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Trusted Working Hours

Employment, labour law, Medium-sized companies, News, Start-ups / / ,

ECJ has decided on the dilemma: setting up a system enabling the duration of time worked each day by each worker to be measured is a must.
The European Court of Justice requires to set up such an objective, reliable and accessible system, which allows to enable the duration of time worked each day by each worker (number of hours worked and hours of overtime worked, also when that work was done) to be measured.

The European Court of Justice gave its judgment on May 14, 2019 in the Federación de Servicios de Comisiones Obreras contra Deutsche Bank SAE case No. C-55/18 conducted on the basis of the reference for a preliminary ruling of the Spanish National High Court (Audiencia Nacional). According to this, solely the practice of setting up a system enabling the duration of time worked each day by each worker to be measured is compatible with the laws of the EU.

In the view of the European Court of Justice, the above obligation is reasoned by two key circumstances.
With regard to, that employment relationships are asymmetric by nature, where employees are considered as „weaker parties”, registration is necessary particularly due to the fundamental right to the limitation of maximum working hours and to daily and weekly rest periods, which may be derived from the safety and health protection of workers. As, in the absence of sufficient database, there would be no effective evidence available for employees in case of an incidental infringement of their rights.
In consequence thereof, authorities and courts facilitate the supervision regarding the enforcement of the above rights in the course of which only controlling these records provides an acceptable solution.

Therefore, the obligation extends to the set up of such an objective, reliable and accessible system, which allows to enable the duration of time worked each day by each worker to be measured, especially to recall the number of hours worked and when that work was done, also the number of hours of overtime worked unchanged, moreover, which is also in compliance with the special provisions regarding the form of registration, attributes of each sector of activity concerned, or the specific characteristics of certain undertakings set forth by the member states, if any (see: transport sector).

Although, several constructions of performance of work – especially of flexible working hours – have been developed by the international practice lately, which often lack clear expectations related to the methods of measuring duration of time worked, Act I of 2012 on Labor Code (“Labor Code”) disposes rather unambiguous thereof in Hungary, which is also in consonance with principles of the laws of the EU.

As a general rule, employers register the durations of regular working time and overtime, stand-by duty, periods of leave and the duration of overtime undertaken voluntarily according to Section 134(1) of the Labor Code, while the above obligation includes registration of the latter two elements of this list in respect of adoption of trusted working hours pursuant to Section 96(2).

In this context, we kindly draw the attention of our honorable Client to that it is expressly recommended to supervise the definition of the adopted working arrangements and the sufficient recordkeeping related to the above with regard to the timeliness of this issue.

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GDPR „OMNIBUS” Act overwrites the usual HR process

Company groups, Data protection, Employment, labour law, Medium-sized companies, News, Start-ups / / , , , ,

On 26 April 2019, Hungary’s new ‘Omnibus Act’ implementing provisions of the GDPR took effect. This article examines its significant impact on employers and the continuing uncertainty surrounding some of the changes it introduces.

Only a few months ago, employers were required to readjust their processes in preparation for GDPR implementation and now the new so-called ‘Omnibus’ act that amends the Labour Code, among other changes has entered into force (on 26 April 2019). The new regulation requires immediate and very significant work from HR departments, while there are several open issues to be jointly interpreted by labour lawyers together with HR and data protection professionals on how to ensure their daily practice is compliant with the new but ambiguous regulations.

The bottleneck is a result of the fact that Hungarian lawmakers were well behind schedule with implementation of GDPR, leaving employers only a few days to review the new processes, since all employers must comply with all requirements from day one. There is a strong hope that (as has happened in several previous cases) the Omnibus Act will very shortly be corrected by a new amendment.

The GDPR ‘Omnibus’ Act amends 86 acts including the Labour Code in order to comply with GDPR regulations.

This amendment requires the review of labour contracts, HR processes and significant HR policies such as recruitment, selection, new employees’ induction process, operations, the data management of access control systems and use of employer’s devices, just to mention the most common areas concerned.

Employers and all organisations should have complied with the new regulations within a couple of days of entry into force.

Although the new requirements contain more details than the published draft bill, there are still several open issues on how to implement them in practice. For example what is the meaning of, and what are the criteria for the necessity and proportionality test contained in the new regulations in relation to limitations on employees’ personal human rights (in connection with e-mail, internet, device or video surveillance, etc.)? The GDPR only includes the privacy impact assessment and the ‘balancing test’ for ‘legitimate interest’.

