Employer of Record Hungary
Infotree Global Solutions provides the Hungry Employer of Record services for companies who are looking to hire employees and manage HR and payroll in Hungary. No need to set up a branch office because all your business requirements will be taken care of by a dedicated team of professionals. They will do all the work in compliance with the local labor laws and help in running your global business smoothly and effectively.
As your Hungary employer of record, we would give you insights into the compensation, benefits, and facilities required for your employees in Hungary. Here are some of the important factors you need to know before you start hiring in Hungary:
Table of Contents
Hiring in Hungary
Concerning the hiring process in Hungary, it is first necessary to consider the logistics and recruitment process requirements. Labor law in Hungary provides strong protection to employees. Employers should abide by all rules laid down by the Hungarian Labor Code. To ensure that you get the best human resource for your company, you must be familiar with the best challenges to outsource the talent in Hungary to make the most out of it. It is ideal for working closely with an experienced Employer of record in Hungary in such cases. It saves your precious time and gets you the proper guidance you need while expanding your business operations in Hungary.
As your Employer of record Hungary, we can help you manage your time and resources in the country while better understanding the legal requirements for staffing. It is necessary to ensure that your cooperation complies with the local rules and regulations.
Rules and regulations concerning employment compliance are crucial for expanding business operations in a new country. In the case of Hungary, the norms are different, which makes it necessary for aspiring businesses to get well-versed in the same. Here are a few significant criterions concerning employment compliance and how the rules apply.
Compensation – A Major part of Hungary’s compensation law is for a minimum wage depending upon the employee’s education and qualification background. Typically, employees working full-time for up to 40 hours a week are entitled to up to 200,000 HUF every month. Employees with a Secondary Education background usually make at least 260,000 HUF per month. In addition, employers must provide a fair wage to their employees, which must be contained in the employment contract signed between the two parties.
Working Hours – In Hungary a standard working day consists of 8 hours for full-time jobs. The work is scheduled for up to 5 days a week which can be increased or decreased depending on employment terms. However, it must not exceed twelve hours daily for an employee working in a standby job or any employer’s relative or the owner himself. It must also be noted that employees in Hungary are entitled to up to two days of rest a week.
However, if it is an irregular work schedule, the weekly rest days can be adjusted accordingly. In the case of full-time employment, the employees are permitted up to 250 hours of work time in a given calendar year. It must be paid for extra, and the working overtime shall be in writing if requested by the employee. From an employer’s perspective, it is usually not easy to manage all these aspects. Therefore, it is ideal to take assistance and guidance from an experienced Hungary Employer of Record.
Probationary Period – The statutory length of the probation in Hungary must not exceed three months from the date of the employment relationship. If the probation period falls short by three months, the employer can also choose to extend the probation period but only for once. The terms for a probationary period can also be stipulated but only in the case of fixed-term employment and permanent employment. The employment contract must provide for the stipulation of the probationary period in such cases. It is one of the critical aspects businesses must take care of while planning a business expansion. However, it is not always easy to manage all things at once. Being your employer of record in Hungary we take care of all legal compliances so that you can focus on core activities.
Bonus – The Hungarian law does not mandate a 13th-month salary as a bonus. Therefore, employers don’t need to pay a bonus to their employees, although they can choose to do so. It is a performance-based criterion but does not reset the counter value of the performance as per the standard duty outlined in the employment contract. It is payable depending on the employee’s undertaking and if the employee’s performance turns out to be exceptional.
Termination and Severance – Employers can terminate employment contracts for business, personal, or workplace misconduct. However, they are required to provide 30 days written notice and an explanation for the termination. In the event of termination due to misconduct, a warning must be issued by the employer first and a fair chance to be given to the employee for an explanation. Upon the employment contract termination by notice, the employer should clear all final dues of employees no later than the fifth working day of termination.
