Employer of Record in Hungary

Comprehensive Guide to Employer of Record (EOR) in Hungary

What is an Employer of Record (EOR)?

An Employer of Record (EOR) in Hungary is a third-party organisation that manages employees' legal, administrative, and payroll responsibilities on behalf of a company. The EOR is the legal employer, allowing businesses to hire and manage employees in Hungary without establishing a local legal entity.

Essential Functions of an EOR in Hungary

1. Legal Employer: Acts as the official employer, ensuring compliance with Hungarian labour laws.
2. Payroll Management:
   • Processes salaries, taxes, and social contributions.
   • Manages overtime, bonuses, and deductions.
3. Tax Compliance:
   • Ensures proper withholding and payment of income taxes and social security contributions.
4. Work Permits and Visas:
   • Handles visa and work permit applications for foreign employees.
   • Ensures compliance with immigration laws.
5. Employee Benefits Administration:
   • Manages statutory and supplementary benefits, such as health insurance, pensions, and paid leave.
6. Termination Management:
   • Manages termination processes, ensuring compliance with Hungarian laws on notice periods and severance pay.

Benefits of Using an EOR in Hungary

1. Faster Market Entry: This avoids the time-consuming process of setting up a legal entity.
2. Compliance Assurance: Ensures adherence to Hungarian labour, tax, and immigration regulations.
3. Cost Efficiency: Eliminates local infrastructure needs, reducing operational costs.
4. Administrative Relief: Frees businesses from managing HR, payroll, and compliance.
5. Scalability: Offers flexibility to scale the workforce up or down based on business needs.
6. Risk Mitigation: Minimizes legal and financial risks related to non-compliance.

Labor and Employment Laws in Hungary

Employment Contracts

1. Types of Contracts:
   • Open-ended contracts: Most common for long-term employment.
   • Fixed-Term Contracts: Limited duration, renewable for up to 5 years.
   • Part-Time Contracts: For reduced working hours.
2. Contract Requirements:
   • Must be in writing.
   • Must include job title, responsibilities, salary, working hours, and termination conditions.
   • Language: Typically in Hungarian or with a certified translation.

Working Hours

1. Standard Workweek: 40 hours (8 hours per day, Monday to Friday).
2. Overtime:
   • Allowed up to 250 hours annually (400 hours with employee consent).
   • Compensation: 150% of regular pay or additional time off.
3. Night Work:
   • Additional pay is required for night shifts (22:00–06:00).

Leave Policies

1. Annual Leave:
   • Minimum of 20 days, increasing with age.
   • Example: 30+ years of age = 30 days.
2. Public Holidays:
   • 13 national holidays, such as New Year’s Day and National Day (March 15).
3. Sick Leave:
   • Paid at 70% of the daily gross salary for up to 15 days annually.
   • After 15 days, paid by social security.
4. Parental Leave:
   • Maternity Leave: 24 weeks, paid by social insurance.
   • Paternity Leave: 5 days (7 days for twins).
   • Parental Leave: Up to 3 years of unpaid leave, job-protected.

Termination

1. Notice Periods:
   • Ranges from 30 days to 90 days based on tenure.
2. Severance Pay:
   • Required for dismissals due to redundancy or company restructuring.
   • 1–6 months of salary, depending on length of service.

Payroll in Hungary

Salary Payments

1. Frequency: Typically monthly, by the 10th of the following month.
2. Currency: Hungarian Forint (HUF).

Income Tax Rates

• Flat Rate: 15% of gross income.

Social Security Contributions

1. Employer:
   • Social Contribution Tax: 13% of gross salary.
   • Vocational Training Contribution: 1.5%.
2. Employee:
   • Social Security Contributions: 18.5% (pension, health, and unemployment).

Payroll Compliance

• Employees must be registered with the National Tax and Customs Administration (NAV).
• Monthly reporting and payment of contributions are mandatory.

Employee Benefits in Hungary

Mandatory Benefits

1. Health Insurance:
   • Public healthcare is provided through social security contributions.
   • Covers medical treatment, hospitalisation, and preventive care.
2. Paid Leave:
   • Annual leave and public holidays.
   • Paid sick leave and maternity leave.
3. Pension Contributions:
   • Part of the social security system.

Supplementary Benefits

• Common in competitive industries:
  • Private health insurance.
  • Meal vouchers.
  • Transportation subsidies.
  • Wellness and fitness allowances.
  • Professional development programs.

Bonuses

• Performance-based or year-end bonuses are standard in Hungary, especially in sectors like IT, finance, and manufacturing.

Work Permits and Visas in Hungary

Types of Work Permits

1. General Work Permit:
   • For employment under a Hungarian employer.
2. Single Permit:
   • Combines a residence permit and work authorisation.
3. EU Blue Card:
   • For highly skilled workers meeting a salary threshold.

Visa Types

1. Short-Stay Visa (Type C):
   • For stays up to 90 days within 180 days.
2. Long-Stay Visa (Type D):
   • For employment, study, or residence.
3. Residence Permit:
   • Required for stays exceeding 90 days.

Application Process

1. Employer applies for a work permit with the Hungarian Immigration Authority.
2. Required Documents:
   • Employment contract.
   • Proof of qualifications.
   • Copy of passport.
   • Proof of accommodation.
3. Processing Time:
   • Work Permit: 15–30 days.
   • Residence Permit: 1–2 months.

Costs

• Work Permit: €50–100.
• Residence Permit: €60–100.

Industries Utilizing EOR Services in Hungary

1. Information Technology (IT): High demand for skilled tech workers.
2. Manufacturing: Strong automotive and electronics sectors.
3. Shared Services and Outsourcing: Hungary is a BPO and SSC centers hub.
4. Healthcare: Growth in demand for medical professionals.
5. Education: International schools and universities frequently hire foreign staff.

Comparison: Hungary vs. Other Countries

1. Market Size:
   • Hungary offers a smaller but highly skilled workforce compared to Western Europe.
2. Costs:
   • Competitive labour costs and moderate taxation make it attractive for employers.
3. Compliance:
   • Labor laws are less complex than in countries like Germany but stricter than some Eastern European neighbours.

This detailed guide covers all critical aspects of employment and EOR services in Hungary. Let me know if you need additional information or help formatting a specific use case!