer of Record (“EoR“). This form of employment allows companies to enter markets in countries other than their home country without establishing a business premises (from corporate viewpoint) and recruiting employees there. The essence of the model is that the company wishing to enter a new market, as a client, enters into a contract with the company providing the EoR service. The EoR service provider concludes employment contract with the employees, so the EoR service provider becomes the employer of the employees (it bears all the responsibilities of employment), while these employees perform their activities on behalf of the client.

In Hungary the challenge with the EoR model is that the Hungarian labour law provides special provisions on temporary agency work which is a much more strictly regulated activity that requires a licence. It is similar in substance, since the purpose of temporary agency work is to allow the temporary-work agency to temporarily assign the temporary-agency worker, who is employed by the temporary-work agency for the purpose of a loan to the user enterprise for work supervised by the user enterprise. If the Hungarian labour authority finds that the service provider has engaged in temporary agency work without being registered with the authority, it may reclassify the legal relationship in question as temporary agency work and impose a fine of up to HUF 25 million on the service provider. For this reason, EoR service providers typically wish to avoid being classified as temporary work agencies.

Another problem with the model, as explained earlier, is the integration of the employee into the client’s work organisation. The reason is that the tighter the relationship between the parties, the greater the risk that the contract will be considered temporary agency work.

Tax issues may also arise in connection with the EoR model. If the client establishes a premise by using the EoR service, it may be subject to tax liabilities.

Summary

In summary we can conclude that the traditional employment model is still dominant, but labour market trends and new work-related demands suggest that atypical forms of employment will become increasingly popular in the future. However, before applying them, it is necessary to carefully examine the underlying conditions in the specific case to ascertain their lawfulness.

International publication on Global Law Experts

News, Employment, labour law /

Global Law Experts recently published Anna Katalin Papp’s article on Doing Business in Hungary from an Employment Law Viewpoint

Introduction

Employment relationships under Hungarian law are primarily, but not exclusively, governed by the provisions of Act I of 2012 on the Labour Code (“Labour Code“). In addition, the content of employment relationships is further governed by the provisions of other legislation (e.g. Act XCIII of 1993 on Occupational Safety and Health), collective agreements, internal rules of the employer and individual employment contracts. As an EU member state, Hungary is also subject to EU legislation – either directly or by implementation – in the area of labour law. Below is a summary overview of the most important Hungarian labour law rules. Please note that the below does not constitute full legal advice.

  1. Establishment of employment

The employment relationship is established by the conclusion of a written employment contract. The employment contract must contain the mandatory elements prescribed by law (e.g. basic salary, job title) and any other conditions that the parties consider necessary. In that context, the parties may derogate from the provisions of the Labour Code mostly in the favor of the employee, unless derogation is prohibited by law.

It is important to note that the employment relationship is an agreement between the parties, thus it can only be modified by the mutual consent thereof.

At the same time as the employment relationship is established, the employee must be provided with an information letter containing the most important information about the employment relationship (e.g. the person exercising the employer’s rights, the duration of the daily working hours, possible starting and ending dates of work, benefits beyond the basic salary, etc.). This is a unilateral information letter issued by the employer, therefore, as a general rule, it can be unilaterally amended (updated) by the same.

The employee should also be informed of their job duties at the time of the establishment of the employment relationship, as the job description summarizes the tasks expected by the employee to perform. That is typically included in a separate job description – the content thereof can indeed be unilaterally amended by the employer without changing the job title.

When the employment relationship is established, the employer must also register the employee with the tax authorities.

  1. Working hours and work schedules

The standard daily working hours in Hungary are 8 hours, and the standard working week is from Monday to Friday (i.e. 40 hours a week in principle).

Deviations from the daily working hours and working days are possible for certain activities (e.g., multi-shift activity) and working schedules (e.g., working time frame) within the limits provided by the law.

The right to schedule working hours is assigned to the employer, but it can also be delegated to the employee, known as a flexible work schedule.

  1. Teleworking

As a result of COVID, teleworking, or a hybrid version thereof, has also become widespread in Hungary. According to Hungarian law, teleworking is when the employee works partly or at all time at a location separate from the employer’s premises.

