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Hiring in Hungary

Background checks in Hungary

Hire employees in Hungary

Language requirements in Hungary

Corporate presence requirements and payroll setup in Hungary

Easily hire employees in Hungary with our EoR solution

Employer of record in Hungary

Employing workers in Hungary usually means setting up a local legal entity, which is a time-consuming and expensive process. It’s also probably not worth the hassle if you only want to engage a handful of workers.

One alternative is to engage workers as independent contractors instead of employees. But that comes with a big risk of employee misclassification, which could land your business with fines, penalties, and other consequences.

The solution? Hire employees through an employer of record, or EoR.

What is an employer of record (EoR)?

An employer of record is an organisation that engages workers on behalf of other organisations. Legally speaking, they are the workers’ official employers. However, the end client retains full responsibility for their day-to-day work. Employers of record also handle various HR processes, including payroll, benefits administration, onboarding, and more.

Working with an employer of record in Hungary

When you work with an employer of record in Hungary, they’ll become your workers’ legal employer. They’ll take on the responsibility of complying with labour laws, providing employees with the right benefits, and managing taxes and social security contributions on your behalf. That means all you’ll have to do is focus on finding the right people for the job.

What you need to know to hire employees in Hungary

Whether or not you use an employer of record in Hungary, you’ll need a solid understanding of the labour laws and workplace norms that apply there if you want to engage workers. This will allow you to ensure that any EoR provider you work with is complying with their obligations. Read on for everything you need to know to compliantly and confidently engage employees in Hungary.

Hiring in Hungary

Hungary offers favourable conditions for businesses launching international expansions, including the lowest corporate tax rate of all OECD countries. However, employers should be aware of the various rules, regulations, and customs that apply before hiring in Hungary. Read on to find out what you need to know.

Labour laws in Hungary

The main source of labour law in Hungary is the Labour Code, which came into force in 1992 and underwent significant revisions in 2012. The Hungarian Constitution also provides certain protections for employees. These two pieces of legislation regulate things like working hours, wages, benefits, and termination procedures. They’re generally fairly favourable to employees.

Employers in Hungary are also entitled to negotiate their own employment terms as long as they meet at least the minimum requirements set out by the law. In certain cases, collective bargaining agreements provide additional terms that employers hiring in Hungary must abide by.

Employment contracts in Hungary

Employers in Hungary must provide each employee with a written employment contract. If they fail to do so, the employee can challenge the validity of the contract within 30 days of starting work. The labour inspectorate may then impose a penalty on the employer. Any changes to the employment contract should also be made in writing.

Taxes and social security in Hungary

Employers in Hungary must comply with various tax regulations, which include a requirement to withhold taxes from employees’ wages and pay them to the tax authority. Personal income is taxed at a flat rate of 15%. Employees aged under 25 are exempt from income tax. Employers must also make social security contributions on behalf of each employee. In Hungary, these pay for things like health insurance, pensions, and unemployment insurance.

Works councils in Hungary

Large companies hiring in Hungary are required to establish works councils representing the interests of employees. They must then work with these bodies to negotiate various matters, such as collective redundancies.

Visas and work permits in Hungary

Hungary is in the EU and the Schengen zone, which means that EU and EEA citizens have the automatic right to work in the country. All third-country nationals require a work permit to work in Hungary.

Background checks in Hungary

Background checks allow employers to verify information gathered during the hiring process and determine whether a candidate is suitable for a role. However, there are certain limitations that apply to background checks in Hungary, which employers should be aware of.

Required background checks in Hungary

Employers in Hungary are responsible for checking that their employees have the legal right to work in the country. For non-EU or EEA citizens, this means verifying that they have the relevant visa or work permit. Criminal records checks are also mandatory for certain occupations.

Other possible background checks in Hungary

Here are some of the other types of background checks that employers may perform in Hungary:

Criminal records checks: Criminal background checks are fairly common in Hungary. However, employers may not obtain a criminal record directly. Instead, they must ask the candidate to provide a criminal record certificate issued within 90 days.
Education and employment history: Verifying a candidate’s educational and work history is also a common type of background check in Hungary. It allows employers to confirm information received during the application process while gaining insights into the employee’s background and professional experience.
Credit history: Credit history checks are used to assess a candidate’s financial integrity and reliability. In Hungary, they’re permitted and common for positions involving a significant amount of financial responsibility but may not be justifiable for other roles.
References: Contacting a candidate’s references is also a common type of employment background check in Hungary. It allows employers to understand more details about the candidate’s work ethic, skills, and suitability.
Social media screening: Social media checks are less common than other types of background checks in Hungary. While they are technically permissible, employers should be careful to avoid violating the candidate’s right to privacy.

