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.
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.
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:
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.
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 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.
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.
Employees who have been employed for at least three years in Hungary are entitled to severance pay in the following situations:
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 can happen in one of three ways:
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.
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:
Replacing an employee with a better-qualified employee is also a justifiable reason for termination of employment 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.
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:
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:
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.
Certain groups of employees benefit from special protections from dismissal in Hungary. Specifically, it’s illegal to terminate an employee’s contract if they:
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:
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.
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.
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.
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.
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.
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.
Termination of employment in Hungary can occur by mutual agreement, notice or immediate termination. A fixed-term expiry and certain other events end employment automatically. The method used determines the reason, timing, documents and payments the employer must handle.
Either party can propose a mutual agreement, but the employee must agree freely. The document should state the end date and every payment due. An employee can usually resign from indefinite employment without giving a reason.
An employer giving notice normally needs a valid reason related to the employee’s conduct, ability to do the job or the employer’s business. Immediate termination is reserved for a serious breach or conduct that makes continued employment impossible. A party generally has 15 days from learning of the relevant circumstances to exercise immediate termination, subject to the statutory long stop period.
A fixed term expires automatically. Employment also ends if the employee dies or the employer ceases to exist without a legal successor. Each method requires different documents and payments, so the employer should choose it before communicating the decision.
An employee can challenge an unlawful termination of employment in Hungary and seek compensation. A court can order reinstatement only in specified cases. The employer may have to pay for income or entitlements the employee lost because of the dismissal.
Lost-income compensation is generally capped at 12 months of absence pay, calculated from regular earnings. The employee may instead claim the amount that would have been paid during the employer notice period. Severance can also become payable if the employee lost it because of the unlawful dismissal.
A court may restore employment when the dismissal involved discrimination, ignored a dismissal ban or breached the protection given to an employee representative. Reinstatement may also be available in certain cases involving an abuse of rights or unlawful termination connected with protected family-related leave. Employees have a short deadline to bring a claim, generally 30 days from notification of the termination, so the employer should retain the written reason and proof of delivery.
The employer should keep the evidence used before the decision. Giving a different explanation after the employee brings a claim may not correct an invalid reason or missed step.
Yes, the statutory notice period in Hungary starts at 30 days. When the employer gives notice, the employee’s length of service can extend the period to a maximum of 90 days after 20 years with that employer.
Service-based additions:
The parties can agree to a longer period, but generally no more than six months. A fixed-term notice period cannot run beyond the agreed end date of the contract.
When the employer gives notice, it must release the employee from work for at least half of the notice period and pay absence pay for that time. The employee must be released in no more than two instalments at the times they request.
Notice must be in writing, and certain protected absences can delay its start. These include specified periods of incapacity for work, leave to care for a sick child and unpaid leave to care for a relative. Other circumstances, including pregnancy and qualifying maternity or childcare leave, may prohibit the employer from giving notice altogether. The employer needs to confirm the final date before communicating it to the employee.
In Hungary, severance pay is generally required when an employer terminates an employee after at least three years of service. It may also apply when the employer ceases operations without a legal successor. Severance can also apply in certain cases where employment ends because a business transfer places the employment relationship outside the scope of the Hungarian Labour Code.
The amount increases with length of service, starting at one month’s absence pay after three years and rising to six months after 25 years. Employees who are within five years of pension age may qualify for an additional one to three months of severance pay.
Severance is generally not payable if the employee qualifies as a pensioner when employment ends. It may also not apply where dismissal is based on the employee’s conduct or their ability to perform the role for reasons unrelated to health. Employment contracts or collective agreements may provide more generous severance terms.
At the end of contract in Hungary, employers must pay all salary and other amounts the employee has earned. This includes payment for unused annual leave and statutory severance, when due. The final amount depends on the end date and the reason the employment ended.
The payment may include salary through the final day, earned variable pay, approved expenses, notice-related absence pay and contractual benefits already due. When employment ends, the employer must pay the employee for any unused statutory annual leave. Any deduction needs a lawful reason and should appear in the final payslip.
The employer must also give the employee the certificates and records needed for future employment and benefit claims.