Teleworking must be agreed in the employment agreement, i.e. the consent of the employee is always required, if the employer wishes to introduce or eliminate it. Still, the detailed terms (e.g., the number of office and teleworking days) may be determined unilaterally by the employer.

The rules on teleworking are fundamentally different for jobs involving IT devices (e.g. office workers) and non-computing jobs (e.g. seamstresses, chefs).

  1. Executive employees

An employee is considered to be an executive employee in two major scenarios:

  • by virtue of their position:
    •  the executive(s) of the employer and other employees under their direct authority and authorized to replace them, in whole or in part (e.g. MD, CFO);
  • by agreement of the parties, if
    • the employee holds a position of major importance or a position of a highly confidential nature for the operation of the employer;
    • their basic salary is at least seven times the statutory minimum wage, i.e. HUF 2,035,600 (approx. EUR 5,100) in 2025.

Regarding  executives, the parties may derogate from most of the provisions of the Labour Code, for example, the termination of an executive does not need to be justified in principle (taking into account the fiduciary nature of the position).

  1. Non-compete agreements

Upon agreement of the parties, the employee may not engage in any conduct that would harm or jeopardize the legitimate economic interests of the employer (e.g. working for a competitor, starting a business in a competing activity) for a maximum of 2 years after the termination of employment.

Importantly, a valid and enforceable agreement is conditional on (i) the written agreement of the parties; and (ii) appropriate consideration for the employee in exchange for the restriction.

Proportionate consideration must be assessed on a case-by-case basis. When determining the amount of compensation, the degree of impediment the agreement has on the employee’s ability to find employment elsewhere shall be taken into consideration and tailor-made to the certain employment. However, in general the consideration shall not be less than one third of the basic salary due for the same period as the agreement.

  1. Termination of employment

The employment relationship may terminate automatically (e.g. death of the employee, termination of the employer without successor, expiry of the fixed term), or initiated by the parties, namely by (i) mutual agreement; (ii) termination (with notice period); or (iii) termination with immediate effect.

Upon mutual agreement the parties are free to determine the terms of termination of their employment relationship, notwithstanding the provisions of the Labour Code.

In the case of termination by notice (termination in lieu of notice), the employment relationship is terminated at the end of the notice period. The basic notice period prescribed by law is 30 days, which increases based on the length of service in the case of termination by the employer.

An employment relationship of indefinite term may be terminated by the employee without giving reasons, whereas the employer is obliged to give reasons. The employer may give notice of termination only for reasons related to the employee’s conduct or ability or the employer’s operations.

The employer or the employee may terminate the employment relationship with immediate effect if the other party (i) willfully or by gross negligence, seriously breaches a fundamental obligation arising from the employment relationship, or (ii) otherwise engages in conduct which makes it impossible to continue the employment relationship.

The termination with immediate effect shall be communicated within 15 days of gaining knowledge of the grounds therefor.

  1. Consequences of unlawful termination

The Labour Code provides for sanctions for unlawful termination of employment.

In the case of an unlawful termination by the employee, the employee

  • in the case of an employment contract of indefinite term, shall pay an amount equal to the absentee pay due for the period of the employee’s normal notice period (typically 30 days),
  • in the case of a fixed-term contract, shall pay an amount equal to the absentee pay for the remaining period of the fixed-term contract (but maximum of 3 months).

In the event of unlawful termination of employment by the employer, it must compensate the employee for any damage caused by the unlawful termination (the amount claimed for loss of earnings must not exceed the employee’s 12 months’ absentee pay).

In certain cases (e.g. violation of equal treatment, abuse of rights), the employee may also request the reinstatement of his/her employment relationship, in which case, if the court grants the request, the time spent in the interim period (the period between the unlawful termination and the final court decision) is considered as employment and for that the employee is entitled for renumeration.

  1. Employment of foreigners

Employment of EU nationals is permit-free but may be subject to registration.

Employment of third-country nationals is, as a general rule, subject to permit. There are several types of permits that can be applied, depending on the circumstances of the case to decide which permit is appropriate for the particular third-country national.