As for severance, the employees are entitled to payment if the employer terminates the employment contract due to operational reasons. The amount for severance pay constitutes a minimum of one month’s salary and a maximum of 6 months, depending on the employment contract’s conditions (as follows)
- Three years of employment – One-month severance pay
- Five years of employment – Two months of severance pay
- Ten years of employment – Three months of severance pay
- Fifteen years of employment – Four months of severance pay
- Twenty years of employment – Five months of severance pay
- Twenty-five years of employment – Six months of severance pay
For employers and employees working in Hungary, there are special categories of employee entitlements both parties should know. It includes maternity leave, vacation, sick leave, paternity leave, health benefits, pension, and other entitlements. However, such compliances usually need expert guidance you can get from the Employer of Record to make the compliance process hassle-free.
Maternity leave – Expecting mothers are entitled to up to 24 weeks of maternity leave starting from four weeks before the scheduled delivery date. During this period, the employees are entitled to up to 70% of the average salary and Confinement Benefit (CSED). Employees are entitled to receive two hours of daily work time allowance during the first six months of nursing. In addition, for the next 18 months until the child’s first birthday, the mothers can also avail of the service for childcare fee (Gyermekgondozási dj – GYED), which is an amount paid for up to 70% of the previous earnings of the parent dedicated towards the childcare.
However, it must be noted that the amount does not exceed 70% or twice the minimum wage paid to the employee. An additional benefit for child home care allowance is also available for the parents and grandparents responsible for caring for the child up to three. Although it is not a significant amount, it still counts for people eligible for it.
Vacations – There are special rules and regulations for employee entitlements, including the provisions for vacations. Employees are entitled to at least 20 days of vacation every year, and it is eligible for changes depending on the employee’s age. For example, if the employee is up to 25 years of age, the allowance is 20 business days. For employees of more than 25 years, the figure goes up to 21 days. For those above the age of 31, an additional business day is available every three years, and for those up to the age of 35 additional business day is provided every two years. Finally, the limit goes up to 30 business days for employees aged 45.
Sick Leaves – Hungarian employees are entitled to sick leave for 15 days annually but only if enrolled with the national social security system. During this period, employees are entitled to 70% of their salary (based on an average of six months), which is paid by the employer. However, after 15 days, the amount comes down to 50%-60 % depending on the service terms, and the employer is liable to pay one-third of it while the state pays the remaining amount.
The rules are different if the employee cannot work due to an accident in the workplace or occupational field. In this case, the extension goes up to 4 days or more, but it usually gets less than three months. During this period, the employee is responsible for saving for the injured employee at an introductory rate of 75% from the first day until the employee is ready to join again. However, if the leave duration exceeds three months, the employees have the right to claim compensation from the compensation fund.
Paternity Leaves – Fathers are entitled to five days off under the paternity leave provisions. The employer is responsible for allocating the same within two months after birth. Fathers of newborns can apply for additional three years of unpaid leaves till the child reaches three years of age.
Under parental leaves, the father or mother of the child can apply for childcare leaves until the child reaches two years of age. In this scenario, the entitlement includes a compensation offer of 70% expandable up to double the minimum daily wage.
Health Benefits – Mandatory health benefits for Hungary and employees include pension, maternity leave, paternity leave, PTO, and eye exams. In addition, employees are also entitled to receive medical, life, and accident insurance. The employees are eligible only for medical insurance if they pay for social security contributions. The health benefits for employees also include sick leave under the permissible limits and depending on the employment contract. As your employer of record in Hungary, we can help you with details to understand and arrange for health insurance schemes in the local market.
Pension – As for pensions, the statutory pension system is responsible only for old-age pensions that are eligible for only those above retirement age. People eligible to qualify for the statutory retirement age criteria can claim insurance contributions. The retirement age increases gradually at 65 years of age. The Hungarian pension system allows for a minimum pension, but the employee must qualify for a minimum of 20 years of service. If the amount of minimum pension shot the average contribution days, the pension would equate to a hundred percent of the employee’s average monthly wage.