The usual process of recording a new employee’s data is basically overridden by the new rule that the employer may only request presentation of an ID card and other personal documents, but no copies can be made, even with the consent of the employee. This will mean that proper identification of the employee would be difficult. The provision of false data by the employee may result in annulment of employment, but with a lack of proper evidence and documentation, the employer may not be in a position to act.

Handling of criminal data records is more strictly regulated, and in the future the basic rule is that no criminal record clearance may be requested from employees. Exceptional and very strict criteria are set for cases when the employer may require an employee to present criminal record clearance, but the precise criteria can be decided by the employer if a serious business risk for the organisation would arise from an employee with undisclosed criminal record working for it.

Finally, the amendment relating to data managed by the biometric access control systems (digital fingerprint, iris/retina scanning, face identification systems), and also the use of the employers’ devices is based on new principles, meaning that a review of internal policies relating to these issues must be conducted.

GDPR „OMNIBUS” Act overwrites the usual HR process Read More »

Reinterpreted Restrictive Covenant!

Employment, labour law, Medium-sized companies, News, Start-ups / / , , ,

The supreme court has confirmed that it is not possible to incorporate the consideration for non-compete into the monthly wages even in the labour contract with the executive employees. The common practice is that the employees are required to notify the employer on the data of their a new employer.

Now according to the decision of the supreme court, breach of the notification undertaking shall not be penalised, only breach of the restrictive covenant. This surprising decision would significantly reduce the employers ability to check the fulfilment of this undertaking, because they do not become aware or only by accident if their former employee works for their competitor if there is no sanction for non-reporting. The labour code but it is a contract governed by the Civil Code which basically based on the principle of the parties’ freedom to freely determine their agreement in the absence of expressly prohibited provision, and the Civil Code does not prohibit the imposition of a penalty for breaching of notification obligation. It seems that the courts leave less room for the Hungarian employers in their civil law

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Amendments with regard to the GDPR has been published

Company groups, Data protection, Employment, labour law, Medium-sized companies, News, Start-ups / / , , , , ,

The amendments with regards to the GDPR, which was adopted by the Hungarian Parliament on the 1st of April, was officially published today.

In order to harmonize with the GDPR, the amendments modifies over 80 sectorial law, including provisions of the Labour Code.

The majority of the amendments will come into effect at the end of April, but the modifications regarding the national accreditation and the protection of inventions by patents will come into force in May.

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Legislative changes in Hungary anticipating a possible ‘No Deal’ Brexit

Employment, labour law, Medium-sized companies, News, Start-ups / / , , , , , , ,

The proposal affects the right of residence, employment and entitlement to social security and unemployment benefits for British citizens in Hungary.

The Hungarian government has drafted a bill on 26 February 2019 titled “Amendments to certain laws in the event of the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union in a disorderly manner” under number T/4821. According to the explanatory memorandum to the bill, the likelihood of a disorderly exit has increased significantly, which means that on the midnight of 29 March 2019 the United Kingdom of Great Britain and Northern Ireland would become identical to third-countries. The amendments to the law contained in the bill would enter into force in Hungary at the time and in the event of a no deal Brexit.

As regards residence and employment, the essence of the bill is that British citizens can continue to hold the same status as an EU citizen for 3 years after leaving which means, they can legally reside and work in Hungary after leaving the EU in case their status is in order, i.e. they have a Registration Certificate for EEA Nationals or a Permanent Residence Card prior to the date of the exit. After leaving and staying for at least 3 years in Hungary, they can apply for a National Permanent Residence Permit without examining the terms and conditions applicable to housing, subsistence, health insurance and Hungary’s interest. After 5 years of uninterrupted stay in Hungary, British citizens may apply for EC residence permit as well. In the latter case, however, the examination of the residence conditions, unlike national residence permit, cannot be waived.

As it follows from the rules above, British citizens arriving in Hungary after Brexit will be entitled to reside and work under the rules applicable to third-country nationals.

The main principle for the various social security benefits is that the benefits determined before the UK’s exit remain the same.
In terms of pension rights, the periods of insurance completed both prior and past to Brexit are recognized and offset, as proposed in the bill.

Legislative changes in Hungary anticipating a possible ‘No Deal’ Brexit Read More »

Opportunities created by the “overtime act” put into practice

Employment, labour law, Medium-sized companies, News, Start-ups / / , , , , ,

Amending Act CXVI of 2018 on the organization of working time and the minimum fee of labor leasing activity (hereinafter: amendment) has been announced on 20 December 2018 and entered into force on 1 January 2019.

