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The deadline for publishing annual accounts is approaching – company law matters to do

News, Corporate law / / , , ,

The preparation and approval of annual accounts is an important part of the operation of any company in each year and requires the involvement of an auditor if certain conditions are met. Depending on the outcome of the accounts, there may be cases where the capital situation needs to be reviewed and adjusted. In this newsletter, we set out the main points to be noted with regard to the general deadlines for the adoption and publication of the annual accounts.

The importance of the annual accounts

The annual accounts of companies required by Act C of 2000 on Accounting (the “Accounting Act“) must be published annually by the last day of the fifth month following the balance sheet date of the financial year in question, i.e. 31 May for companies with a financial year ending on 31 December and are available to the public.

The purpose of the accounts is to give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and of changes in those assets and liabilities, including to enable third parties to obtain a true and fair view. The accounts include the company balance sheet, which details the company’s assets and liabilities, and the profit and loss account, which shows the company’s assets and liabilities for the previous year and the current year in a comparable manner.

Necessity of an audit

The preparation of the accounts is essentially the responsibility of the management, and their adoption is the responsibility of the supreme body. Under certain conditions, the adoption of the accounts may be subject to an audit. This includes the auditor’s responsibility to determine whether the annual accounts have been prepared in accordance with the law and whether they give a true and fair view of the company’s financial position.

The Accounting Act requires all companies keeping double-entry books to have a statutory audit. Exceptions to this requirement are those companies whose annual net sales did not exceed 600 million Hungarian Forints (until 31 December 2024, 300 million Hungarian Forints) on the average of the two financial years preceding the financial year under review, and whose average number of employees was less than 50. In other words, if any of these conditions are not met, the company is obliged to be audited. If the company is subject to an audit, the auditor’s report is a prerequisite for the lawful adoption of the annual accounts. Of course, companies that are not otherwise required by law to have an auditor may also decide to audit the accounting documents.

Appointment of an auditor

The appointment and engagement of an auditor is necessary for the company to be able to fulfil its audit obligations. The first auditor must be appointed in the instrument of incorporation. The mandate of the auditor must last at least until the adoption of the accounts following his/her election, with a maximum duration of 5 years. In view of this, the supreme body must decide on the election of an auditor several times during the operation of the company (at least every 5 years), which must be notified to the court of registry in the context of a change registration procedure. Once the appointment has been made and accepted by the auditor, the management must conclude a contract with the auditor within 90 days, in accordance with the conditions laid down.

In view of the above rules, companies typically determine the end of the auditor’s mandate by 31 May. With regard to the upcoming deadline for the adoption of the annual accounts, it is worth checking whether the company is required to have an audit and whether it currently has an appointed auditor to fulfil its obligations under the Accounting Act.

Capital position analysis

Once the annual accounts have been drawn up and adopted, the company’s economic result, which may be negative, becomes clearly visible. The Civil Code imposes a number of capital requirements on companies, which are not met if

  • the equity of the company decreased to half of its original value due to losses;
  • the equity of the company decreased under the minimum limit of initial capital determined by law (currently HUF 3 million for a limited liability company);
  • the company is threatened with insolvency or has stopped making payments; or
  • the assets of the company do not cover its debts.

In the case of limited liability companies, the law imposes an obligation to intervene, which must be remedied by the most appropriate and long-term solution for the company, and the result of which must be reported to the court of registry, if necessary.

There are a number of solutions to remedy a negative capital situation, but they will only be effective if they respond to the cause of the capital shortfall and take into account the short and long-term company law related effects. Experience over the years has shown that we always recommend that, in addition to our company law lawyers, accountants and auditors should be involved in preparing the appropriate decision – even before the adoption of the accounts, if necessary.

Image source: Nataliya Voitkevich, Pexels.com

The European Data Protection Board’s New Guidelines on Pseudonymisation

News, Data protection / / , ,

In the first quarter of 2025, the European Data Protection Board (“EDPB“) adopted a new guideline under reference number 1/2025 (the “Guideline“), focusing on the principles and benefits of pseudonymisation under Regulation (EU) 2016/679, the General Data Protection Regulation (GDPR). In this newsletter, we summarise the main findings of the Guidance that are relevant to practice.

What is the significance?

