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Notice periods in Hungary
Termination of employment in Hungary
Post-termination restraints in Hungary
Waivers in Hungary
Transfer of undertakings in Hungary
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End of employment in Hungary
Every employment relationship must come to an end — and there are specific rules that apply when that happens. Of course, these differ depending on the exact situation. For example, employees may choose to resign, or they may be dismissed either with or without notice. Employers in Hungary need to understand their rights and obligations in each situation to ensure they remain compliant with the law.
In this section, we’ll discuss various different aspects of the end of the employment relationship in Hungary. We’ll talk about the notice periods that both employers and employees have to provide to end their agreement, as well as the situations when it’s possible to dismiss an employee without notice. We’ll also consider the post-termination restrictions that employers in Hungary can impose on their employees and the rules that apply to employees after a transfer of undertakings.
Notice periods in Hungary
Employers and employees in Hungary must give the other party a certain amount of notice if they want to end their employment relationship — here’s what you need to know.
Notice periods in Hungary for employers and employees
The statutory notice period in Hungary is 30 days for both employers and employees. However, if the employer terminates the employment, the notice period is extended based on the employee’s years of service, as follows:
- Three years of service: Five additional days’ notice.
- Five years of service: 15 additional days’ notice.
- Eight years of service: 20 additional days’ notice.
- Ten years of service: 25 additional days’ notice.
- Fifteen years of service: 30 additional days’ notice.
- Eighteen years of service: 40 additional days’ notice.
- Twenty years of service: 60 additional days’ notice.
This means that the maximum statutory notice period for an employer in Hungary is 90 days. Notice periods can be extended by up to six months by agreement between the two parties.
Giving notice to employees in Hungary
To end an employee’s employment contract, employers in Hungary must give notice in writing. They must also have a good reason for dismissing the employee. When an employer gives notice to an employee, the employee must be exempted from work for at least half of the notice period. They are also entitled to an absence fee based on their average earnings during this time. Employers must also pay dismissed employees’ compensation for any unused annual leave.
Notice periods in Hungary for fixed-term contracts
Notice periods for fixed-term contracts in Hungary are theoretically the same as those for permanent contracts. However, there are limited circumstances under which a fixed-term contract can be terminated before its term is reached. There’s no need to give notice to end a fixed-term contract at the end of its term.
Probationary periods in Hungary
The statutory probationary period in Hungary is no more than three months. If a probationary period is shorter than three months, it may be extended once, as long as the total duration doesn’t exceed three months. Probationary periods of three months cannot be extended.
Severance pay in Hungary
Employees who have been employed for at least three years in Hungary are entitled to severance pay in the following situations:
- Dismissal with notice by the employer.
- Liquidation of the employer without a legal successor.
- Employer’s failure to meet Labour Code obligations.
The amount of severance pay employees are entitled to depends on their length of service. It starts at one month’s pay for employees who have been engaged for three years and goes up to six months’ pay for those with 25 or more years of service.
Termination of employment in Hungary
Termination of employment in Hungary can happen in one of three ways:
- By mutual agreement.
- By dismissal notice.
- By termination with immediate effect.
Termination by mutual agreement in Hungary
Termination by mutual agreement is when an employee and an employer agree between them to end the employment contract. The Labour Code doesn’t provide explicit provisions for termination by mutual agreement, so the parties are free to set out the terms of the termination. However, it usually involves monetary compensation for the employee.
Termination by dismissal notice in Hungary
In Hungary, either the employer or the employee can terminate a contract by giving the other party the appropriate notice. When the employer gives notice to an employee, this is known as termination by dismissal notice. The notice given by the employer must be in writing.
Employers must also have a valid reason for terminating an employee by dismissal notice, which must be stated on the written notice. Valid reasons include:
- Reasons related to the employee’s behaviour: For example, employees can be dismissed for not fulfilling contractual obligations, inability to cooperate with colleagues, or causing a breach of trust.
- Reasons related to the employee’s skills: For example, an employer may terminate an employee if they lack the capacity to fulfil their role. Employees may not be terminated due to a temporary incapacity to work.
- Reasons related to the business: For example, company reorganisation or restructuring.
Replacing an employee with a better-qualified employee is also a justifiable reason for termination of employment in Hungary.
Termination with immediate effect in Hungary
Termination with immediate effect is another form of termination of employment in Hungary. It’s reserved for serious matters, such as an employee breaching their obligations either willfully or through gross negligence. The breach must be serious enough to warrant termination with immediate effect. However, this is based on the gravity of the breach itself, not the amount of damages caused.
