Hungary

While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ a worker in Hungary, outlining the potential cons.

HQ country employment & payroll

What it is: While the person is in Hungary, they are employed and payrolled directly by the company’s HQ entity.

Cons: This may appear attractive, but it generally isn’t legal in the long term. HQ payroll won’t be possible if the person is not a tax resident in the HQ country.

Independent contractor agreements

What it is: People are locally registered as sole traders or limited liability company owners in Hungary and invoice for their work. There is no direct employment relationship.

Cons: In Hungary, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.

Direct local employer setup

What it is: The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.

Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.

Partnering with an Employer of Record Hungary /Temp agency

What it is: Employment is handled by a platform that specialises in employing people on behalf of customer companies. The Employer of Record, which in Hungary is done through a temporary agency licence, helps to hire and pay employees.

Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work. In Hungary, this model comes with a limit of 5 years.

Setting up a local company in Hungary can be time-consuming and complicated. That is further complicated by the monthly activities – payroll needs to be calculated and run every month, taxes filed, benefits extended, change of rules and regulations followed.

While many employers practice employing remote workers as independent contractors, it’s a bad practice. If an individual is giving their full and undivided attention to your company in Hungary, treating them as an independent contractor is a likely breach of Hungarian employment laws and of those in your country.

Your company could be liable for fines for owed holiday pay, severance pay, sick pay, social welfare payments, paternity benefits, maternity benefits, or other legal measures. Since the individuals you are working with do not receive the benefit of local employment laws and protections that are often afforded to people working full-time hours.

Read more on why hiring remote people as independent contractors is a bad idea.

When you hire employees in Hungary, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect all applicable laws and regulations regarding employment and work practices. Complying with local employment law in Hungary is fundamental for the correct running of your business – not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but also to minimise your risk of liabilities as an employer. Being compliant means respecting and following all local labour laws, sick leave and illness benefits, severance pay, annual leave, minimum wage, tax credits, and working hours regulations.

As with every other country, there are certain costs associated with employing a worker in Hungary that come on top of the gross salary you are offering. In Hungary that is social security. To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

In Hungary, the Employer of Record model for employing a worker on behalf of another company doesn’t exist and is instead done through a temporary agency licence. Employing someone through a temp agency licence means that Boundless is the legal employer of the individual, as far as the Hungarian government, tax, and employment authorities are concerned.
We are responsible for:

• informing you about any pre-employment requirements
• ensuring their employment is compliant with Hungarian employment law
• informing you about the length of the maternity leave, paternity leave, public holidays, illness benefits, medical benefits
• providing a locally compliant employment contract
• processing local payroll
• filing employment-related tax returns
• issuing payslips to the employee
• distributing salary payments
• payments to the local tax authorities

Customers that work with a temp agency in Hungary are responsible for:

• sourcing and recruiting their own workers
• managing the employee’s day-to-day work load
• contributing to the personal / professional development of the employee through their work
• following any guidance we give on employment and HR best practices or legal obligations in Hungary, such as the employment contract, public holidays, annual leave, sick leave, maternity and paternity benefits, probationary periods, overtime pay, statutory redundancy payments, liability insurance and many others
• ensuring that payroll bills relating to their team are paid to Boundless before the cut-off point in each pay cycle

Boundless as the Employer of Record Hungary (temp agency licence holder) files all pertinent taxes and contributions to the National Health Insurance Fund as they relate to the compliant employment of an individual in their home country.

We carefully choose employment lawyers or advisories to partner with in each country we operate in, including Hungary. They ensure the Hungary employment contracts, and any other relevant documents required for new employees comply with the local jurisdiction. We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice period or work-from-home regulations. Whenever a potentially sensitive issue arises in Hungary, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

The company remains responsible and informs employees of the day-to-day management of the people and teams that are employed through Boundless, including any disciplinary or performance issues.

Boundless ensures compliance with Hungarian-specific procedures, practices and labour laws while employing people and teams on behalf of the company. This includes the deployment contracts.

Any new employee that is locally employed through a temp agency in Hungary gets full employment rights and benefits as specified in local law. They get a locally compliant employment contract, statutory maternity leave, annual leave, illness benefits, any relevant tax credit, severance pay and many more.

In Hungary, both employers and employees have to pay taxes. For employers, that includes social security and for employees, they include social security and income tax. To get a clear overview with both employee and employer taxes, use our salary breakdown calculator.