The rules on data processing apply in a wide range of roles, often as an employer, supplying partner or contractor. Choosing the right legal basis for data processing and complying with the principles is of paramount importance, as are the technical and organisational measures in place to ensure the security of the data processed. The GDPR considers pseudonymisation as a risk mitigation tool, whereby personal data are processed in such a way that it is not possible to identify the natural person to whom they relate without further information, i.e. identity can only be established by additional information.

It is a condition that this information – i.e. the pseudonym and the additional attribute – is stored separately and that it is ensured that the data cannot be linked to the natural person concerned unless the conditions are met. Where pseudonymisation is used, the specific risks that the method is intended to reduce must be identified and the procedure must be designed to be effective in achieving the stated aim. This may be particularly relevant in cases where the nature of the data processed would make it easy to identify the natural person. However, it is essential that pseudonymisation does not replace other data protection measures but complements them.

Supporting compliance with data protection principles

Pseudonymisation, as a good practice identified by the EU Commission, can, if properly applied, help data controllers to comply with the principles of the Regulation. According to the GDPR, data may only be collected for specified purposes and processed in a manner compatible with those purposes. Pseudonymisation reduces the risk that personal data may be further processed in a way that is incompatible with the purpose for which the data were originally collected.

For example, assigning widely different pseudonyms (e.g. employee identifiers) to data of persons with very similar identifiers (e.g. employees named Steven Smith) may not only enhance confidentiality, but also contribute to the requirement of accuracy and timeliness of personal data by reducing the possibility that data (e.g. payroll) are wrongly attributed to the wrong person.

Justification of the legal basis for processing

To demonstrate the lawfulness of processing, it is essential to indicate the appropriate legal basis. Since pseudonymisation reduces the risk to the rights and freedoms of data subjects, it can facilitate the use of legitimate interest as a legal basis (Article 6 (1) (f) GDPR). Pseudonymisation minimises the chances that the data will lead to unauthorised identification.

Likewise, pseudonymisation can help to ensure compatibility with the original purpose (Article 6 (4) GDPR). Pseudonymisation can also be a good safeguard when considering compatible purposes for further processing, as it can limit the possible consequences of the envisaged further processing for the data subjects, thus reducing the risk of further processing purposes.

How to apply?

The organisation acting as data controller must ensure that pseudonymised data cannot be linked to an individual as long as the additional information is processed separately. To achieve this, the data controller must modify the data and store additional keys and information separately so that only authorised persons can link the data.

For the sake of the efficiency of the method, pseudonymised data should not contain direct identifiers (e.g. known identification numbers such as tax identification number, ID number), because these direct identifiers can be used to easily associate data with data subjects. Instead, identifiers, unique codes that can only be assigned to data subjects using additional information may be used; this is the pseudonym. All this needs to be ensured by appropriate technical and organisational measures, such as:

– encryption,

– use of interpretation keys and separate storage,

– ensuring access only to authorised persons.

Data processed in the course of a pseudonymisation as personal data

It is important to note that pseudonymised data is still considered personal data, i.e. it is subject to the GDPR, and therefore the rights of the data subject must be ensured. For example, if the person can provide the pseudonym under which his or her data is stored and can prove that this pseudonym relates to him or her, the data controller must be able to identify the data subject, and the claims made in the exercise of the data subject’s rights must be met if any additional conditions are met.

The pseudonymisation of data reduces the risks for the data subjects, since in case of a possible unauthorised access or disclosure, with a proper pseudonymisation, the direct identification data relating to the natural person will not be disclosed (e.g. a cafeteria declaration is sent to the wrong place but only the pseudonym is indicated).

Interestingly, if the security of the pseudonymised data is compromised, leading to an unauthorised reversal of the pseudonymisation, this may constitute a data breach and appropriate action may need to be taken depending on the circumstances of the specific case.

Conclusion

The Guideline provides a useful framework for the use of pseudonymisation as a data processing safeguard. It is not only a technical tool, but a set of data protection procedures that contribute to the compliance with the GDPR rules, while at the same time helping to ensure data processing and related rights. The introduction of pseudonymisation is appropriate based on a review of the data processing strategy in place, but it also requires technical and organisational measures and the appropriate completion of the data processing documentation.

Image source: Markus Winkler, Pexels.com

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/

 

 

Clarification on trusts

News, Commercial legal advice / / ,

The institution of trusts came into force more than 10 years ago, and the new Civil Code has designated them as a type of contract and introduced a separate law with detailed rules.