According to the Labour Code, this type of termination must be affected within 15 days of the employer learning about a breach, or within the statute of limitations for criminal liability if the employee has committed a criminal offence.
Mass redundancy in Hungary
Special rules apply to mass redundancy in Hungary, which is defined differently depending on the size of the organisation. The following are considered to be mass redundancies:
- Companies with 20–100 employees: Laying off at least 10 employees.
- Companies with 100–300 employees: Laying off at least 10% of employees.
- Companies with 300+ employees: Laying off at least 30 employees.
When an employer is planning a mass redundancy, they must inform the works council of their plans to allow for negotiations. At least seven days before negotiations begin, the employer must provide the works council with:
- The reason for the layoffs.
- The number of employees concerned.
- Their reasons for choosing those employees.
- The amount of severance to be paid.
Unlawful termination in Hungary
Employees who believe they have been unfairly terminated in Hungary can file an appeal with a labour court. They can request to be reinstated at work and paid compensation for the period of unemployment after their dismissal. Employers must inform employees of this right as part of the dismissal procedure.
If the termination is deemed unlawful, the employee can request compensation for damages. They may also claim non-material damages if their rights as a person have been violated.
Special protections from termination of employment in Hungary
Certain groups of employees benefit from special protections from dismissal in Hungary. Specifically, it’s illegal to terminate an employee’s contract if they:
- Are pregnant or on maternity leave.
- Are on childcare unpaid leave (or before their child’s third birthday for employees who don’t take this leave).
- Are engaged in voluntary military service.
- Are in the process of undergoing in vitro fertilisation (for six months).
Post-termination restraints in Hungary
Post-termination restraints are restrictions that employers can impose on former employees to protect the legitimate interests of their business. They are also referred to as restrictive covenants and are fairly common in Hungary for employees in senior positions. The following types of post-termination restraints may be used in Hungary:
- Non-compete agreements: These prevent employees from starting or working for businesses that compete with their former employer within a certain time period after ending their employment.
- Customer non-solicit agreements: These prohibit employees from soliciting or ‘poaching’ customers from their former employer.
- Employee non-solicit agreements: Similarly, these prevent employees from soliciting or ‘poaching’ employees from their former employer.
Limitations on post-termination restraints in Hungary
In Hungary, post-termination restraints should always be tailored to each individual employee. There are certain restrictions that apply to different types of post-termination restraints. For example, non-compete agreements are only permissible for up to two years. They must be included in the parties’ employment contract, and have to be reasonable in reach and scope.
The employer must also agree to pay compensation equivalent to at least one-third of the employee’s salary during the restrictive period. Payment is also required for customer and employee non-solicit agreements. However, compensation for a non-compete also covers these types of restrictive covenants, so additional payment is not needed.
Waivers in Hungary
In some countries, it’s possible for employees to waive certain employment rights as part of a settlement agreement with an employer. Waivers are enforceable in Hungary if they are expressed as a written agreement. They cannot be broadly interpreted and must therefore be specific in their terms.
Transfer of undertakings in Hungary
A transfer of undertakings is when one business entity is partially or wholly acquired by another. There are strict rules regulating what happens to employees when this happens — read on to find out what you need to know about transfers of undertakings in Hungary.
What is a transfer of undertakings in Hungary?
According to the Labour Code, a transfer of undertakings in Hungary is defined as the transfer and takeover of an employer’s material and non-material resources, including business units, plants, shops, sites, or workplaces. The rules don’t apply to share deals or business transfers where the transferred entity is subject to a liquidation (insolvency) procedure.
Employee rights after a transfer of undertakings in Hungary
Employees of a transferred entity are automatically transferred to the acquiring entity. All of the existing rights and obligations arising from the employment contracts are also transferred, and employment is considered to be continuous. The former employer must inform the new employer of the rights and obligations that apply. However, employee rights are not affected if they fail to do so.
If a collective bargaining agreement is in place, it continues to apply to transferred employees for at least one year after the transfer. A transfer of undertaking is not a legitimate reason for dismissal. Employers considering a transfer of undertaking must inform the relevant authorities and consult with their works council before proceeding.
Avoid risk and missed opportunities with our end-to-end employment solutions
There are many different ways an employment contract can come to an end. But whatever the situation, you need to understand the rules that cover the end of employment in Hungary — or you could end up facing legal issues.
Our solutions ensure your business is protected from risk when a relationship with a worker comes to an end — whatever the reason. We can also help you to avoid missed opportunities by re-deploying talent where possible.
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