1. Introduction
The Hungarian Labour Code, enacted in 2012, aims to increase flexibility in the labour market, making Hungary a more attractive destination for foreign investment. The legislation grants employers relatively broad unilateral rights, particularly regarding working time arrangements and scheduling, which allows businesses to respond quickly to operational needs. However, employee protection remains strong by international standards, especially concerning the termination of employment.
2. Labour and Employment Law Requirements
a) Employer Policy Requirements
According to the Hungarian Labour Code and EU Directive 2019/1152 on transparent and predictable working conditions, employers are required to provide employees with written information within seven days of commencing employment. This information can be included directly in the employment contract or referenced from the Labour Code.
Employees need to be informed about the following:
- Who is entitled to exercise the employer’s rights
- The employee’s position
- The start date and duration of employment
- The place of work
- The tasks associated with the position, either directly or through a job description
- Working time arrangements, including daily hours, whether the role is full-time or part-time, the scheduling of workdays, possible starting and ending times, and rules for overtime.
Overtime can only exceed statutory limits if the employee and employer agree in writing, allowing for up to 150 hours of voluntary extra work per year. Special operations, such as continuous, multi-shift, or seasonal work, must also be communicated. Additionally, salary information must be clear and include the method of payment, frequency, and payment dates. Employees must also be informed about their benefits, vacation entitlements, the calculation method for these entitlements, termination procedures, notice periods, the employer’s training policies, and the process for paying employment-related taxes. If a collective bargaining agreement applies, it must also be indicated.
Employers must also provide information about their data protection policy in alignment with the General Data Protection Regulation (GDPR). This includes identifying the data controller, explaining the purpose, legal basis, and duration of data processing, outlining the rights of employees and available remedies, naming the relevant supervisory authority, identifying any data processors, and indicating if personal data will be transferred outside the European Union.
b) Employee Training Requirements
Occupational safety and fire training:
Hungarian law requires employers to provide employees with appropriate training to perform their work safely throughout their employment. This includes familiarising employees with all relevant safety rules, instructions, and information, such as the locations of fire extinguishers, evacuation procedures, the proper use of personal protective equipment, and the safe operation of machinery.
Recent legislative amendments allow certain positions and activities to fulfil training obligations through a general training curriculum instead of in-person training. The ministerial decree specifies which roles are covered by this rule, such as office work involving IT and computer equipment, whether performed on-site or remotely. For these roles, employers may provide the training curriculum through internal electronic networks, such as a shared Teams group or intranet. However, traditional in-person training remains mandatory for all other positions not included in the decree.
c) Employment Contracts
An employment relationship in Hungary is established through an employment contract, which must specify, at a minimum, the employee’s base salary and job title. During negotiations and at the time of signing, both parties are required to act in good faith and share all material information relevant to the agreement.
The employment contract must be in writing, although the employer cannot invoke the lack of a written form. The employee may only challenge the validity of the contract on this ground within thirty days of starting work.
A contract is considered written if both parties sign separate but consistent copies or if their declarations are documented in multiple forms that reflect mutual agreement. The employer is responsible for recording the contract in writing and providing the employee with a copy.
Employment can only commence once the employee has received medical certification confirming fitness for the position while considering health, safety, and hygiene requirements. The job must not pose any risks to the employee’s health or development, particularly in the case of minors.
3. Corporate Law Requirements
Compliance for Incorporation
Companies in Hungary may be formed as a general partnership (közkereseti társaság – Kkt.), a limited partnership (betéti társaság – Bt.), a limited liability company (korlátolt felelősségű társaság – Kft.), or a joint-stock company (részvénytársaság – Rt.). Of these, the most common are Kft. and Rt., as both limit the liability of shareholders to the value of their contributions.
