Labour and Employee Benefits: Hungary

A Q&A guide to labour and employee benefits in Hungary. This Q&A is part of the multi-jurisdictional guide to labour and employee benefits. For a full list of jurisdictional Q&As visit


László Kenyeres, Barnabás Buzási, Péter Göndöcz and Tamara Kiss, Faludi Wolf Theiss

Scope of laws

1. Do the main laws that regulate the employment relationship apply to:
  • Foreign nationals working in your jurisdiction?

  • Nationals of your jurisdiction working abroad?

Laws applicable to foreign nationals

Contracting parties can choose the governing law of the employment relationship in accordance with private international law. However, certain mandatory rules apply regardless of the choice of law. In particular if a European Economic Area (EEA) or non-EEA national employed by a foreign employer is posted to Hungary, Council Directive 96/71/EC concerning the posting of workers (Posted Workers Directive) applies. Under the Hungarian implementation of the Posted Workers Directive, the foreign posted employee is protected by the following mandatory rules of the Hungarian Labour Code (Act XXII. of 1992 on the Labour Code):

  • Maximum working time and minimum rest periods.

  • Minimum annual paid leave.

  • Minimum wages.

  • Conditions of the hiring-out of workers.

  • Occupational safety.

  • Access to employment or work by:

    • pregnant women (or women who have recently given birth);

    • women with young children;

    • young people.

  • The principle of equal treatment.

Laws applicable to nationals working abroad

A Hungarian national is subject to Hungarian labour law if assigned to work abroad by a Hungarian employer for a temporary period. However, while working abroad, the employee is subject to the mandatory (minimum) regulations of the host state (such as working hours, public holidays and work safety).


Employment restrictions and incentives

2. Are there any age or nationality restrictions on managers or company directors? If so, please give details.

Age restrictions

There are no age restrictions on managers or company directors.

Nationality restrictions

There are no specific nationality restrictions on managers or company directors.

3. Are any grants or incentives available for employing people? If so, please give details.

Certain grants and incentives are available for the creation of new jobs or for the retention of existing jobs. In relation to newly created jobs, an incentive package may contain job creating and training subsidies in addition to development tax allowance and cash subsidies. This will always depend on the actual conditions of the investment. To preserve the level of employment, the relevant authorities continuously launch programmes under which wage subsidy or wage supplement subsidies are available in certain circumstances.


Work permits

4. What permits do foreign nationals require to work in your country? Please explain:
  • How these permits are obtained.

  • How much they cost.

  • How long the process takes.

Required permits

EU/EEA and Swiss citizens do not need to obtain a work permit for employment in Hungary. The employer must register its EU/EEA/Swiss employee at the local employment authority. Third country nationals must obtain a work permit before the start of employment in Hungary. An individual work permit, for which the employee must apply, can be granted for a maximum of two years and may be renewed an unlimited number of times.

There are additional exceptions from the work permit requirement (munkavállalási engedély) for:

  • Executive employees.

  • Academic employees.

Employers can recruit third country nationals if they have advertised for specific positions, but they were not able to fill their vacancies with Hungarian employees within the given time frame.

Obtaining permits

Local public employment services (Regionális Foglalkoztatási Szolgálat) and immigration offices (Bevándorlási Hivatal) of the future employer's seat issue the work and residence permits. The work permit is incidental to a residence permit.


Obtaining the work permit is free of charge but the employee bears the cost of official translations of the documents verifying the qualification of the employee. EU/EEA nationals only pay the registration fee of HUF1,500 (as at 1 August 2010, US$1 was about HUF218).

In addition, third country nationals must obtain a visa (EUR60 ((as at 1 August 2010, US$1 was about EUR0.8)) or a residence permit (HUF18,000) depending on the length and scope of the employment.

Length of process

The whole process (including obtaining work and residence permit) may take two to three weeks.


Terms of employment

5. What terms govern the employment relationship? In particular:
  • Is a written employment contract or statement of employment terms required?

  • Are any terms implied by law into the employment contract (in addition to the terms referred to in Question 1)?

