Requirement for Foreign Employees to Work
While citizens of EEA countries can freely take up employment under EU regulations, the employment of third-country nationals is subject to strict rules. Previously, the work-related residence permit was a single, unified category with the same conditions for everyone, except for a few special types (e.g., the EU Blue Card, or the National card available for Ukrainian and Serbian nationals). However, at the beginning of 2024, a major change took place, dividing the permit into two main categories. The guest worker permits for lower-skilled workers, which include four subtypes and permits for highly skilled workers. The guest worker permit grants significantly fewer rights, with its basic type being subject to a strict annual limit, currently allowing 35,000 workers in 2025. Additionally, the number of eligible sending countries is currently limited to three, though this is expected to expand in the future.
As a general rule, obtaining the permit requires the employer to report a labour demand. If the government office cannot refer a Hungarian worker for the given position and the application, employer, and third-country national meet all other requirements, the government office grants permission for the third-country national’s employment in Hungary. For job positions where third-country nationals can be employed without the need to submit a labour demand, the government determines the eligible sending countries, which currently include Georgia, Armenia, and the Republic of the Philippines. As a general rule, the work permit for third-country nationals is issued for a maximum period of two years. However, no permit is required for individuals recognised as refugees, beneficiaries of subsidiary protection, or those with immigrant or permanent resident status, as well as for persons entitled to free movement and residence under EU law.
Does a Foreign Employer need to Establish or Work through a Local Entity to Hire an Employee?
An employer is not required to establish or operate through a local entity to hire an employee but tax-related aspects are advisable to check before deciding to hire an employee through a foreign entity as employer due to the question of permanent establishment. Parties can agree to choose the governing law in accordance with Article 3 of the Rome I Regulation. However, this freedom of choice of law is restricted: if, at the time of the choice of law, all other essential elements of the legal relationship are connected to a country other than the one whose law has been chosen, the parties’ choice must not prejudice the application of the mandatory legal provisions of the other country, which cannot be derogated from by agreement. Moreover, posted workers may be subject to additional rules based on EU regulations on postings. If the employer has a registered office or an independent establishment in Hungary, the regulations governing industrial relations and the works council must also be applied.
Limitations on Background Checks
Under the Labour Code and Act CXII of 2011 on Informational Self-Determination and Freedom of Information, employers are not authorised to conduct background checks on employees unless the individuals concerned have given their prior consent. However, there are specific job positions where such background checks are permitted, but only when explicitly required by law. The employer must inform the employee about the processing of their personal data, ensuring that the employee is aware of which data is being handled and for what purpose. Another key rule is that the employer may only disclose facts, data, or opinions related to the employee to a third party if permitted by law or with the employee’s consent. The most important regulations regarding background checks are as follows.
According to the Labour Code, an employee can only be required to make a declaration or provide information that does not violate their personal rights and is essential for establishing, fulfilling, or terminating the employment relationship. Furthermore, an employee may only be subjected to a suitability examination if it is prescribed by employment-related regulations or is necessary for exercising a right or fulfilling an obligation defined by such regulations.
Based on the above, an employer cannot request candidates to provide data that is not directly related to their job position or is not strictly necessary for its performance. If such a request is made, it would constitute purposeless and therefore, unlawful data processing. In this regard, it is important to note that if data processing lacks a legitimate purpose, the legal basis for processing becomes irrelevant, as having a legal basis alone is insufficient employers must only request data that is genuinely necessary and used for a specific, legitimate purpose. Additionally, a fundamental rule in the Labour Code is that data may only be requested directly from the employee and not from third parties. Therefore, even if the employer has a legal basis for processing the data and intends to use it for a legitimate purpose, obtaining the data from someone other than the employee would render the action unlawful.
However, since employees often share a wealth of personal information on social media platforms, it is not inherently unlawful for an employer to view publicly accessible information on the internet or an employee’s social media profile. This is particularly true given that social media platforms provide privacy settings that allow individuals to control who can access their personal data. However, it is important to note that employers cannot use information gathered from the internet to assess job applicants unless they have explicitly informed the candidates of this practice in advance. Certain exceptional job positions may require background checks despite these restrictions, but such checks are only permissible if mandated by law (please see more details on this below).
A decision based solely on automated data processing, including profiling, that negatively impacts an individual’s legal status or significant interests is only permitted if explicitly allowed by law or an EU legal act. Such decisions must comply with the principle of equal treatment, and the data controller must inform the individual about the applied decision-making methods upon request. Additionally, individuals must have the right to request human intervention for a review of the decision. Unless otherwise specified by law or EU regulations, special categories of personal data cannot be used in such automated decision-making processes. Profiling refers to any automated processing of personal data aimed at evaluating, analysing, or predicting an individual’s personal characteristics, particularly concerning their workplace performance, economic situation, health status, personal preferences or interests, reliability, behaviour, location, or movements
Previously, the most common method for background checks was requesting a certificate of good conduct, primarily used to verify a clean criminal record. However, such certificates cannot be copied—only presented—and even this is allowed only in limited cases. Under data protection rules, employers now have more restricted rights to require job applicants or employees to provide such documentation. This requirement is generally limited to roles involving the supervision, education, care, or medical treatment of minors under 18. Additionally, employers may only request a certificate of good conduct if the job involves significant financial interests, protected legal secrets, or the handling of firearms, ammunition, explosives, toxic or hazardous chemical or biological substances, or nuclear materials, where a legally protected security risk is involved. However, for roles such as cashiers, shelf stackers, or truck drivers, employers cannot lawfully demand such certificates. It is also important to note that a certificate of good conduct does not provide a comprehensive record of past legal infractions. Certain penalties, such as suspended sentences, fines, driving bans, community service, reprimands, and probation orders, do not appear in the certificate.
If an individual faces discrimination in employment due to a criminal record in a position where a clean record is not a legal requirement, the employer may face civil court proceedings for violating the employee’s personal rights. Additionally, if an employer unlawfully requests a certificate of good conduct, they may also be subject to data protection investigations and fines.
Restrictions on Application/Interview Questions
The principle of equal treatment must be upheld from the job application stage, requiring employers to ensure that interview questions do not constitute direct or indirect discrimination. According to the practice of the Equal Treatment Authority, whether a question is considered discriminatory depends on the overall circumstances of the case. Questions related to private life, family status, sexual orientation, childbearing plans, religious or political beliefs, and even residence may be deemed discriminatory. Although residence is not directly linked to the employment relationship, it can be relevant, as employers are required to reimburse commuting costs. In such cases, an employer may justify the question if it serves a rational and reasonable purpose. Similarly, an employer may be exempt from liability if the nature of the job necessitates hiring someone in excellent physical condition and asks health-related questions in that context. Furthermore, under the EU directive on pay transparency, once it is implemented into Hungarian law in 2026, employers will no longer be allowed to ask candidates about their past or current salaries.
Important data protection regulations also apply during the application process. Job advertisements must clearly state the name of the hiring company, as anonymous postings are not permitted. If a recruitment agency, rather than the employer, advertises the position and forwards the applicant’s CV to the client, it must inform the applicant of the recipient or obtain prior consent. Applicants have the right to know who is posting the job and where their resume is being sent. Additionally, employers must inform candidates about the specific purpose and duration of data processing, which is generally advisable to be limited to the period necessary for evaluating the application.