Payroll Tax in Hungary
For a foreign company looking forward to expanding its operations in Hungary, it is necessary to understand the payroll and taxation structure since it is an essential requirement. Usually, corporations do their best, but it is always better to stay one step ahead. Thus, getting additional help from the Employer of Record in Hungary can significantly streamline the process.
VAT – The general rate for value-added tax is 27%, while a reduced rate of 18% is applicable for products including certain milk products, cereal flour, and starch. The next category of reduced value-added tax is 5% applicable for a few pharmaceutical products, audiobooks, printed books, newspapers, newly registered residential properties, live performance activities, and specific categories of the animal sector.
However, it is also necessary to note that certain services do not fall under the category eligible for value-added taxes. These include medical, cultural, educational, and sporting services since these are treated as public services. The exception is also available for financial and insurance services and intra-community supplies for exports, goods, and services.
Advertisement tax – The Hungarian taxation structure also includes a particular category of advertisement tax applicable to certain advertising services made available over the Internet. Advertisement published in Hungarian or if it is not published in Hungarian but is available on an online platform that is mainly in Hungarian qualifies for this category. Currently, the rate is 5%, but it is applicable only in exceptional cases where an advertiser places the order to publish the advertisement.
Corporate Tax – With effect from 1 January 2017, corporate income tax for companies in Hungary stands at a flat 9% of the tax base. For non-residents, the corporate tax is levied on income from local business activities within the domestic territory of Hungary. The taxable base is calculated depending on the profit before tax reflected in the taxpayer’s financial statements. As for the minimum tax base, specific rules apply if the profit before taxation is below the minimum text days except for the pre-company period and the first text year after the new incorporation.
Individual income tax – As for individual income tax in Hungary, the rate is 15% of the original tax base. For local taxpayers, their real income is treated as the tax base, while for foreign taxpayers, it is their locally taxable income. The taxation rate for individual income tax is assessed based on domestic source income and foreign source income, provided that the person is a Hungarian. Any income generated from the employment activity in Hungary qualifies as a domestic source of income even if it is made from a foreign country. However, in the case of income paid from a foreign country, the income tax stays due irrespective of whether or not the income transfer has taken place.
Social Security Tax – The social security contribution base is the gross compensation paid to employees. The employer’s contribution to the social tax stands at 15.5%, while the employee contribution rate is 18.5%. It includes 10% pension contribution, 7% health Insurance contribution, and 1.5% for unemployment contribution. 15% of the unused child tax base allowance fund can be reduced from the health insurance and pension contribution.
These contributions are payable based on the minimum wage. Moreover, if a foreign company pays employers and individuals, they are liable to pay for both social security payments and filing for monthly social security decorations. It is the general rule for dependent persons more than 18 years of age as they are liable for healthcare services if they contribute towards the Healthcare service contributions. Individuals not covered under this category are liable for the monthly contributions. Businesses mostly faced challenges while ensuring tax compliance. Therefore, it is ideal for getting timely assistance from Infotree Global Hungary Employer of Record to step ahead in the right direction.
Employment Laws in Hungary
Employment laws in Hungary provide that the employees are entitled to their employment entitlements depending upon the employment terms and the provisions by law. Although it is not mandatory to have an employment contract, it is always safe to have a written employment contract signed by the employer and employee. In addition, the employment laws provide basic rules concerning Medical Health benefits, paternity leave, maternity leave, regulations concerning compensation and work time, pension, and probationary period.
If you plan to expand your business operations in Hungary, do not hesitate to contact us to get help with employment laws. We will work closely being your Employer of Record in Hungary to help you with the process.