  • Are collective agreements with trade unions or employee representatives common (generally or in specific industries)?

Written employment contract

Employment contracts must be concluded in writing (Article 76(2), Act XXII of 1992 on the Hungarian Labour Code). However, an employee can only claim that the employment contract is invalid if it has not been recorded in writing within 30 days from the day on which he starts work.

The employment contract must set out:

  • The employee's personal base wage.

  • The employee's job function.

  • The place of employment.

The parties may settle any further issues in the contract. Employers must inform the employees of their respective job functions and the level of education required for any particular job or position.

On concluding the employment contract, the employer must notify the employee of:

  • The regular working hours.

  • Other parts of the employee's remuneration.

  • The date the wages are paid.

  • The date the employment starts.

  • The number of days of paid annual leave, and the procedures for allocating and determining the leave.

  • The procedures in relation to the employer and employee's notice period.

  • Any collective agreement applicable to the employee.

  • The name of the local trade union branch and whether there is a works council (for example, a central works council or shop steward).

The employer must provide the above information in writing to the employee within thirty days from the conclusion of the employment contract.

Implied terms

Terms such as minimum wage, allowances and premiums, work safety regulations and so on may be implied into an employment contract by law, collective agreements, work regulations and/or practice.

Collective agreements

Collective agreements are common in Hungary and can be concluded at company, industry or national level. Extended scope collective agreements exist in the construction, bakery, tourism and electricity industry.

Collective agreements may settle any questions in relation to the employment relationship.


Minimum wage

6. Is there a minimum wage? If so, please give details, in particular whether it applies to all employees, regardless of their age and experience.

The government establishes the level of minimum pay annually. The level of monthly minimum wage depends on the qualification required for the position held by the employee. Full-time employees in positions requiring at least a secondary school-level diploma must be paid at least HUF89,500. Employees holding positions where no such diploma is required must be paid at least HUF73,500. Collective bargaining agreements may also establish a minimum level of pay for certain employees or categories of employees.


Working time

7. Are there restrictions on working hours? If so, please give details.

The working time restrictions for full-time employment are an average of eight hours a day or 40 hours per week over a maximum four-month period (working cycle).

Special rules apply to employees working on-call duty.

8. Is there a minimum holiday entitlement? If so, please give details. How many public holidays are there in a year and are they included in the minimum holiday entitlement?

The minimum number of statutory paid holidays depends on the employee's age and varies from 20 to 30 days. For example, an employee of 26 is entitled to a minimum holiday of 21 working days, while an employee of 46 is entitled to a minimum of 30 days of annual statutory paid holiday. Special categories of employees are entitled to additional holiday, such as:

  • Single parents and employees assuming a greater role in raising a child according to the parents' decision: two to seven days per year, depending on the number of dependant children under the age of 16.

  • Blind employees: five days per year.

  • Employees under the age of 18: five days per year.

  • Employees working permanently underground: five days per year.

  • Employees working at least three hours per day at a workplace subjected to ionising radiation: five days per year.

There are ten public holidays in Hungary. Public holidays are not included in the minimum holiday entitlement.


Illness and injury pay

9. What rights do employees have to time off in the case of illness or injury? Is that time off paid? Can an employer recover from the state sick pay granted to its employees?

Employees are entitled to 15 days' sick leave per year. During the term of the sick leave employees generally receive 70% of their base salary (including regular allowances). This amount is paid by the employer. After this time, the exact amount of payment may vary from 50% to 60% of the base salary depending, among other things, on the term of service. One-third of this amount is generally paid by the employer and two-thirds is paid by the state. Different rules apply in cases of injury suffered in the course of performing work or occupational disease.


Parents and carers

10. What are the statutory rights of employees who are parents or carers (including those of disabled children and adult dependants)? How is employees' pay affected during periods of leave?

Maternity rights

Pregnant employees (or those having given birth) are entitled to 24 weeks' maternity leave. The leave must be scheduled to start four weeks before the expected birth date, if possible. During the entire period of maternity leave, the employee is entitled to 70% of her average salary, if she is regarded as insured under the Health Insurance Act LXXXIII. of 1997.