To establish a company, the founders must prepare a founding document – either a deed of foundation or articles of association – which must specify the company’s name, its registered office, its primary business activity, the identity of its founders, the value and form of their capital contributions, and the persons appointed as executive officers. Company names must be unique and include the chosen corporate form (e.g., “Kft.”), while the registered office acts as the legal seat where official correspondence is received. The primary activity must be listed in accordance with the Hungarian company register, with some activities, such as financial services or insurance, subject to licensing or restricted to specific corporate forms.
For a Kft., the minimum registered capital is HUF 3 million (approximately EUR 7,500), and for an Rt. HUF 5 million (approximately EUR 12,500), which in some cases may be paid after registration. At least one executive officer must be appointed to represent the company, and they must formally accept the role and confirm their eligibility to hold office. The founding document must be either executed as a notarial deed or countersigned by a lawyer or chamber legal advisor and then submitted to the court of registry within 30 days of signing.
Post Incorporation Registrations
a) Compliance for Incorporation
The process of establishing a Hungarian company occurs in two stages. From signing the founding documents until the registration application is submitted (within 30 days), the company may not engage in commercial activities. Once the application is filed, the entity operates as a “pre-company” (előtársaság), using the designation “under registration” (bejegyzés alatt) on all documents. If registration is approved, all rights and obligations of the pre-company automatically transfer to the newly registered company. If it is rejected, operations must cease immediately, and any liabilities must be settled; founders, and occasionally managing directors, will bear unlimited liability for outstanding claims if assets are insufficient.
Registration with the court of registry is compulsory for acquiring legal personality, and legal representation by a lawyer is necessary. The application must include the founding document and, where applicable, previous official approvals, name reservation decisions, and proof of lawful use of the registered office. Foreign members must provide a recent company extract with a certified Hungarian translation, proof of registration, and appoint a delivery agent in Hungary. All executive officers must submit declarations confirming acceptance of their role, absence of conflicts of interest, and eligibility to serve. Limited liability companies must also submit a list of members and confirmation of capital contributions. Joint-stock companies, on the other hand, must provide documentation on share subscriptions and capital payments. Hungarian law permits the complete online formation of a Kft., with all documents signed electronically and identification verified via video call, in accordance with anti-money laundering regulations. This process is fee-exempt for Hungarian companies but still requires legal representation by a lawyer.
b) Post-Incorporation Registrations
After registration, the tax authority, local municipality, and statistical office are automatically notified. However, companies must request access to the official company portal (cégkapu), which serves as the primary channel for communication with public authorities. Registration with the relevant chamber of commerce and industry is compulsory, as is opening and maintaining a corporate bank account. If the company employs staff – including managing directors – it must inform the tax authority of each employment relationship before the employee’s first working day.
4. Payroll and Benefits Providers
All employees in Hungary must be registered with the National Tax Authority (NAV), a process that can be completed online. The required forms depend on whether the employer has a registered office or a branch in Hungary. Both employers and employees are subject to Hungarian income tax and social security contribution obligations.
Employers must pay at least the statutory minimum wage of HUF 290,800 per month, or the higher guaranteed minimum salary of HUF 348,800 if the position requires at least a secondary education. Employees are subject to 15% personal income tax and 18.5% social security contributions, while employers must pay a 13% employer’s tax.
Employers are responsible for withholding and remitting all taxes and contributions to the authorities. Due to the complexity of Hungarian payroll rules, many companies employ professional payroll service providers to ensure compliance. Both employers and employees may also make voluntary contributions to private pension schemes, although Hungary does not operate an occupational pension system.
Conclusion
The Hungarian Labour Code offers a detailed and comprehensive regulatory framework covering employment relationships, working hours, and termination. While it provides employers with considerable flexibility, it also imposes strict compliance obligations. For foreign companies entering the Hungarian market, understanding these regulations is vital to avoid risks and maintain a compliant workforce. With decades of experience in employment and corporate law, OPL Gunnercooke is well-equipped to support foreign businesses throughout their operations in Hungary, from initial market entry to ongoing compliance.
