Hire in Hungary
Hungary PEO &
Employer of Record
Hire & manage teams remotely in Hungary without a local entity. We handle HR compliance, payroll & taxes so you can focus on your business.
Business Language
Hungarian
Salary Currency
Forint (HUF)
Payroll tax
13.00%
Payroll Cycle
Monthly
Time zone
UTC +2
Capital city
Budapest
Hire Employees in Hungary
The NNRoad Advantage ☺
Pay as you go
Global account manager
Compliance
Fast Onboarding
Foreigner Visas
Platform
Employer of Record in Hungary
01.
Candidate Selection
02.
Employee Onboarding
03.
Compliance & Payroll
04.
Payroll Reporting
Recruiting process outsourcing – including but not limited to resume screening, shortlisting candidates, coordination for interviews, and assistance for salary negotiation.
Hiring and termination of employees/local labor contracts (contract administration – engagement, extension termination and conversion to permanent hire).
On-boarding and off-boarding employees following labor law practice.
Complete payroll solution and benefit administration
Employee management – employee record retaining, time keeping, bonus and allowance management, expense and claims, and leave employee database management accordingly to the local law.
Mandatory insurance compliance (i.e. pension, labor and health insurance) according to the local labor laws.
Payment management (Invoicing customers/clients and vendor payments).
Work VISA application assistance, if needed.
Local individual income tax reporting.
Payroll & PEO in Hungary
01.
Compliance & Payroll
02.
Payroll Reporting
Registering the necessary company and personnel information for payroll calculation in the payroll software and system
Monthly Payroll Processing
Year-End Adjustment and Annual Declaration
Taxes & Payroll in Hungary
Employee Income Taxes:
Individual income tax (IIT) is an important source of revenue for the Hungarian government, accounting for approximately 40% of total tax revenue. The tax is levied on the income of individuals who are resident in Hungary, as well as non-residents who receive income from Hungarian sources. The basic rate of IIT is currently 15%, but this increases to 32% for those earning more than 1.5 times the average wage in Hungary.
There are also various deductions and allowances available, such as for dependents and certain types of expenses. The Hungarian tax system is generally considered to be complex, and individuals may need to seek professional advice to ensure they are complying with all the relevant rules and regulations.
Hungarian personal income tax (PIT) is assessed on the following:
Tax Brackets
Income between HUF 500,001 and HUF 1,500,000: 20% tax rate
Income above HUF 1,500,000: 30% tax rate
Sample Calculation
Employer Costs in Hungary
Employer costs in Hungary consist of various taxes and contributions that employers are required to pay in addition to the salaries and wages they pay to their employees. These costs include social security contributions, health insurance contributions, and vocational training contributions, among others.
The exact amount of these costs varies depending on factors such as the employee’s salary level, the type of employment contract, and the industry in which the employer operates. In addition to these costs, employers may also be subject to other taxes and contributions, such as payroll taxes and local business taxes.
Employer Contribution
Employers must pay contributions based on the salary of their employees:
15.50% – Social Contribution Tax
1.50% – Vocational Training Fund
Total employment costs: 17%
Employee Contribution
7% – Health Care Contribution
10% – Pension Fund
1.50% – Unemployment Fund
Total employee cost: 18.50%
Benefits & Insurance in Hungary
Benefits and insurance in Hungary are provided through a combination of government-run social security schemes and private insurance companies. The social security system includes health insurance, pension insurance, and unemployment insurance, which are funded through contributions from employees and employers. Health insurance provides access to a range of medical services and treatments, while pension insurance provides retirement benefits based on an individual’s contributions and length of service.
Unemployment insurance provides financial support to individuals who are out of work and seeking employment. In addition to these social security schemes, many employers also offer private insurance benefits to their employees, such as life insurance, disability insurance, and supplementary health insurance. These benefits are usually optional and can provide additional coverage and financial protection beyond what is provided by the social security system.
Pension Fund
In Hungary, the pension system consists of a mandatory state pension fund and optional private pension funds. The mandatory state pension fund, known as the National Pension Insurance (Nemzeti Nyugdíjbiztosítás), is a social security program that provides retirement benefits to eligible individuals based on their contributions and years of service.
The state pension system in Hungary operates on a pay-as-you-go basis, where current workers’ contributions fund the benefits of current retirees. The contributions are deducted from employees’ salaries, with employers also making contributions on behalf of their employees. The amount of pension benefits received depends on factors such as the individual’s earnings history, the number of years contributed, and the retirement age.
In addition to the state pension fund, Hungary also offers a voluntary private pension system. Individuals have the option to join private pension funds, known as the Pillar II funds. These funds operate as defined contribution schemes, where individuals can divert a portion of their income into a private pension account. The contributions to private pension funds are invested and can provide additional retirement income on top of the state pension.
It’s important to note that the Hungarian pension system has undergone several reforms in recent years, including changes to the retirement age, contribution rates, and benefit calculations. These reforms aim to ensure the long-term sustainability of the pension system amid demographic changes and evolving economic conditions.
Healthcare Insurance
In Hungary, healthcare insurance is mandatory for all residents. The healthcare system operates on a social insurance model, where contributions from individuals and employers fund the provision of healthcare services.
The National Health Insurance Fund (Országos Egészségbiztosítási Pénztár, or OEP) is the central institution responsible for administering and managing the healthcare insurance system in Hungary. It collects contributions and ensures that eligible individuals have access to a range of healthcare services.