In addition, the employee is entitled to a leave of absence without pay until the child reaches the age of three, to care for the child at home. After the end of maternity leave period (see above), the insured employee is entitled to 70% of her average salary. This 70% is capped at HUF102,900 monthly and is only payable until the child reaches the age of two.

If the employee cannot be regarded as insured according to the Health Insurance Act, she is entitled to a child care allowance paid by the state.

Employers cannot dismiss employees during pregnancy and until the child reaches the age of three, except in case of extraordinary dismissal and mass redundancy.

During the first six months of nursing, female employees are entitled to two hours of work time allowance daily and one hour daily after that up to the end of the ninth month.

Paternity rights

Following the birth of his child, a father is entitled to five days of fully paid work time allowance, which the employer must allocate within the two months following the date of birth.

The parents can decide that the father will look after the child following the lapse of maternity leave until the child reaches the age of three. In this case the father is also entitled to the same allowance and same protections as female employees (see above, Maternity rights)

Adoption rights

Employees who adopt a child (case law does not define the exact age of the children) are entitled to the same time allowances and social benefits as the mother who gave birth to the child (see above, Maternity rights). However, the Labour Code remains silent in terms of adoption rights and the above statement is based on prevailing case law.

Parental rights

Based on the parents' decision, the employee assuming the greater role in raising a child (as well as single parents) is entitled to extra vacation time of:

  • Two days a year for one child.

  • Four days a year for two children.

  • Seven days a year for more than two children under 16 years.

Carers' rights

There is no specific provision concerning carers' rights.


Continuous periods of employment

11. Does a period of continuous employment create any benefits for employees? If individual employees are transferred to a new entity, are they deemed to retain their period of continuous employment?


Employees may be eligible for certain statutory benefits due to the length of their continuous employment, such as:

  • Longer notice periods.

  • Severance payment and/or higher amounts of severance payment.

  • Eligibility for sick pay and/or higher amounts of sick pay.

  • Eligibility for longer terms of sick pay.


Employees retain their period of continuous employment and original employment contract if they are transferred to a new entity (that is, a new employer) and the transfer falls within the definition of "succession" (Article 85/A, Labour Code). A succession includes any legal transaction that modifies the employer's legal identity (for example, merger, split, sale or spin-off). The succession can take place in:

  • The company.

  • An independent unit of the company (such as a plant, division, or workplace).

Only asset acquisitions fall within the scope of the Labour Code. Transfers of shares or quotas do not alter the employer's legal identity and therefore cannot be considered as succession.


Temporary and agency workers

12. To what extent are temporary and agency workers entitled to the same rights and benefits as permanent employees?

Temporary workers

Part-time, fixed-term and temporary workers have the same rights as other employees. In relation to remuneration, they are entitled to proportionate personal base wage and other allowances.

Agency workers

Agency workers have similar rights as the employer's own employees (for example, collective agreements can be extended to them). However, due to the nature of the employment, there are some differences. For example, the employment contract of the agency worker cannot contain a non-compete clause. In addition, special regulations are set for the information and notification obligations of the user undertaking, as well as for holiday entitlement and termination of the employment relationship.

In relation to remuneration (for example, personal base wage, allowances and overtime pay), special conditions apply which do not fully follow the principle of equal salary for equal work.

The employer's rights are shared between the user undertaking and the agency.


Data protection

13. What statutory data protection rights do employees have?

Employment-related data protection issues are regulated by the Act LXIII of 1992 on Data Protection (DPA).

An employer can only demand an employee to make a statement, provide certain data or take a test if it does not violate his personal rights. In addition, this information must be considered as being relevant for the purpose of entering into an employment relationship.

Job candidates and employees have the general right to receive information on the collection, use, storage and processing of their personal data. They are also entitled to request the correction, or in certain circumstances, the deletion of their data.

Employers can only disclose facts, data and opinions concerning an employee to third persons in the cases specified by law (particularly the DPA) or with the employee's consent.