  1. Foreign employers

If a foreign company decides to carry out activities/provide services in Hungary, it is advisable to consider the nature of the Hungarian activity (especially with regard to the persons to be employed) at the time of the establishment of the Hungarian company. The conditions of employment – for example: form of employment (e.g., employment / assignment), persons to be employed (e.g., on the basis of nationality), mode of employment (e.g., Home office / office presence) – have a fundamental impact on the employment structure.

  1. Taxation of salaries

Payments received with respect to the employment relationship (typically salary) are generally subject to three main taxes and contributions in Hungary: (1) personal income tax (15%), (2) social contribution tax (13%) and (3) social security contribution (18,5%).

These taxes and contributions are typically deducted (or paid) in advance by the employer, thus the employee receives his/her tax-deducted, i.e., net salary from the employer.

However, there are certain benefits (e.g. some cafeteria benefits or the newly introduced housing allowance) that are taxed more favourably, and there are also employees who may qualify for tax relief under certain conditions (e.g. based on age, family status).

https://globallawexperts.com/doing-business-in-hungary-from-employment-law-viewpoint-2/

 

 

Employers’ tasks related to the implementation of EU Directive 2023/970 on equal pay and pay transparency

News, Employment, labour law / / , , ,

The deadline for the implementation of Directive 2023/970/EU (hereinafter: “the Directive“), published on 17 May 2023, which aims to reinforce the principle of equal pay for men and women for equal work or work of equal value through pay transparency and enforcement mechanisms, into Hungarian law is approaching, and must be met by 7 June 2026. Although the specific Hungarian legislation will be known after the Directive has been implemented, it is already necessary to refrain from any action that would jeopardise the aims of the Directive, so employers should also keep the rules in mind in their internal processes and include compliance with the Directive on their 2026 to-do list.

Purpose of the Directive

The Directive sets minimum requirements to ensure that men and women receive equal pay for work of equal value. It applies to employers in both the private and public sectors and to employees who have an employment contract. Entry into force will be phased in, but from June 2026 large companies with 250 or more employees will have to comply.

Basic principles of the Directive

To achieve the aims of the Directive, we need to see what we mean by equal work or work of equal value and what we need to look at when we talk about pay. Work of equal value is work that is considered to be of equal value in a non-discriminatory and objective, gender-neutral way, in accordance with gender-neutral criteria.

Accordingly, there may of course be differences in pay, but these need to be justified by objective criteria, independent of the sex of the employee. In terms of remuneration, all elements of pay must be taken into account in the comparison, be they basic wage, bonuses, transport allowances, so the Directive looks at all benefits received directly or indirectly, in cash or in kind, by the employee under the employment relationship.

In order to assess and ensure equal value for work and equal pay, the Directive requires the application of a pay structure that allows for the assessment of whether employees are in a comparable situation, based on objective, neutral, gender-neutral criteria. These criteria may, in particular, be relevant to the skills, responsibilities, working conditions and conditions of the job in question and their assessment must not lead to direct or indirect discrimination on grounds of sex.

Member State and employer obligations

The Directive sets out a number of obligations for both Member States and employers.

The Member States are responsible for collecting and regularly communicating data on pay gap and for setting up the necessary monitoring mechanisms and appointing a monitoring body to protect workers’ rights.

There are also a number of obligations for employers. It is important to ensure that, at the application and selection stage, the applicant is informed of the initial pay or its range, based on the criteria for the position concerned, and, where applicable, of the provisions of the employer’s collective agreement in relation to the position. It has to be ensured that the candidate can conduct an informed and transparent negotiation of the position.

In order to provide the relevant information, it is advisable to bear in mind that this data is sensitive for the employer and may therefore be subject to a confidentiality obligation. On the other hand, the collection and processing of the necessary data of the applicant should be in line with the GDPR rules.

During the employment relationship, employees will need to be informed of the criteria used by the employer to determine their pay, pay levels and pay increases. In addition, the Directive gives employees the right to request and receive information in writing about their individual pay levels and the average pay levels, broken down by gender, for categories of employees who perform the same work or work of equal value as them.

