PEO Hungary

World Bank Ease of Doing Business Ranking

• DB Rank – 52
• DB Score – 73.4

Rankings on Doing Business topics – Hungary

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Global PEO in Hungary

Hungary, as a Professional Employer Organization (PEO) country, offers a dynamic and enticing environment for businesses seeking to expand their operations. With its strategic location at the crossroads of Europe, Hungary serves as a gateway to various markets, making it an appealing destination for companies aiming to establish a presence in the region. The country boasts a skilled and educated workforce, renowned for its technical expertise and multilingual capabilities, making recruitment and talent acquisition relatively seamless. Additionally, Hungary’s favorable business regulations and competitive cost structure provide an advantageous backdrop for companies looking to optimize their operational efficiency and cost-effectiveness. As a PEO destination, Hungary’s blend of economic stability, strategic location, and skilled workforce makes it an alluring choice for enterprises seeking to navigate the complexities of international expansion while mitigating administrative and legal burdens.

What Is a PEO?

A PEO, or Professional Employer Organization, is a company that provides a range of HR and payroll services to small and medium-sized businesses. These services can include employee benefits, payroll, compliance with labor laws, and recruiting and training.

PEOs work by entering into a co-employment agreement with the businesses they serve. In this arrangement, the PEO becomes the employer of record for the business’s employees, taking on responsibilities such as payroll, tax withholding, and employee benefits. The business, however, retains control over its day-to-day operations and the supervision of its employees.

PEOs can help businesses streamline their HR and payroll processes, reduce costs, and free up time and resources to focus on their core business activities. They can also provide access to a range of benefits and resources that small businesses may not be able to afford or manage on their own.

PEOs are also understood as employer of record / EOR at times.

Hungary – Country Overview

The economy in Hungary has been growing steadily over the past few years due to robust exports and soaring domestic demand. The country’s economy is expected to grow from 146.00 USD Billion in 2019 to 157.00 USD Billion in 2020. In the same period, the GDP per capita is expected to grow from 15980.00 USD to 16790.00 USD.

Many critical reforms have been implemented in Hungary in several areas. Licensing procedures in the country have been streamlined, which is further aided by freedom in trading and investment. It reflects in the high foreign direct investment (FDI) inflow in the country.

Currency

Hungarian Forint

Principal Language

Hungarian

Government

Parliamentary Representative Democratic Republic

Capital City

Budapest

Major Cities

Debrecen, Miskolc, Szeged, Pécs

Employment Contracts in Hungary

Under the Labor Code in Hungary, an employment contract must be in writing.

Employers are responsible for creating a written employment contract, and if it not incorporated, employees can challenge the validity of the contract within 30 days from the first day of commencing work.

An employment contract comprises:

• the remuneration of an employee
• the job description
• the place of work
• probation period, if any
• the duration of the employment contract – fixed or indefinite term
• the hours of work
• the provisions related to conflict of interest and restrictive covenants, and
• terms and conditions of termination of employment.

When an employer and employee agree to a probation period, the duration cannot be more than 3 months. Also, a trial period agreed in a collective bargaining agreement cannot be more than 6 months.

Working Hours in Hungary

Standard work schedule comprises 8 hours per day and 40 hours per week. Work time should not exceed 12 hours per day and 48 hours per week.

If the daily work schedule goes beyond 6 hours, employees are entitled to a minimum of 20 minutes break. If the duration of work is more than 9 hours, the employer must allow an additional 25-minute break to employees.

Employees must get a minimum of 11 hours’ rest period after completing daily work and before commencing the next day’s work. In the cases of continuous shifts, split shifts, multiple shifts or in seasonal work, workers must get a minimum of 8 hours rest period.

Overtime

Employees are entitled to 50% premium of their regular wages for overtime work, and 100% for working on a rest day.

If employees work overtime on national holidays, they are entitled to a 100% premium besides regular wages.

Depending on the requirement, employees may need to perform up to 250 hours of overtime work in a year, which may go up to 30 hours based on the collective agreements.