The employer has the right to monitor the employee's computer if the computer has been designated for work-related use only. In relation to e-mails, the employer must distinguish between e-mail addresses for private purposes (containing the employee's name) and work-related email addresses not referring to the employee.

The employee has the right (as data subject according to the DPA) to file a claim against the data controller for any violation of his rights. The court must hear these cases immediately.


Discrimination and harassment

14. What protection do employees have from discrimination or harassment, and on what grounds?


The Act CXXV of 2003 on Equal Treatment (Equal Treatment Act) and the Penal Code (Act IV of 1978) contain the main regulations against discrimination and harassment. The Equal Treatment Act contains an exhaustive list of differentiating criteria. These are:

  • Sex.

  • Racial origin.

  • Colour.

  • Nationality.

  • Origin of national or ethnic minority.

  • Mother tongue.

  • Disability.

  • State of health.

  • Religious or ideological conviction.

  • Political or other opinion.

  • Family status.

  • Motherhood (pregnancy) or fatherhood.

  • Sexual orientation.

  • Sexual identity.

  • Age.

  • Social origin (that is, the employee's social background).

  • Financial status.

  • Part-time nature or definite term of the employment relationship or other type of work relationship.

  • Membership in an organisation representing employees' interests.

  • Any other status, characteristic feature or attribute.

In relation to the above criteria, a difference in treatment does not violate the principle of equal treatment if the discrimination is:

  • Proportional.

  • Justified by the characteristics or nature of the work.

  • Based on relevant and legitimate conditions considered during the hearing.

The Equal Treatment Act does not provide any specific legal protection to employees who raise a complaint based on a violation of the Equal Treatment Act.

In proceedings started following a violation of the principle of equal treatment, the injured employee must prove that he has suffered a disadvantage and he possessed any of the above characteristics (sex, colour, and so on). If these conditions are rendered probable, the employer must prove either that:

  • The measure is not disadvantageous to the employee.

  • It observed the principle of the equal treatment.

  • It was not obliged to observe this principle in this case.

Employees who believe they are discriminated against can claim compensation for the damage caused by the discrimination. The employer must take the required measures to prevent discrimination between the employees by issuing a warning letter or by terminating the employment relationship of the specific employee.

There is no explicit regulation in the Labour Code concerning victimisation, but according to the general principles of the Labour Code, parties must act in good faith and fairly. Therefore, disadvantaging an employee on the basis that he is exercising (or prepared to exercise) his legal rights, is unlawful.

There is no qualifying period for claims of discrimination or harassment. Protection also covers the parties' relationship before the start of the employment relationship.


Sexual harassment, and harassment of any other sort which violates human dignity is prohibited. Harassment is also a criminal offence punishable by:

  • Up to three years' imprisonment.

  • Community service.

  • A fine.

15. Do whistleblowers have any protection? If so, please give details.

There is no specific legal provision giving protection to whistleblowers. In addition, the whistleblower employee may face legal (criminal) consequences under the DPA. According to the DPA and the Data Commissioner's statement, whistleblowing is the acquisition and transfer of personal data to third parties without the consent of the data subject.


Dismissals and redundancies

16. What rights do employees have when their employment contract is terminated? Please provide information on:
  • Notice periods.

  • Severance payments.

  • Any procedural requirements for dismissal.

Notice periods

When terminating the employment relationship by ordinary termination, the notice period must be at least 30 days, but cannot exceed one year. The 30-day notice period is extended by:

  • Five days after three years of employment with the employer.

  • 15 days after five years.

  • 20 days after eight years.

  • 25 days after ten years.

  • 30 days after 15 years.

  • 40 days after 18 years.

  • 60 days after 20 years.

Severance payments

The employee is entitled to severance pay if the employer terminates the employment relationship by ordinary termination, or following the dissolution of the employer company without legal succession. The employees are entitled to receive varying amounts of severance pay depending on the length of employment with the employer.

A severance payment is the sum of the average earnings of:

  • One month for up to three years' employment.

  • Two months for up to five years.

  • Three months for up to ten years.

  • Four months for up to 15 years.

  • Five months for up to 20 years.