When employment is terminated by notice, wages, other entitlements and required documents must be provided no later than the employee’s last day at work. In other cases, the deadline is generally the fifth working day after employment ends. Payroll, HR and the manager should set an earlier internal deadline for final salary, leave and expense information.
Fixed-term contracts end automatically on the date stated in the agreement or when the agreed event occurs. No separate notice is needed when a valid fixed term expires.
An employer can end the contract early by giving notice only in limited circumstances. These include insolvency proceedings, the employee no longer being able to perform the role or an unavoidable external event that makes continued employment impossible. The employer may also terminate immediately if the employee commits a serious breach.
An employee may terminate a fixed-term contract by notice if continuing the employment would become impossible or would cause disproportionate harm because of the employee’s circumstances. The employee must give the reason for the termination.
An employer can also bring forward the end of contract in Hungary without giving one of those reasons. In that case, it must pay up to 12 months of absence pay or the amount due for the remaining term if shorter.
The employer must still pay outstanding salary, unused leave and any other amounts due and provide the required documents. If the employee continues working after expiry, the relationship should be documented immediately; continued work can create a dispute over whether a new employment relationship has arisen and on what terms. . HR, payroll and the manager need to record and use the same end date.
Employers can use a written non-compete after termination of employment in Hungary to protect a genuine business interest for up to two years. The employer must pay for the restriction, and its terms cannot limit the employee’s ability to earn a living more than necessary.
The agreement should define the restricted activities, territory, duration and business interest. The employer must pay at least one-third of the employee’s base salary for the same restricted period. A wider restriction on comparable work will generally require a higher payment.
Confidentiality and trade-secret duties can continue separately after employment but should not act as an unpaid non-compete. A non-solicitation clause also needs a clear business reason and reasonable limits. Before taking action, the employer should compare the former employee’s new work with the agreement and check that both the restriction and payment are still reasonable.
Collective redundancy rules apply when an employer plans enough business-related dismissals within 30 days to meet the statutory threshold. The number depends on the employer’s average workforce during the previous six months.
The threshold is at least 10 dismissals for a workforce of more than 20 but fewer than 100, at least 10% for 100 to 299 employees, and at least 30 for 300 or more. Related dismissals andmutual agreements initiated by the employer count towards the total.
Before making its final decision,, the employer must consult the works council and provide written information about the reasons, numbers, timing and employee selection method. The employer must notify the state employment body and give affected employees advance written information. Each affected employee must generally receive that information at least 30 days before notice or immediate termination is communicated. A termination communicated in breach of this requirement is unlawful.
The notice period in Hungary still applies to each employee. The collective process does not replace individual notice and severance rights. Employers should count every dismissal in the 30-day period before making announcements. Splitting one redundancy plan into several smaller groups may not avoid the collective rules.
Yes, employees on indefinite contracts who do not qualify as pensioners receive extra protection during the five years before they reach statutory retirement age. The rules for termination of employment in Hungary limit when an employer can dismiss them during this period. This is often called protected age, but it is not a complete ban on dismissal.
An employer can rely on conduct only when the facts would justify immediate termination. For ability or business reasons, dismissal is generally possible only if there is no suitable vacant role at the employee’s workplace or the employee rejects an offer. Suitability depends on the employee’s skills, education, experience and health.
The employer must meet this stricter test before giving notice. Qualifying employees may also receive one to three extra months of severance, depending on their length of service. Before deciding, the employer should confirm the employee’s pension age, contract type and suitability for any vacancies and retain evidence supporting the proposed reason.
International companies choose CXC for termination support in Hungary because ending employment can involve local notice rules, severance, protected employees and specific documentation that global HR teams may not manage regularly. CXC provides the local employment support needed to handle these requirements correctly.
Through our Employer of Record service, CXC supports the termination process in line with the employee’s contract and Hungarian employment requirements, including notice, final pay, unused leave and severance where applicable. We can also identify situations where additional local advice may be needed, such as protected employees or collective redundancies.
With more than 30 years of workforce management experience and coverage across 100+ countries, CXC can support companies managing employee exits in Hungary alongside their wider international workforce.
Speak to our team to learn more about employee termination support in Hungary 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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