Fiduciary trusts are a responsible but also a great option for natural persons with large private assets, as they can offer tax advantages, and solve management, succession, matrimonial property, private property protection, succession challenges or even provide as a preparation for a sale. A well-constructed contract can plan the fate of the assets for years, or even decades, with regular review. We find that our clients who opt for this structure are at first reluctant, but then increasingly brave, to address issues during the provisions that affect their fundamental life situations:

  • How can I ensure the successful future of a company built up over many years of work, and the predictable future of employees?
  • What role can individual family members play in the fate of the company?
  • Do they want to be involved in management at all and is there a Plan B if I cannot hand over the running of the company to the person I care most about?
  • What happens to all the assets I have built up from my own resources after my death?
  • How can I ensure that my family members can live their own lives in peace and prosperity after I am no longer able to help them?

To consult on these issues is a matter of great trust for us, and we approach such trust with the same care and respect.

At the same time, however, we often come across offers and opinions on the market which identify the tax advantage of asset management – which is otherwise welcome – as the most important objective and which make everything subject to this – but, in our view, the goal does not justify the means in this case either.

The recent joint statement of the Tax and Information Department of the Tax Authority and of the Ministry of National Economy clarifies a position we have previously held under the Civil Code, the Accounting Act and the Income Tax Act, that dividend claims to be placed in trust (which can be done at the time of the conclusion of the trust deed or at a later date), does not alter the liability to pay public tax under the public law, i.e. if the dividend has already been declared in the concerned tax year, it is taxable as a dividend regardless of whether it is paid or placed in trust.

The fact that the Ministry-Tax Authority have published their position paper and that the audit of trusts is a priority in the 2025 audit plan means three things in our view:

  • those who have not assigned the assets in the above manner, based on the combined interpretation of the Civil Code, the Accounting Act and the Tax Act, are expected to be subject to self-audits;
  • those who have not paid due attention to the “substance principle” in the process of disposing of their assets are recommended to review their contracts and adapt the relevant provisions;
  • those who plan to set up a trust this year should take into account that there are different tax consequences for dividends already declared and amounts placed in the profit and loss reserve.

We believe that if we know the rules of the game well, it is possible to win by playing the game cleanly, even collectively.

Image source: Leeloothefirst, Pexels.com

Review of the right to erasure in 2025

News, Data protection / / , , ,

In October 2020, the European Data Protection Board (“EDPB“) adopted a document on a coordinated enforcement framework under Regulation (EU) 2016/679 of the European Parliament and of the Council on the General Data Protection Regulation, the GDPR, under which each year a specific data protection issue is examined by Member State authorities on the basis of a framework and methodology defined by the EDPB. These harmonised actions aim, among other things, to facilitate compliance and raise awareness.

This year, the EDPB intends to examine the way in which the right of erasure is exercised and its provision by data controllers. In this article, we summarise the most important facts in this regard.

The importance of the review

In 2025, the EDPB intends to examine the right to erasure, as this is one of the most frequently exercised data subject rights since the entry into force of the GDPR, but there are a large number of complaints to supervisory authorities about its enforcement. To this end, the EDPB, with the help of Member States’ authorities, will this year examine practices in relation to the exercise of the right to erasure and assess how data controllers handle requests for erasure received by them and how they apply the conditions and exceptions to the exercise of this right set out in the GDPR.

What is the right to erasure?

The GDPR sets out the basic rights that the data controller – whether an employer, supply partner or contractor – must inform the data subject of in advance and provide them to the data subject during data processing. Among other things, the data subject has the right to request the erasure of personal data relating to him or her, which the data controller must do without undue delay.

However, the right to erasure is subject to conditions, which may be exercised in one of the following cases:

  • if the personal data are no longer necessary for the purposes for which they were processed;
  • if the data processing was based on the data subject’s consent and the data subject has withdrawn it;
  • if the data subject objects to the processing, where the legal basis for the processing is the protection of the legitimate interests of the controller or of a third party;
  • if the data have been unlawfully processed; or if there is a legal obligation to delete the data.

Ensuring the right of the data subject

The data controller must at all times ensure that the rights of data subjects with regard to the data processing of personal data of natural persons are adequately protected. One of the most important steps is to guarantee the availability of the data controller and to enable contact, which should be achieved through mechanisms that facilitate the exercise of the data subject’s rights.