Visa and Work Permits in Hungary
To work legally in Hungary, individuals belonging to the member countries of the European Union and European Economic Area do not need any work visa or permit. People who do not fall into this category must obtain a long-stay visa as a free approved permit. However, it only allows a stay for up to 30 days, so it is not usually appropriate for employees looking forward to long-term employment. Individuals can apply for a residence permit for up to 3 years, while the work permit is valid for only two years. Individuals belonging to Non-EU and Non-EEA countries may apply for an EU blue card, which works both as a residence and work permit for highly qualified workers who want to work and live in Hungary.
Taking care of work permits and Visa permission is essential for extending the business to a foreign country. Therefore, any individual or business might face critical challenges during this journey. Hence, it is always recommended to get help from a Hungary Employer of Record to make the process hassle-free and save heavily on time and resources.
Challenges When Expanding into Hungary
Despite being an ideal place to do business for new Ventures, extending into Hungary is not always an easy journey. It comes with different disadvantages, or let us say, challenges that can make the expansion process difficult for some businesses. Therefore, businesses must get the proper assistance from a credible Employer of Record Hungary and stay aware of all the challenges beforehand to bring changes in their journey accordingly. Here are a few common challenges new businesses may face while expanding their operations into Hungary –
- Paying taxes is also tricky for a new business entering the Hungary market. The procedure takes an average of 277 hours to complete, and the tax authority imposes a local business tax, rehabilitation contributions, and training contributions. For a new business, it is not easy to get familiar with these procedures because they are exhaustive and often take significant time.
- New businesses also have to deal with the rules and regulations concerning contract enforcement. The procedure to enforce a contract takes almost a year to complete in Hungary, which new businesses may not find suitable. The procedure usually takes 35 steps to navigate through the judgment. Therefore, it can also become a challenge while expanding the business into Hungary. However, you can always reach out to us as your Employer of Record Hungary to get any help with such procedures.
- Language and cultural barriers are also specific to businesses expanding their operations in Hungary. The differences in culture and language can make it difficult for a new business to survive and thrive in the new business environment. Therefore it is necessary to have a local representative in a new country to make the process seamless.
Benefits of Hungary Employer of Record
To simplify your expansion process let Infotree Global assist you to deal with all the complexities. Be it hiring employees, distributing payroll, or taking care of expenses, we are there to assist you at every step. Partner with us and start your global business without worries.
Market Access – Relying on the professional expertise of an Employer of Record is the best way to enter an unknown market quickly. By using EOR services, an international organization can avail the expertise of a Hungarian employee to work for its company. Besides quick access to the Hungarian market, the employer of record also enables the client to ease off worries related to payroll and HR.
In-Country Laws – It is hard to ignore the importance of regulations and compliance in a foreign country. If you are operating a business in Hungary, you need to be well aware of the payroll and taxation rules. With Hungary Employer of Record services, a company can hire a foreign individual or local employees and deal with the complexities of the country’s rules. Be it income tax, social security contribution, expanse management, withholding charges, or business tax, an EOR or PEO company takes care of it all with total compliance.
Diverse Solutions – No matter whether you already have a company in an international location or you are going to establish one, an employer of record can help you significantly. The employer of record Company can hire staff on your behalf without setting up a subsidiary in Hungary. If your firm is already operating, using EOR for managing payroll tasks can be a great idea as it can present an effective solution to tax and accounting responsibilities in the country.
Why Infotree Global Solutions?
Infotree Global is dedicated to providing professional assistance to help you set up a business in Hungary. We provide the support of our in-country team of professionals to undertake all the legal formalities associated with employment in Hungary and help you stay compliant with the country’s labor laws. Owing to our rich industry experience, we help you hire the most talented individuals for your company and embrace all payroll-related jobs. Thus, we help you save time without worrying about legal hassles so that you can stay focused on your expansion endeavors. With our global payroll and employer of record solutions, you can experience professional assistance at every step and expand your business without worrying about legal complexities.
Make the most of our professional services and overcome the challenges associated with international hiring. If you want to hire our Hungary Employer of Record and need assistance, connect with us!