  • Six months for up to 25 years.

Any term of imprisonment or public service work and a leave of absence without pay for more than 30 days (with the exception of a leave of absence without pay for caring for a close relative or a child under ten years of age), is not included in the period applicable for eligibility for severance pay.

Employees who qualify as pensioners when the employment relationship is terminated are not entitled to severance payment.

The amount of severance pay is increased by three months' average earnings if the employee's employment is terminated within the five years preceding his eligibility for either:

  • Old age pension.

  • Old age pension with age allowance.

An employee who previously received extra severance pay on the basis of the above pension regulation is not entitled to the above additional increments in severance pay.

Procedural requirements

In cases of ordinary and extraordinary terminations, the employer must justify the dismissals. The justification must be clear and reasoned. An employee can only be dismissed for reasons in connection with:

  • His ability.

  • His behaviour in relation to the employment relationship.

  • The employer's operations or economic reasons.

In ordinary terminations, the employer must serve the notice and relieve the employee of his work duties. The length of this relief is half time of the notice period.

In a collective redundancy, the employer must inform and start consultation with the employees' representatives.

17. What protection do employees have against dismissal? Are there any specific categories of protected employees?

Ordinary termination cannot take place in certain circumstances (Article 90, Labour Code). The employer cannot terminate the employment relationship during:

  • Incapacity to work due to illness.

  • The entire duration of eligibility for sick pay on the grounds of incapacity resulting from an accident at work or occupational disease.

  • The period of sick leave for the purpose of caring for a sick child.

  • Leave of absence without pay for nursing or caring for a close relative.

  • Pregnancy (for three months after giving birth or during maternity leave).

  • Leave of absence without pay for the purpose of nursing or caring for children under the age of three.

  • The period of eligibility for childcare allowance.

  • Regular or reserve army service.

  • The entire duration of incapacity for persons receiving rehabilitation benefits.

The legal succession of the employer cannot serve as grounds for termination of an indefinite duration employment relationship by ordinary dismissal.

18. What rules apply on redundancies?

The employment relationship may be terminated by (Labour Code):

  • Ordinary termination.

  • Extraordinary termination.

  • Parties' mutual agreement.

  • The employer during the probation period and with immediate effect.

  • In the case of fixed-term employment, the employer paying the employee, in advance, the average wage due for the unexpired part of the contract, up to a maximum of one year's average salary.

The method of termination may also depend on the term (fixed or indefinite) of the employment contract.

Collective redundancy refers to a situation in which an employer, based on the average statistical workforce for the preceding six-month period, terminates the employment relationship, within a 30-day period for reasons connected to its operations, of:

  • At least ten employees, when employing more than 20 and fewer than 100 employees.

  • At least 10% of the employees, when employing 100 or more, but fewer than 300 employees.

  • At least 30 persons, when employing 300 or more people

The restrictive provisions concerning collective redundancy do not apply to employers employing fewer than 20 employees. These employers can terminate the employment relationship of all employees at the same time without needing to satisfy the information and consultation requirements of the collective redundancy regulation (Article 94/A (1), Labour Code).

The form of termination applied by the employer (that is, ordinary termination or mutual agreement) is irrelevant when assessing whether the collective redundancy regulation must be applied. The dismissals must be justified by economic reasons or needs of the employer.


Taxation of employment

19. What is the basis of taxation of employment income for:
  • Foreign nationals working in your jurisdiction?

  • Nationals of your jurisdiction working abroad?

Foreign nationals

Foreign nationals are taxed in Hungary on their Hungarian source income.

Income from employment should be treated as Hungarian source income in the following cases:

  • If the regular place of employment is in Hungary.

  • When the private individual is employed in various locations, if the private individual is employed in the employer's Hungarian permanent establishment, branch or commercial representation.

  • When the private individual is employed in various locations (including Hungary) and the employer has no permanent establishment or branch or commercial representation in Hungary. In this case, the employment income is the salary attributable to the private individual's Hungarian activity.