On the basis of these data, employers will also have additional reporting obligations on their gender pay gap survey, depending on the number of employees.

Legal remedies, enforcement

The Directive also provides for remedies for employees in order to achieve its objectives and to fulfil the employer’s obligations, and in such proceedings the employer has the burden of proving that there has been no discrimination. Interestingly, the Directive allows for legal costs to be charged to the employer even if the employee has reasonable grounds for bringing proceedings.

Concluding thoughts

The Directive sets out a number of complex obligations for employers to reduce the gender pay gap and promote the principle of equal pay.

Although the specific rules will become known when the transposing legislation is published, the framework of the rules is already visible and no less favourable conditions for employees can be expected at Member State level.

It is advisable to start preparing for these obligations now, to review internal processes in the light of the Directive and to keep them in mind when making any changes, both in recruitment, selection and employment, as the transition may take longer and affect several areas – labour law, data protection – in the event of mandatory implementation. Based on the expected employer obligations, we believe that employers who know the depth of information they need to provide to employees and the reports they need to prepare in advance will be the ones who will comply well with the Directive and Member State rules.

Image source: Freepik.com

Changes in simplified employment

News, Employment, labour law / / , ,

Simplified employment is an atypical employment relationship that offers the possibility to work in a more flexible framework than the general rules. The specific provisions can be found in Act LXXV of 2010 on Simplified Employment (“Simplified Employment Act“), whereas the provisions of Act I of 2012 on the Labour Code (“Labour Code“) serve as a background rule. This year, there are several significant changes to the rules on simplified employment, which will be or have been introduced gradually in two stages. This article summarizes these changes.

Amendments effective from 2 February 2025

  • Changes concerning taxes

Employers are required by law to pay a specific contribution for their employees working under the Simplified Employment Act. The amount of this tax is based on a percentage of the minimum wage applicable on the first day of the month in question, thus the increase in the minimum wage also affected the amount of the tax payable. It is also important to note that the percentage of the minimum wage per employee and per calendar day has also increased, i.e., the following percentage of the minimum wage applicable on the first day of the month shall be paid:

  • 0,75% (compared to 0.5% previously), i.e. HUF 2 200 per day for seasonal agricultural and touristic work;
  • 1,5% (compared to 1% previously), i.e. HUF 4 400 per day for occasional work.

There was no increase for film industry extras, thus, the tax rate remained unchanged at 3%, i.e. HUF 8,700 per day.

It is important to note that these new provisions will only apply to employment relationships concluded after 1 February 2025. Accordingly, if an employment relationship was established on or before 1 February 2025, the rate of tax will be based on the previous rules.

  • Employee benefit entitlement

An employee employed in a simplified employment relationship is not considered to be insured, but is entitled to pension, accident health care and job-seeker’s allowance.

The amount of the pension benefit is adjusted to the minimum wage applicable on the first day of the month in question, therefore the amount has already been increased from 1 January 2025. Under the amendment to the Simplified Employment Act, the percentage rate has also increased from 2 February 2025. On this basis, the pension is calculated on the basis of the following percentages of minimum wage on the first day of the month:

  • 2,1% (compared to 1.4% previously), i.e. HUF 6 100 per day for seasonal agricultural and touristic work;
  • 4,2% (compared with 2.8% previously), i.e. HUF 12 200 per day for occasional work.

There was no change for film industry extras, which remained at 2.8%, i.e. HUF 8 100 per day.

Amendment to take effect from 1 July 2025

  • Annual limit, introduction of electronic enquiry system

In the future, employees will be allowed to work up to 120 days per year under a simplified employment relationship. This change is of particular importance, as the duration limit previously applied only to the specific employer-employee relationship, but now it will have to be taken into account for all the simplified employment relationships of the employee established in a given year. Hence, the number of working days worked by the employee in the context of simplified employment must be aggregated, irrespective of the employer. In order to enable employers to verify that the employee concerned has not exhausted his/her annual “limit” of 120 days, the National Tax and Customs Administration (“NAV”) will provide them an electronic enquiry system.