In the event of any request by a data subject concerning the processing of personal data, the controller shall ensure the exercise of the data subject’s right to be informed as soon as possible after receipt of the request, but not later than 1 month or, if it needs further information, to contact the data subject without delay to deal with the request, preferably through the communication channel used by the data subject. If the data controller does not comply with the data subject’s request, it shall also provide a statement of reasons.

In order for the data controller to be able to assess and comply with the data subject’s request, it is important that the data controller has appropriate organisational and technical measures in place. Ensuring the exercise of the right is of paramount importance, because in case of inappropriate data processing, the data subject can file a complaint with the competent authority – in Hungary the National Authority for Data Protection and Freedom of Information – or even with the courts.

Tasks related to data processing

Since the entry into force of the GDPR in 2018, organisations have developed a wide range of data management practices and there have been significant changes in the legislation in the areas affected by data processing.

At the same time, we see that companies that treat GDPR compliance as a one-off project do not review their processes, documents and background legislation (every few years), and therefore the data privacy policy does not reflect reality after years, for which they can be held liable.

We recommend that companies that meet any of the following criteria should review their data processing documentation and, if necessary, align it with their actual processes:

  1. Introduction of new software
  2. Reorganisation of a business unit or certain processes
  3. Choosing new suppliers
  4. Modifying cooperation with customers
  5. Outsourcing of processes – either to a third country or within the EU
  6. Introduction of certificates (ISO, Tisax, etc.)
  7. Compliance with new legislation (e.g. Complaints Act, GPSR, Pay Transparency Directive)
  8. Changes in the group (e.g. new investor owner)
  9. Change of communication platform (e.g. intranet, chatbot)
  10. Create or merge databases

Image source: Freepik.com

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

The most important, recent changes affecting the Accounting Act

News, Corporate law /

At the end of last year, Act LV of 2024 on amending certain tax laws was published, which, among other things, amends certain provisions of Act C of 2000 on Accounting (the “Accounting Act“). In our article, we summarise the most important changes of the Accounting Act.

Changes effective from 29 November 2024

  • Consequences of non-compliance with the audit requirement

If the company fails to comply with any publication or deposit obligation under the Accounting Act, including the auditing obligation, any third party (e.g. natural person, legal entity, public authority) may initiate a legal supervisory procedure before the Court of Registry.

  • New provisions relating to sustainability reporting

The Accounting Act states that companies who are required to prepare a sustainability report or a consolidated sustainability report, as well as persons who voluntarily undertake to do so, must appoint an auditor or audit firm that is a member of the Chamber of Auditors and has a sustainability qualification. The result is that only an auditor with a specific qualification can proceed in the case of a sustainability report. This circumstance shall be taken into account when engaging and appointing the auditor concerned. According to the transitional provisions, in the case of the sustainability report and consolidated sustainability report for the financial year 2024, instead of the company’s supreme body the management of the company will elect the auditor or audit firm that is a member of the Chamber of Auditors, no later than the balance sheet date.

 Changes effective from 1 January 2025

  • Increase in the threshold for statutory audit

As a general rule, all double-entry bookkeepers must be audited. However, there are exceptions to this obligation, subject to certain thresholds and number of employees. The Accounting Act has amended (doubled) the threshold amount, so that an audit is not required if, on average over the two financial years preceding the financial year

  • the company’s annual net turnover did not exceed HUF 600 million, and
  • the average number of employees of the company did not exceed 50.

If any of the above conditions are not met, the company is obliged to be audited.

The amended conditions apply for the first time to the accounts for the financial year starting in 2025.

  • Changes for the threshold for simplified annual accounts

Another general rule is that companies that keep double-entry accounts must prepare annual accounts and annual reports. However, there is indeed an exception to this rule, depending on the threshold and the number of employees. In view of the doubling of thresholds, a double-entry bookkeeper may now prepare simplified annual accounts if, for two consecutive financial years, any two of the following three values do not exceed the following thresholds at the balance sheet date:

  • the balance sheet total does not exceed HUF 2000 million,
  • the annual net turnover does not exceed HUF 4000 million,
  • the average number of employees in the financial year does not exceed 50 persons.

The general rule is that the new, increased thresholds apply to the accounts for the financial year starting in 2025, but the companies may choose to apply the higher thresholds for the financial year starting in 2024 .

In light of the entry into force and applicability of the above accounting rules, all concerned parties are encouraged to consider to what extent and in what way they affect their current and future operations and practices.

(Image Source: Tima Miroshnichenko, 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)

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