Employment agreements in Hungary

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Employment in Hungary is regulated in detail by the Hungarian Labour Code. Deviation from the rules of the statute is generally allowed for the benefit of the employee and only in writing.

Thus, ensuring compliance with the strict labour law rules may require thorough planning and the involvement of HR-experts of a law firm. Before hiring, you need to decide on the specifics of your employment structure, such as the type of employment (full-time or part-time, definite-term or indefinite-term), the working time (standard 8 hours and 5/2 week or uneven schedules) or the extra benefits in addition to the base salary.

Employment contract

After setting up the general employment structure and finding the right candidates, the starting point of a mutually fruitful employment relationship is a written employment contract. The employment contract must contain the agreed base salary and the position of the employee. Within 15 days of signing the employment contract, the employer needs to inform the employee in writing on the details of the employment, such as the applicable working time, extra benefits, salary payment, process of taking vacation, tasks of the position, duration of notice period, applicability of a collective agreement and the person exercising employer’s rights.

Probation period

A probation period may only be agreed at the beginning of the employment relationship and it may last up to 3 months (non-extendable). During the probation period, either party may terminate the employment relationship with immediate effect and without the obligation of providing reasons.

Non-competition clause

Either at the beginning of the employment relationship or anytime until the termination, the parties may agree on a non-competition clause. This prevents the employee from taking up a new job with a competitor of the employer within maximum 2 years after the termination of the employment. In return for this limitation, the employee is entitled to compensation from the employer in the amount of at least 1/3 of his/her base salary for the time of the limitation.

Employees from outside of Hungary

In case you wish to assign to Hungary employees who already work for your company group outside of Hungary, an assignment agreement should be drawn up between the parties.

The receiving Hungarian company is obliged to inform the sending foreign company of the minimum Hungarian labour law rules (maximum working time, minimum rest period, minimum vacation, minimal wage, conditions of agency work, labour safety conditions, rules on employing pregnant and young employees, rules on equal treatment). Such rules apply in case they are more favourable for the foreign employee than the rules of his/her sending state.

Furthermore, the receiving Hungarian company may be jointly and severally liable for the payment of salary and social security contributions should the sending company fail to fulfil such obligations. The sending company needs to register with the labour inspectorate and should have a designated contact person for communication with the authorities and social partners.

The above is a non-exhaustive description of the relevant Hungarian legal provisions. The above summary should not be considered as legal advice and should not be relied upon when making business decisions. Before resolving on investment in Hungary, we recommend that you contact our law firm for detailed, tailor-made legal advice.

Article supplied by Szarvas Law Firm