The taxable base includes all the benefits received by the employee. No costs are eligible against the gross salary. However, beneficial treatment may apply to certain benefits received (for example, smocks, medical treatment, private car use and so on, granted on certain conditions by the employer to employees).

If Hungary and the foreign national's country of residence have entered into a treaty for the avoidance of double taxation, the provisions of the treaty can override the domestic rules.

Nationals working abroad

Generally, Hungarian nationals are taxed on their worldwide income (that is, income derived from employment abroad is subject to personal income tax in Hungary).

The taxable base includes all benefits received by the employee. No costs are eligible against the gross salary. However, beneficial treatment may apply to certain benefit items.

If Hungary and the state of employment have entered into a treaty for the avoidance of double taxation, the provisions of the treaty can override the domestic rules. Tax treaties concluded by Hungary usually follow the OECD Model Tax Convention on Income and on Capital.

If no treaty for the avoidance of double taxation exists between the two countries, Hungarian law provides limited tax credit opportunities, reducing the exposure to double taxation.

20. What is the rate of taxation on employment income? Are any other taxes or social security contributions levied on employers and/or employees? If so, please give details, including the rates.

The taxable base for personal income tax is the gross salary increased by 27% for the employer's statutory social security contributions (that is, 127% of the gross salary). Tax rates are progressive (in 2010):

  • 17% on a taxable base of up to HUF5 million.

  • 32% on any amount exceeding HUF5 million.

For social security contributions, see Question 26.



21. Are there any circumstances in which:
  • An employer can be liable for the acts of its employees?

  • A parent company can be liable for the acts of a subsidiary company's employees?

Employer liability

Employers are generally liable toward third parties for all damage caused by their employees in connection with their employment.

Parent company liability

Parent companies are not generally liable for acts of their subsidiary's employees. However, if the subsidiaries have unlimited liability, the parent companies are generally liable for damages caused by the subsidiaries' employees if the subsidiary does not have sufficient financial resources to make good these damages.

22. What are an employer's obligations regarding the health and safety of its employees?

Employers must make and give effect to appropriate health and safety arrangements. Therefore, employers must:

  • Make the workplace safe.

  • Prevent risks to health.

  • Ensure that safe working practices are set up and followed.

If it has at least 50 employees, employers must provide the employees with the conditions to elect a work safety representative. Under certain circumstances, employers must continuously employ a work safety expert to comply with work safety requirements.


Representation and consultation

23. Are employees entitled to management representation (such as on the board of directors) or to be consulted about issues that affect them? Is employee consultation or consent required for major transactions (such as acquisitions, disposals or joint ventures)?

Management representation

If the annual average number of the employees exceeds 200, it is generally mandatory to appoint a supervisory board and the employees have the right to elect one third of the board's members. In relation to the employees' involvement in European public limited companies (Societas Europaea) (SE) the relevant Hungarian provisions comply with Council Directive 2001/86/EC supplementing the statute for a European company (European Company Statute Directive).


The employees' representative bodies (trade unions and/or works councils or workers' representatives) have the right to information, agreement, consultation and joint decision-making in relation to certain matters.

Generally, consultation with the representative bodies of the employer is required in relation to matters that may affect a significant number of employees (for example, where anticipatory business measures envisaged) and, in particular, where there is a threat to employment. A joint decision of the representative bodies and the employers is required to decide questions concerning the utilisation of welfare funds listed in the collective agreements and to certain assets, such as real properties of a similar nature.

Major transactions

As the employers must consult with the employees' representative bodies concerning significant anticipatory business measures, employee consultation is generally required for major transactions. Representative bodies do not have the right to veto transactions.

24. What are the remedies that are available if an employer fails to comply with its consultation duties? Can employees take action to prevent any proposals going ahead?


In general, if an employer fails to comply with the representative bodies' right to consultation or joint decision-making, the relevant employer's action can be ruled invalid. If the employer's action is ruled invalid, the employer must adopt a new decision in compliance with the Labour Code or if this is not possible, the provisions on liability for damages must be duly applied.

Employee action

The employees cannot generally take any action to prevent proposals going ahead.