In our article we are looking for answers to the following questions; what opportunities the change has actually created for employers and which employers can take advantage of the opportunities created by the change.
The amendment essentially concerns issues related to the organization of working time, in particular the rules on working time banking and overtime.

The new opportunities provided by working time banking are only open for employers with collective agreements, while the opportunities in the area of overtime may be used by employers without collective agreements as well, as follows:

I. Options based on collective agreement

According to the amendment as from 1 January 2019, a maximum of 36 months of working time banking may be introduced on the basis of a collective agreement instead of a maximum of one year. In practice, this means that employers wishing to apply a longer working time frame, an amendment must be initiated to the collective agreement currently in force or; in the absence of a collective agreement in force, a collective agreement must be concluded with the trade union authorized to conclude the collective agreement, including that option.

It is important to note that not only 36 months, but shorter, e.g. a 24-month working time frame may also be included in a collective agreement by the parties.

There is a statutory limit to the extremes of work schedules arrangement within the longer working time banking – in addition to the rules on rest days/rest periods – that the 48 hours a week should be at most an annual average (and not, for example, the average of the three years).

For the time being, it is disputed whether the working time banking of more than one year is harmonized with the rules of Directive 2003/88/EC on certain aspects of the organization of working time. Article 19 of that directive provides that a ‘reference period’ for the calculation of working time or rest periods in a collective agreement may not exceed 12 months.

II. Options based on individual agreements with employees

The annual number of overtime hours can be increased up to 400 hours based on an individual agreement with employees. This option is therefore open to employers which do not have a collective agreement/ do not have a trade union with authorized to conclude a collective agreement.

400 hours is the absolute upper limit for overtime work. Higher amounts cannot validly be stipulated in a collective agreement either.

The employee may terminate the agreement by the end of the calendar year. Termination of the agreement shall not be a reason for termination of employment.

III. Options based on the request of the employee

According to the amendment, overtime (supplement payment) is not generated in situations where the employees themselves request the modification of the working time schedule in advance within 96 hours.

This provision recognizes situations that actually occur in practice, when for example the employee asks for a change in the working time schedule for some kind of personal reasons, e.g. “exchange” a workday with another colleague.

It is important that the initiative really comes from the employee. Using employee’s requests for employers’ interests are abusive, thus illegal.

In relation to the option described above it is also important to take into account the general principle of labor law, that working schedule arrangements, overtime arrangements are possible only if the requirements of healthy and safe work are met. In addition to the economic benefits associated with more flexible working hours, it is important to consider that the employer may be required to pay financial compensation for the damage caused by the workers who are proven overloaded or the accidents and health damage caused to them.

Opportunities created by the “overtime act” put into practice Read More »

Labour law related changes in 2019

Medium-sized companies, Employment, labour law, Start-ups /

Mandatory and guaranteed minimum wage – Childcare benefits – Sick pay – Pension
Government Decree No 324/2018. (XII. 30.) determines the amount of the mandatory minimum wage. The mandatory minimum wage for full-time employees increased with 8% as of 1st January 2019, from 138,000 to gross 149,000 HUF. The guaranteed minimum wage paid to skilled workers rose by 8% as well in the case of completion of full time working as of 1st January 2019, from 180,500 to 195,000 HUF.

Due to the increasing minimum wage the amount of the childcare benefits (GYED), the benefits for university students and graduates grew as well as the sick pay as of 1st January 2019. The eligible families are entitled to a maximum of 208,600 HUF in childcare benefits. Students enrolled in a bachelor’s program will be eligible for 104,300 HUF support and students enrolled in a master’s program for 136,500 HUF. The daily maximum of sick pay increased from 9180 HUF to 9933 HUF.

The amount of pensions amended favorably. The pensions (including among others retirement pension, widows’ pension, orphans’ allowance etc.) increased with 2,7% with the effective date of 1st January 2019. The amount of minimum pension remained unchanged (28,500 HUF).