Given that this limit will be introduced during the year, the 120-calendar day limit will be taken into account from 1 July 2025 when calculating the duration of employment in 2025.

Summary

It can therefore be concluded that the cost of simplified employment has increased this year, and the rules on the annual limit have made this type of work more restrictive than before.

However, we would like to point out that on 11 March 2025, the Government submitted an act proposing to ease the rules on simplified employment, such as the general limit of 120 days and the possibility of extending the limit with an additional 90 days for occasional agricultural work, with effect – as planned – from 1 January 2026. The provisions of the proposal will be detailed in a separate article, once it is adopted and officially published.

For more information on simplified employment, please have a look at the information brochure (unfortunately, the information brochure only available in Hungarian language) on the following link issued by the NAV.  If you have any further questions on this topic, please do not hesitate to contact us.

Image source: Maria Turkmani, Pexels.com

Key Provisions of the 2025 Labor Law Amendments

News, Employment, labour law / /

At the end of 2024, Act LVII of 2024 on labour-related provisions (“Amending Act“) was published, introducing new regulations for labour-related legislation for 2025. The Amending Act includes changes to the Act I of 2012 on the Labour Code (“Labour Code“) and the Act XCIII of 1993 on Labour Safety (“Labour Safety and Health Act “). In this article, we summarize the main provisions of the Amending Act.

  • Key provisions affecting the Labor Code:
  • The period to use paternity leave increases from 2 months to 4 months, considering its limiting nature. An important new provision is that employers shall not give notice to employees during paternity leave, even if they are executive employees.
  • Employees will be exempt from the requirement of availability and from work duty for up to two hours if their work obligations exceed eight hours on the day of an election or referendum. They will also be entitled to an absence fee for the duration of their absence. This amendment of the Labour Code aims to ensure employee participation in elections without financial or employment-related disadvantages.
  • The Labour Code already provided that the working time of an employee performing stand-by job or a relative of the employer, if they have a written agreement with the employer, may be increased to a maximum of 24 hours per day in the case of a daily working time schedule and to a maximum of 72 hours per week in the case of a weekly working time agreement. Given that this type of agreement can be very burdensome for the employee, the Labour Code provides the possibility for the employee concerned to terminate the agreement. In order to bring Hungary into compliance with EU law, the above-mentioned rules on the termination of a written agreement are being amended. According to the Amending Act, in the case of a work time frame exceeding 6 months, the employee may give 15 days’ notice to the last day of the calendar month after the expiry of 6 months.
  • The Amending Act, in the light of the interpretation of the law so far, specifically provides that employees are entitled to a 100% wage supplement for overtime work on public holidays.
  • Key provisions affecting the Labour Safety and Health Act:
  • According to the provisions of the Amending Act, documents generated in the context of occupational safety and health activities (e.g. documents on risk assessment or periodic safety review) must be kept by employers in an up-to-date condition at their headquarters or premises in such a way that they are accessible to the parties concerned, in particular employees. According to the reasoning, this is necessary because the Labour Safety and Health Act has not yet stipulated where occupational safety and health documents should be kept. In a number of cases, the occurrence of exceptional events has revealed that employers are not fully aware of their obligations, and employees and their representatives have not been able to get to know the provisions that are applicable to them. Both physical and electronic storage methods are acceptable.
  • In view of the increased amount of the OSH fines, the Amending Act introduces the possibility for employers to be allowed by the authority to pay in instalments, thus protecting smaller companies or, where appropriate, companies in financial difficulties. It is important to note, however, that if any instalment is not paid in time, the full amount of the remaining fine will be due.

The provisions of the Amendment Act take effect on January 1, 2025. Employers are advised to review their practices at the beginning of the year, particularly regarding the storage of occupational safety and health documents. This is crucial as the OSH authority’s scope includes ensuring compliance with all occupational safety regulations and enforcing them through administrative measures. The amendments to the Labor Code are equally important. For instance, should an employer terminate an employee during paternity leave and the termination is challenged in labour court, the court may rule the termination unlawful.

If you have any questions regarding the above, our Office is at your disposal.