25. Is there any statutory protection of employees on a business transfer? In particular:
  • Are they automatically transferred with the business?

  • Are they protected against dismissal (before or after the disposal)?

  • Is it possible to harmonise their terms of employment with other (existing) employees of the buyer?

Automatic transfer

In the event of a transfer of a business or part of a business with the objective of pursuing or reinitiating the relevant business activity, the employment relationships concerned are automatically transferred to the buyer entity.

Protection against dismissal

The transfer of a business itself cannot serve as a sole reason for the termination of employment. However, a reason based on or in connection with the employer's business activity (rationale) may, under certain circumstances, be acceptable. The reason for termination (for example, economic reasons connected to the employer's business) must, in all cases, be clear, real and reasonable.


The terms of the employment can only be amended by mutual agreement. Therefore, if the buyer wishes to harmonise the employment terms of the transferred employees with the buyer's other employees, it must seek agreement with the employees on the harmonised terms.



26. Do employers and/or employees make pension contributions to the state in your jurisdiction? If so, please give details of:
  • The contributions payable.

  • The tax treatment of those contributions.

  • The monthly amount of the state pension.


The employer's statutory social security contribution is 27% of the gross salary paid. The employee's statutory social security contribution is 9.5% (social security contribution) and 7.5% (health insurance and labour market contribution) of the gross salary received. The 9.5% social security contribution is capped at a gross salary of HUF7,453,300.

Special social security rules may apply if the employee is on assignment within the EU.


There are no tax implications for statutory social security contributions.

Monthly amount

The amount of state pension depends on the average salary of the particular employee and the overall service time. Usually the monthly amount is between 33% and 80% of the average monthly income.

27. Is it common (or compulsory) for employers to provide access, or contribute, to supplementary pension schemes for their employees? Do such schemes provide pensions the value of which:
  • Can usually be determined at the start of the arrangement (for example, the value is linked to the employee's salary)?

  • Cannot usually be determined at the start of the arrangement (for example, the value is dependent on employer and employee contributions and investment return on those contributions)?

These contributions are not compulsory, but are available under the Hungarian law, usually in the form of contributions to supplementary pension schemes. The amount of these contributions can be agreed at the start of arrangement or/and may be varied later based on the scheme.

28. Is there a regulatory body that oversees the operation of supplementary pension schemes? If so, please briefly summarise the regulatory framework.

Similarly to ordinary pension funds, supplementary pension funds are supervised by the Hungarian Financial Supervisory Authority (HFSA).

Foundation and functioning of a supplementary pension fund is conditional on the HFSA's authorisation. In addition, the operating rules of a supplementary pension fund must be approved by the HFSA and operation of the fund is regularly supervised by the supervisory authority.

29. Are any tax reliefs available on contributions to supplementary pension schemes (by the employer and employees)? If so, please give details.

The employer can provide voluntary pension contributions to its employees in form of a benefit in kind.

In these cases, 50% of the contribution paid for the benefit of the employee (but a maximum 50% of the minimum wage (the minimum wage is HUF73,500 to HUF89,500 per month depending on the employee's qualifications)) may be taxed at 25%.

Any contribution exceeding the above threshold is subject to the following tax rates:

  • 54% personal income tax.

  • 27% health tax.

30. Is there any legal protection of employees’ pension rights on a business transfer? In particular:
  • Do supplementary pension rights qualify as acquired rights that transfer automatically under national legislation?

  • If not, is there any other protection for pension rights on transfer?

The transfer of employees within the framework of a business transfer at the employer's level does not affect the employee's pension rights, as the supplementary pension rights qualify as acquired rights under Hungarian law.

31. Can the following participate in a pension scheme established by a parent company in your jurisdiction:
  • Employees who are working abroad?

  • Employees of a foreign subsidiary company?

Employees working abroad

Employees working abroad cannot be excluded from participation in a Hungarian supplementary pension fund. However, in any case, conditions for participation settled by Hungarian domestic laws and regulations of single pension funds must be met.

The beneficial tax treatment detailed in Question 29 may also apply to employees working abroad as well.

