Hiring remote workers in Hungary involves a series of key steps to ensure compliance and smooth onboarding. Whether you’re a company expanding your remote workforce or just starting to hire internationally, this step-by-step guide will help you navigate the process of hiring remote employees in Hungary effectively and legally.
Step 1: Understand Hungary Employment Laws
Before hiring, familiarise yourself with Hungarian labor laws, including minimum wage, working hours, leave entitlements, and termination rules. Hungary has strict labor regulations that protect employees, so compliance is crucial.
Good to Know!
- Standard Working Hours: In Hungary, the standard workweek consists of 8 hours per day and 40 hours per week. Overtime is defined as work beyond these hours and is governed by employment contract
- Probation Period: A probation period in Hungary is optional and can be included in the employment contract by mutual agreement. It cannot exceed three months.
- Termination Notice: Both the employer and the employee must provide a written notice of termination, which must include a valid reason for dismissal. Employers must give at least 30 days’ notice, but this can extend up to 90 days for employees with more than three years of service.
- Severance Pay: The amount of severance pay depends on the length of the employee’s service, with longer employment durations resulting in higher severance payments.
Step 2: Choose Your Hiring Method
In Hungary, as in many countries, hiring and paying employees directly as a foreign company without a local presence is not legally permissible. To comply with local employment and tax laws, you must either establish a legal entity or partner with a registered Employer of Record (EOR).
There is no one-size-fits-all answer—the right choice depends on your company’s needs, goals, and circumstances. Here’s a quick comparison to guide your decision:
Step 3: Draft a Compliant Employment Contract
Creating a compliant employment contract is a critical step in hiring employees in Hungary. Employment contracts must adhere to Hungarian labor laws, ensuring that both the employer and employee understand their rights and obligations.
In Hungary’s labor market, there are two types of employment contracts:
Indefinite-Term Contract
- Description: This is a standard type of employment contract without a fixed end date. It is the most common form of employment in Hungary and offers job security to employees.
- Flexibility: Provides both the employer and employee with more flexibility, as the contract continues until either party decides to terminate it, subject to the notice period.
- Termination: Requires a notice period for termination, which is typically 30 days but can vary based on the length of employment and contract terms.
Indefinite-Term Contract
- Description: This contract is used for a specific period or for the duration of a project. It has a clearly defined start and end date.
- Duration: Cannot exceed five years, according to Hungarian labor laws.
- Termination: Automatically ends on the specified expiration date without the need for notice. However, if the contract is renewed or extended beyond five years, it may be considered an indefinite-term contract.
Key Requirements for Employment Contracts in Hungary
- All employment contracts in Hungary must be in written form to be legally binding. Verbal agreements are not sufficient and may lead to legal disputes.
- The contract must include specific details required by Hungarian labor laws: Read more about contract mandatory details
- Ensure the contract does not contain terms that are less favorable than those provided by Hungarian law, as these would be considered invalid.
- The employee must receive a copy of the signed contract, and both parties should acknowledge that they have read and understood the terms. This can be critical in preventing future legal issues.
Step 4: Register with Local Authorities
Register with the Hungarian Tax Authority (NAV)
You will need to obtain a tax identification number for your company if you don’t already have one. You must also submit regular tax returns and comply with reporting requirements.
Register with the Social Security Administration (OEP)
You will need to ensure that you are properly registered with the OEP and that contributions are correctly calculated and submitted. This involves setting up the necessary systems to track and remit these payments.
Step 5: Set Up Payroll
- Choose a Bank: Select a bank that offers payroll services suitable for your company’s needs.
- Account Setup: Open a business bank account to handle salary payments and other business transactions.
- Gather employee’s information: Collect employee details, including personal info, tax IDs, and bank details, for payroll setup.
- Generate Payslips: Provide employees with payslips detailing their gross salary, deductions, and net salary.
- Distribute paychecks and file taxes: Pay salaries, deduct Hungarian taxes, and submit social security contributions to the appropriate authorities.
- Reconcile Statements: Regularly reconcile your bank statements with payroll records to ensure accuracy and address any discrepancies promptly.
- Monitor Payments: Keep track of payment statuses and address any issues with delayed or incorrect transfers.
- Keep Documentation: Retain copies of bank statements, payroll files, and transaction records for compliance and auditing purposes.
Step 6: Provide Mandatory Benefits
Register with the Hungarian Tax Authority (NAV)
1.Retirement Benefits
2.Paid Time Off (PTO) :
- Annual Leave: Employees are entitled to at least 20 days of paid annual leave, which increases to 30 days once they reach 45 years of age.
- Public Holidays: Hungary recognises multiple paid public holidays each year.
- Sick Leave: Employees are granted 15 days of paid sick leave annually, with the possibility of extended leave for severe health conditions.
- Parental Leave: Women are entitled to 24 weeks of paid maternity leave while men are entitled to 10 days within two months of birth, with 5 days at 100% pay and 5 at 40%.
- Parental Leave: Women are entitled to 24 weeks of paid maternity leave while men are entitled to 10 days within two months of birth, with 5 days at 100% pay and 5 at 40%.
3.Occupational health and safety training
4.Medical Examination
Step 7: Submit Tax and Contribution Reports
- Monthly/Quarterly Filings: Submit tax and social security contribution reports to NAV and OEP monthly or quarterly, as required.
- Annual Reporting: Prepare and submit annual reports summarising payroll taxes and contributions.
Step 8: Maintain Compliance & Employment Obligations
Regularly review your compliance with Hungarian labor laws, ensuring timely payment of taxes and social security contributions. Also, stay on top of employee-related obligations like annual leave, overtime, and changes in employment terms or terminations.
Conclusion |
In Conclusion, Hiring remote workers in Hungary can be smooth and compliant with the right knowledge and resources. From understanding local employment laws to setting up payroll and providing mandatory benefits, each step is essential for a successful remote workforce. Whether you establish a legal entity or partner with an Employer of Record (EOR), ensuring compliance is crucial to avoiding legal and financial risks.