(Image Source: Pavel Danilyuk, pexels.com)

Rules on occupational safety and health in 2025

News, Employment, labour law / /

At the end of December 2024, a legislative amendment was published in the interests of legal competitiveness which also includes changes to the field of occupational safety and health. In this article, we summarise the new rules of Act XCIII of 1993 on Occupational Safety and Health (the “Occupational Safety and Health Act“) that will enter into force in 2025.

Simplification of the document preparation obligation

The employer is obliged to carry out risk assessment, risk management and the determination of preventive measures before the start of the activity and in justified cases. From 1 January 2025, the obligation to carry out periodic assessments under the Occupational Safety and Health Act has been extended to 5 years (compared to 3 years previously). These obligations now also apply if the employer’s scope of activity changes.

In addition, the legislation allows for the risk assessment to include a prevention strategy and the provision of personal protective equipment, so that these no longer need to be set out in a separate document.

Changes to the persons authorised to carry out tasks in the field of occupational safety and health

In many cases, the Occupational Safety and Health Act makes the performance of certain occupational health tasks by persons with professional qualifications subject to the approval of an occupational physician, but the legislator has considered that in certain cases it is appropriate to omit the medical approval and that persons with specific professional qualifications may perform certain occupational safety and health activities independently, thus making it easier for businesses.

Thus, from 1 July 2025, the occupational safety and health tasks required during the preliminary examination from an occupational safety and health point of view, the preparation of the occupational safety and health content of the rescue plan, the preparation of the occupational safety and health training agenda may be performed independently by a person with specialist medical degree in occupational medicine, occupational physician, occupational hygiene, public health epidemiology, preventive medicine and public health, or a person having qualification as a public health epidemiological inspector or supervisor. The tasks may continue to be carried out by a person qualified as a public health inspector or supervisor with the approval of an occupational physician.

The tasks relating to the occupational safety and health content of the risk assessment will also be carried out by persons with the qualifications listed above; this facilitation will also apply to employers with up to 50 employees classified the lowest, so-called class III risk category. This will also apply to the tasks related to the development of the occupational safety and health content of the prevention strategy from 1 July 2025.

For the same reasons, the scope of those entitled to carry out occupational safety and health tasks concerning the internal policy for the provision of personal protective equipment and the implementation of a working environment which does not pose a risk to health will also be amended from 1 July 2025. These tasks will be carried out by a medical doctor providing basic occupational health services or a person having qualification as a public health epidemiological inspector or supervisor. With medical approval, the tasks may continue to be performed by a person qualified as a public health inspector or supervisor.

Summary

The changes that came into force on 1 January and those that will be introduced later, on 1 July, will make it easier for businesses to comply with the safety and health requirements, both administratively and operationally.

If you have any questions about the practical application of the changes or compliance with any other occupational safety and health rule, our Office will be happy to help.

(Image Source: Luis Quintero, pexels.com)

The Supreme Court took an important decision regarding the postal delivery of termination notices

News, Employment, labour law / /

According to the facts underlying the decision, the employee had moved from his registered address but failed to notify the employer of this change, despite being contractually obligated to do so. At the same time, the employee arranged for a so called “mail forwarding services” with the post office.

After the employee moved out, the employer sent a termination notice by post (to the previous address), which the employee has received as proved by the return receipt. Subsequently, during the communication related to the termination process of the employment relationship the employee indicated that the termination had not been delivered to him. However, the employer relying on the evidence of the return receipt dismissed the claim and proceeded with further steps, such as deregistering the employee.

For the reasons set out above, the employee filed a lawsuit against the employer, claiming unlawful termination of the employment relationship. During the legal proceedings, it was established that the postal worker had not acted in compliance with the delivery procedures when delivering the mail: despite the mail forwarding service, the termination notice was delivered to the employee’s former address, and the postal worker had failed to verify the identity of the person who received it.

The employer argued that the postal worker breached the forwarding agreement between the employee and the post office, but this breach should not affect the termination and could not be held against the employer.