Employees of a foreign subsidiary company

Employees of a foreign subsidiary company may be covered by Hungarian pension funds.

If a foreign subsidiary company, as employer, intends to pay contributions to a Hungarian pension fund for its employees, it should enter into an agreement with the pension fund and apply the same treatment in connection with all employees concerned.

From a tax perspective, benefits referred to in Question 29 do not apply if the foreign subsidiary does not qualify as a taxpayer in Hungary.



32. Is it common to reward employees through contractual or discretionary bonuses? Are there restrictions or guidelines on what bonuses can be awarded? If so, please give details.

Employees are commonly rewarded through bonuses. The Labour Code does not contain any regulations concerning these forms of payment. Certain categories have been developed in case law:

  • Premium. The employee is entitled to a premium payment if he fulfils the goals set out by the employer in advance. The conditions of the payment and the goal should not be discriminatory.

  • Bonus. The bonus is a discretionary payment, payable at the sole discretion of the employer.



33. If employees create IP rights in the course of their employment, do the employees or the employer own the rights?

Act XXXIII of 1995 on the patent protection of inventions differentiates between two invention categories:

  • Service invention. This is any invention created by a person in the execution of his duties stemming from employment, including working out solutions within the domain of the invention. Unless agreed otherwise, patent entitlement must be vested with the employer.

  • Employee invention. This is any invention created by a person who is not required to do so under his contract of employment. However, the use of the invention falls within the sphere of activities of his employer.

    Patent entitlement must be vested with the inventor. However, the employer is entitled to use the invention. The employer's right to use the invention is non-exclusive and the employer cannot grant a licence to use to third parties. The right of use can only be transferred to the successor in the event of:

    • employer's winding-up; or

    • a separation of the department (for example, if the employee's department is transferred to a successor employer).

The inventor must present to the employer the service invention or employee invention immediately following its creation, and the employer must declare within 90 days if it claims the service invention, or if it wishes to use the employee invention.


Restraint of trade

34. Is it possible to restrict an employee's activities during employment and after termination? If so, in what circumstances can this be done? Must an employer pay its former employees remuneration while they are subject to post-employment restrictive covenants?

While in an employment relationship, the employee cannot engage in any conduct which may jeopardise or harm the employer's rightful economic interests. Usually, employers require that the employee only establish a further employment relationship with the employer's prior consent. Executives must comply with stricter non-compete requirements.

Non-compete agreements restricting competitive activities following the termination of employment must provide for a minimum level of compensation to be paid to the employee. This is generally 50% of the employee's last average salary for each month of the restriction period and the restriction cannot exceed three years.


Proposals for reform

35. Are there any proposals to reform employment law or pensions law in your jurisdiction?

There are currently no ongoing reforms in Hungary.


Contributor details

Laszló Kenyeres

Faludi Wolf Theiss

T +36 1 4848 800
F +36 1 4848 825

Qualified. Hungary, 1995

Areas of practice. Employment; corporate and energy.

Recent transactions

  • GDF Suez SA concerning the termination of a top executive's employment relationship.
  • CSM Hungary Kft in replacing the executive leader of the Hungarian operation.
  • Kraft Foods Hungária Kft concerning the multistage fusion with its subsidiary, Győri Keksz Ltd (previously owned by Danone).
  • Companies including SUEZ, Vinci and Unicredit Group on introducing multi-jurisdictional employee share option schemes.
  • KCI, a leading healthcare company, on all employment aspects following the establishment of its shared service centre.

Barnabás Buzási

Faludi Wolf Theiss

T +36 1 4848 800
F +36 1 4848 825

Qualified. Hungary, 2006

Areas of practice. Employment; corporate; M&A and energy.

Recent transactions

  • Kraft Foods Hungária Kft concerning the multistage fusion with its subsidiary, Győri Keksz Ltd (previously owned by Danone).
  • CSM Hungary Kft in replacing the executive leader of the Hungarian operation.
  • Advising a leading home-, body-and aircare company concerning a cross-border asset sale in connection with transfer of parts of business, with special regard to transfer of employees and collective redundancy.

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