Labour law related changes in 2019 Read More »

Employee Stock Ownership Program as a possible alternative to cafeteria

Company groups, Employment, labour law, Medium-sized companies, News / / , , , ,

The Employee Stock Ownership Program (ESOP) – which has been introduced in 2015 – may offer a beneficial and flexible alternative to cafeteria for employees from a taxation point of view.
The point of ESOP is that the company’s employees acquire shares in their employer. The main purpose of the ESOP system is to create ownership interest for the participating employees. Although the employees become owners, they do not have voting rights; therefore, they have no say in the employer’s operations. Their shares only entitle them to receive payments through the company.
The law on ESOP has been changed from 1 January 2019. In this context, existing legal rules have been clarified and additional guarantee rules for employee ownership interest have been established.
The greatest advantage of ESOP lies in its taxation. Rather than the employees would be a subject to a 45% tax burden on their salary, they may receive a part of their salary with only a 15% tax burden as an ’investment income’ through the ESOP.

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The income related tax changes in 2019: the new type of social contribution tax (SZOCHO)

Employment, labour law, Medium-sized companies, News, Start-ups / / , ,

The Act LII of 2018 on the social contribution tax was published on 31 July, 2018 and it will significantly increase the tax items payable after the wages and other incomes from January 1, 2019.
The termination of healthcare contribution (EHO) and SZOCHO with the rate of 19.5% on income instead of EHO are considered to be significant changes of the new regulation.

The new provisions clearly increase the dues of the employers, e.g. increasing tax rate after the fringe (non-wage) benefits, increase of tax base for calculating and the tax rate in case of dividend income, and the significant reduction of tax reliefs. Therefore during planning of wages for the next year, the following new rules shall be considered.

In case of the income withdrawn from the business account, dividend income, entrepreneurial dividend fund, capital gains income, the maximum amount of SZOCHO shall be increased to19,5 percent of twenty-four times of the minimum wage, which shall be HUF 645.000, – calculating with the minimal wage in the present year – from the current amount of HUF 450.000. In addition, the base of SZOCHO payable after the insured member of general partnership, limited partnership and limited liability company shall be 112,5 percent of the minimum wage.

Generally the pay office/employer shall pay SZOCHO, however in some special case the private person earning the income shall pay the SZOCHO. There are special legal provisions regarding assignment, temporary agency work and employment relationship established by more than one employer.

Abolished tax reliefs

– tax relief for young employees under 25 years and employees over 55;
– tax relief for participants in Karrier Híd Program;
– tax relief for research and development activity;
– tax relief enforceable by the employer employing doctoral candidate employees or students participating doctoral education determining by the Act CCIV of 2011 on the national higher education;
– tax relief for permanent job-seekers;
– tax relief in connection with the payment of child care allowance and benefit.

Please note that the tax relief which may be claimed for definite period of time shall not be ceased automatically by 1 January, 2019. These may be obtained during the entire validity period.

The following group of people will be entitled to tax reliefs from the next year:

– the unskilled workers and employees in agricultural positions;
– people who have been out of job for a particular period of time;
– woman nursing three or more children,
– disabled employees,
– workfare workers.

Only one type of tax relief shall be claimed regarding any employee at the same time. In case of eligibility for more tax reliefs, the employer may decide, which tax relief to claim.

The income related tax changes in 2019: the new type of social contribution tax (SZOCHO) Read More »

About the labour law related changes in 2019: the cafeteria allowances and the taxes of the retired employee’s salary

Employment, labour law, Medium-sized companies, News, Start-ups / / , , ,

The Act XLI of 2018 on the alteration of the tax law and other related acts, furthermore on the super-tax of immigration was published on 26 July, 2018 and it will significantly amend the system of the cafeteria allowances and makes the employment of the retired persons more favourable from the next year.

We summarize the essence of the changes as follows:

– only the so called “Széchenyi Pihenőkártya” (SZÉP Card) will remain in the favourable tax category (34,5% in the next year) with a frame of HUF 450.000.-/year;
– the following allowances fall under the tax category of 40,71% in the next year: SZÉP Card over the frame detailed above; gift voucher once a year, up to max. 10 % of the wage minimum;
– all other allowances will be calculated based on the general rules, with the general tax rate as salary in the next year.

What to do in connection with the above mentioned changes:
– review of the cafeteria policy;
– review and appropriate amendment of the documents containing the cafeteria allowances (employment contracts, information letters).

In the next year in case of pensioners employed under the Labor Code no social contribution and social contribution tax (szocho) have to be paid. With regard to that the pensioners (falling into the above mentioned category) will be not entitled to social security allowances.

About the labour law related changes in 2019: the cafeteria allowances and the taxes of the retired employee’s salary Read More »

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