However, the court did not accept this argument. Under the provisions of the Labour Code, in the event of a dispute, the burden of proof regarding proper delivery of a legal statement lies with the party making the statement—in this case, the employer. Since the employer was unable to demonstrate that the delivery was carried out properly (through no fault of its own), the Supreme Court declared the termination unlawful.

The decision highlights that, even if an employer acts lawfully when arranging the postal delivery of a termination notice, unforeseen circumstances outside the employer’s control may still result in adverse consequences, creating a potential risk for the employer. Therefore, before delivering any kind of an employer’s acts, it is advisable to consider alternative delivery methods and assess whether those might be preferable to postal delivery.

(Image source: sl wong, pexels.com)

Key Information in connection with housing allowance

News, Employment, labour law / / ,

Introduction

Pursuant to Government Decree No. 403/2024 (XII. 18.) on housing allowance for employees (hereinafter the “Government Decree”), published in December last year, employers may provide housing allowance to their employees within a specified budget starting from January 1, 2025. This new type of non-wage benefit is also beneficial for employers, as it is subject only to a 15% personal income tax and an 18% social contribution tax. This article summarizes the main questions and considerations related to this allowance.

Key questions and advantages of the benefit

Housing allowance is available to employees under the age of 35, with a maximum annual amount of HUF 1.8 million, equivalent to a maximum of HUF 150,000 per month, provided the employee’s employment relationship lasts throughout the year.

The allowance can be used to pay off housing loans or rent. According to the Government Decree, employees can request the allowance by specifying their housing-related purpose. Employers are required to transfer the amount of the allowance to the bank account provided by the employee. Although the Government Decree does not explicitly state this, the Government communication suggests that in case of loan repayments, employers may transfer the allowance directly to the banks. Currently, the situation remains uncertain as it is unclear whether new regulations will be adopted or if banks themselves will establish additional conditions.

It is important to note that employees bear the primary responsibility for compliance with the legal requirements related to this benefit. If an employee receives housing allowance in an amount exceeding what they actually pay for rent or loan repayments, the tax authority will impose a penalty for the difference; additionally, the excess amount will need to be paid as personal income tax.

Summary

Although the legislator has already established some basic rules regarding the allowance, we strongly recommend to employers to consider the following during its implementation:

  • Establish internal policies outlining the conditions for providing the allowance, thereby minimizing tax and labour law risks and setting detailed rules in advance;
  • Prepare an appropriate statement for employees requesting the allowance which justify the purpose and type of the allowance, as well as the details of communication;
  • Identify the necessary documentation to be retained for verifying the allowance and ensure proper handling of this information from a data protection perspective.

Should you have any questions regarding the above mentioned, please do not hesitate to contact us.

(Image source: Timur Saglambilek, Pexels.com)

Expected changes in the area of labour law

News, Employment, labour law / / ,

On 29th October 2024, the Government submitted its bill proposal number T/9718 (“Proposal“), which contains provisions amending certain labour legislation for the year 2025.  The Proposal concerns, inter alia, Act I of 2012 on the Labour Code (“Labour Code“) and Act XCIII of 1993 on Labour Safety (“Labour Safety Act“). The main changes of the Proposal are summarised below.

Under one of the provisions of the Proposal concerning the Labour Code, workers who would be required to work for more than eight hours on the day of an election or a referendum would be exempted from their work obligation for a period of 2 hours to ensure their participation in these events. Although the Labour Code has already provided that the employees right to vote must be guaranteed, the amendment clarifies the permitted period of absence.

Furthermore, the proposal would also extend the period for using paternity leave from 2 months to 4 months. This would mean that fathers would have more time after the birth of their child to use this type of leave.

The current measures protecting executive employees would also be extended, because the concerned employees’ employment could not be terminated by the employer during paternity leave.

With the amendment of the Labour Safety Act, the government’s declared aim is to ensure that employers manage safety and health documentation in a more up-to-date and transparent manner. In addition, the proposal would create the possibility for companies to pay their OSH fines in instalments, thus protecting smaller businesses or businesses who have financial difficulties.

If the Parliament votes in favour, the amendments will enter into force on 1 of January 2025.

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