Limitations on background checks in Hungary

Employment background checks in Hungary must comply with both the General Data Protection Regulation (GDPR) and the Hungarian Data Protection Act. Candidate consent is required for some types of background checks. Although written consent is not required by law, obtaining it is recommended for record-keeping and compliance.

There are also some limitations on the type of information that can be collected as part of a background check in Hungary. For example, employers are not permitted to gather data that could lead to discrimination. Obtaining a candidate’s medical information is only allowed in very limited circumstances.

Hire employees in Hungary

Before you hire employees in Hungary, it’s important to consider whether this is the best option for your business. For example, if you only want to engage one worker for a short-term project, it’s probably not worth the hassle and cost of setting up payroll and engaging an independent contractor might be a better option. Read on to learn more about the different hiring options in Hungary.

Main hiring options in Hungary

Here are the main options for engaging workers in Hungary:

Employee: Employees are engaged through employment contracts, which must be provided in writing in Hungary. They have certain rights and protections under Hungarian labour laws and collective agreements. Employees may be engaged on a full-time, part-time, indefinite, or fixed-term basis.
Independent contractor: Independent contractors are workers who are not employees. They are engaged not with an employment contract but with a mandate agreement to deliver a final result. Independent contractors typically provide their own equipment, allocate their own working hours, and have the right to use a substitute or subcontractor. They are not entitled to the same rights and protections as employees.
Agency worker: Agency workers in Hungary are workers who are employed by temporary work agencies and leased out to user companies. Employers may engage agency workers for a maximum period of one year. Agency workers have the right to equal treatment with other employees at the user company.

Simplified employment in Hungary

Simplified employment is another way to hire employees in Hungary. Its purpose is to provide a faster and simpler option for employing workers in short-term labour situations by allowing certain deviations from the Labour Code. Simplified employment is only possible for seasonal agricultural and tourism work or occasional work.

Employee misclassification risks in Hungary

When workers who are really employees are misclassified as independent contractors, they miss out on the key rights and protections. Because of this, employee misclassification is a serious issue in Hungary.

If a working relationship has characteristics of employment, it could be reclassified by either the tax authorities or a labour court. When this happens, the agreement is declared null and void, and the relevant labour laws apply. Employers may then be obliged to pay taxes based on the total length of the reclassified employment relationship. Significant tax penalties, late payment interest, and other fees may also apply.

Language requirements in Hungary

The main and only official language in Hungary is Hungarian. Other languages spoken within the country include Romani, Serbian, Slovene, Slovak, Croatian, and German.

Language requirements for employment documents in Hungary

Employment contracts in Hungary must be written in a language that’s understood by both parties. They don’t specifically have to be concluded in Hungarian. However, courts are likely to require a Hungarian version, so it’s good practice to provide one.

English language in Hungary

Hungary is ranked 17th out of 116 countries worldwide (and 15th out of 35 countries in Europe) in the EF English Language Proficiency Index. English proficiency is higher in big cities, especially Budapest, and among younger populations. It’s much more limited outside of urban centres.

Corporate presence requirements and payroll setup in Hungary

Employers wanting to hire employees in Hungary must have at least an established branch in the country. There are also other registration requirements that must be met. Using an employer of record (EoR) is a convenient alternative since it allows you to avoid the complexities of payroll setup in Hungary.

Steps to set up payroll in Hungary

Here are the steps to follow to set up payroll in Hungary:

Register with the Hungarian National Tax and Customs Office: Once registered, your business will receive a tax number that allows you to collect and pay taxes.
Register each new employee with the tax authority: Employers must also register when an employee leaves the company.
Create an online tax account: Employers must create an account for the official online portal, Cégkapu. This is a secured system that must be used for all communications with the tax authorities.
Register with the National Health Insurance Fund: This allows employers to make health insurance payments on behalf of employees.

Do you need a local bank account for payroll processing in Hungary?

No, opening a Hungarian bank account is optional. However, it may make administrative processes like paying employees and remitting withheld taxes easier.

Easily hire employees in Hungary with our EoR solution

Hiring employees in Hungary usually means setting up a legal entity, which can be costly and time-consuming. Employers can avoid this hassle by working with an Employer of Record (EoR), like CXC.

Through our EoR solution, you can confidently hire employees in Hungary, without worrying about compliance issues. We’ll handle everything from payroll to benefits to employment contracts on your behalf — so all you have to think about is finding the right person for the job.

Read about EoR services

Compliantly hire employees anywhere with CXC

With our EoR solution, you can engage workers anywhere in the world, without putting your business at risk. No more worrying about local labour laws, tax legislation or payroll customs — we’ve got you covered.

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