Employee Leave in Hungary

Holidays

The Labor Code in Hungary specifies the following 10 national holidays:

• Jan. 1: New Year’s Day
• May 1: Labor Day
• Whit Monday
• Aug. 20: Hungary National Day
• Aug. 21: Public Holiday
• Oct. 23: 1956 Revolution Memorial Day
• Nov. 1: All Saints’ Day
• Dec. 24: Public Holiday
• Dec. 25-26: Christmas

Workers who are employed for seasonal work may be required to work on national holidays if the nature of business makes it necessary for the employer to be open on national holidays. Holidays are not moved if they fall on a weekend or a Tuesday, Wednesday or Thursday.

Annual Leave

Employees are entitled to 20 days of annual leave. The number of leave may increase with depending on the age of employees (not the seniority) up to 10 additional days.

Also, employees may get additional leaves in certain circumstances mentioned below:

• employees below 18 years are entitled to 5 extra days of leave annually
• parents are entitled to additional leave depending on the number of children under the age of 16
• employees working in hazardous conditions for at least 3 hours a day or permanently working underground are entitled to 5 additional days leave annually, and
• employees receiving blind or disability benefits and those with at least 50% disability are entitled to 5 additional days leave annually.

Maternity Leave

Women employees are entitled to 24 weeks of maternity leave, which begins 4 weeks before the childbirth.

Mothers are entitled to 1 hour of leave twice a day (or 2 hours twice a day in the case of twins) during the first 6 months and subsequently 1 hour per day until the 9 month post-childbirth.

Employees are entitled to unpaid leave to provide care:

• until a child is 3 years old
• until a child reaches 10 years during the period when the employee is eligible for the child-care allowance.

Paternity Leave

Fathers are entitled to 5 days of compensated leave within 2 months following the childbirth on the days they request. In the cases of twins, fathers are entitled to 7 days’ leave.

Employees can get unpaid leave to provide care until:

• a child becomes 3 years old, or
• a child becomes 10 years old during the eligibility period of the child-care allowance.

Sick Leave

Employees are entitled to 15 days’ leave in a calendar year if they are unable to work due to sickness, excluding workplace injuries, types of illnesses mentioned in the social insurance provisions and inability to work due to endangered pregnancy.

During the sick leave, employees receive 70% of their absence fee (total compensation including base salary plus other allowances) for the 15-day sick leave. If those employees are still not able to work after 15 days, partly the social security and partly the employer cover the compensation.

Taxation

Employee tax contributions

In Hungary, income tax is payable at one flat fee rate of 15% for all employees over the age of 25.

Employee payroll contributions

Employees make payroll contributions of 18.5%.

These contributions are comprised of 7% for health care, 10% for their pension fund and 1.5% to cover an unemployment fund.

Employer payroll contributions

Employers contribute 13% of an employee’s salary to cover a social contribution tax.

Hungary corporate tax rate

In Hungary, the corporate tax rate is 9% which is one of the 20 lowest rates in the world.  

Employee Benefits in Hungary

Pension Plan

Employees get pension benefits after reaching the legal retirement age of:

• 62 years and 6 months, which will go up by 6 months annually until reaching 65 years in 2022
• 62 years with a minimum contribution of 20 years if born before Jan. 1, 1952
• any age for women employees with a minimum 40 years of coverage with at least 32 years of work, or
• 60 years if employed for a minimum of 10 years for men and 8 years for women who work in hazardous conditions.

Also, a partial pension is available at 62 years if employees complete 15 years of service.

Besides pension benefits, employees are also entitled to:

• cash benefits in the forms of child-care allowance and sick pay
• health services
• accident benefits for accident-related injuries, emergency medical services, and sick pay for accident-related disability
• rehabilitation benefit

Workers’ Compensation

Employees get coverage for accidents through workers’ compensation insurance while working onsite or on the way to or from work.

Workers’ compensation is funded through the social insurance system. The rate of contribution for social insurance is usually 24% of employees’ wages. Employees can contribute between 3% and 10% of their wages depending on their income.