Healthcare insurance coverage in Hungary provides access to a wide range of medical services, including primary care, specialist consultations, hospital treatments, and medications. The insurance also covers preventive care, emergency services, and certain dental treatments.
Contributions to the healthcare insurance system are generally based on income and employment status. Employees typically have a portion of their salaries deducted to fund their healthcare insurance, while employers also contribute on behalf of their employees. Self-employed individuals and certain other groups are responsible for making their own contributions.
It’s important to note that while healthcare insurance covers a significant portion of medical costs, there may still be co-payments or out-of-pocket expenses for certain services and medications. Additionally, individuals can choose to supplement their healthcare coverage with private health insurance plans for additional benefits and services.
The Hungarian healthcare system has undergone reforms in recent years to improve efficiency, accessibility, and the quality of healthcare services. These reforms have included measures to streamline administrative processes, enhance primary care services, and improve healthcare infrastructure.
Occupational Rehabilitation Contributions
In the first three quarters, taxpayers must pay the advance on contributions for rehabilitation purposes, computed according to the relevant legislation, by the 12th day of the month following the quarter.
Vocational Training Contribution
The health insurance and labor market contribution base of the person subject to contribution responsibilities will be used to assess the contribution for vocational training. The contribution rate for vocational training will be 1.5 percent of the social security tax base.
Working Hours in Hungary
Working hours in Hungary are regulated by the Labour Code, which sets out the maximum working hours, rest periods, and overtime rules for employees. The standard working week is 40 hours, with a maximum of 8 hours per day. Overtime work is allowed, but employers are required to pay their employees at least 50% more than their regular hourly rate for overtime hours. The maximum amount of overtime that an employee can work in a year is 250 hours, or 300 hours in certain industries.
Employees are entitled to at least 11 hours of rest between working days, and a minimum of one day off per week. In addition, employees are entitled to paid annual leave, which varies depending on their length of service and the type of work they perform. The Labour Code also provides for special rules for part-time work, shift work, and night work.
Working Hours Per Week
The standard working time in Hungary is 8 hours per day, 5 days per week.
Overtime
Hungary allows a limit of 250 hours of overtime per year (or up to 300 if specified in the CBA). In Hungary, overtime pay is negotiated between the company and the employee.
Termination Laws in Hungary
Termination laws in Hungary are governed by the Labour Code, which sets out the rules and procedures that employers must follow when terminating an employment contract. Under the code, both employers and employees have the right to terminate a contract, provided they give the required notice period or pay in lieu of notice.
In some cases, termination may be deemed unfair or discriminatory, and employees may be entitled to compensation or reinstatement. The code also provides for the possibility of terminating an employment contract without notice or compensation in cases of serious misconduct or breach of contract. In addition, the code provides for certain protections for employees, such as the right to appeal a termination decision and the right to participate in a consultation process with their employer before any decision is made.
Employers can end a fixed-term contract for a variety of reasons, including commercial, personal, or employee misconduct. It necessitates formal notice and an explanation for the termination. If the reason is misconduct, the employee must be given a warning and given the opportunity to explain his or her actions.
When an employment relationship is terminated by notice, the employee must receive the final wage payment no later than the fifth working day following the termination of the employment relationship.
Severance
The amount of severance compensation is normally 1-6 months of absence pay, depending on the duration of service. Employees close to the retirement age are usually entitled to an additional 1-3 months of absence pay, depending on the length of their employment.
Notice Period
The notice period varies depending on the length of service and the reason for termination, but generally ranges from 15 days to 3 months.
Employment Contract in Hungary
Employment Contract
An employment contract must be signed in writing in Hungary. If the employee raises an objection to this within 30 days of the start of work, the contract will be voided. In Hungary, there are two types of contracts that are used:
Probation Period
In the Hungarian employment contract, the parties may stipulate a probation period of not more than three months from the date of commencement of the employment relationship.
Types of Leaves in Hungary
In Hungary, employees are entitled to various types of leaves in addition to their annual leave and public holidays. One such type of leave is sick leave, which provides employees with time off work due to illness or injury. Sick leave is usually paid and can be taken for up to 15 working days per year. Maternity leave is also available to female employees who are pregnant or have recently given birth. Maternity leave is 24 weeks long and is paid by the government. In addition, fathers are entitled to paternity leave, which is two weeks long and is also paid by the government.
Parental leave is available to both mothers and fathers and can be taken for up to two years following the birth or adoption of a child. During this time, employees may be entitled to a reduced salary or no salary, depending on their employment contract. Finally, employees are entitled to special leave in certain circumstances, such as in the case of the death of a family member or for military service. The types of leaves available in Hungary aim to provide employees with support and flexibility during important life events or periods of ill health.
Annual Leave
All employees are entitled to a paid vacation of 20 days every year, which increases according to the employee’s age to a maximum of 30 days for employees over 45 years of age.
Sick Leave
Employees are entitled to 15 paid sick days, which are paid by the employer. Based on the average wage over the past six months, they receive 70.00 percent of their compensation rate.
Maternity Leave
Women are entitled to 24 weeks of maternity leave, but they can take up to three years and still be eligible for maternity benefits.
Mothers are eligible for a 70.00 percent Pregnancy and Confinement Benefit (CSED) for the first six months of their pregnancy. Mothers are entitled to a Child Care Fee (Gyermekgondozási dj – GYED) for the next eighteen months, or until their child turns two, at a rate of 70.00 percent of their earnings, up to a maximum of double the minimum wage.
Paternity Leave
A father is entitled to five days of paid paternity leave (seven days if the birth is numerous or problematic), which must be taken within two months of the birth.