With the deepening of globalization, when enterprises expand their business in multiple countries, cross-border labor compliance has become one of the most complex and severe challenges. To help enterprises systematically address this issue, we have collaborated with top labor lawyers from over 50 major jurisdictions worldwide (all recommended by Chambers, The Legal 500, or equivalent institutions) to jointly compile a Chinese-English labor & employment compliance guide exceeding 1 million words, and we will continuously update relevant key points.

This article publishes the key points of labor & employment compliance in Hungary.

01 Overview of the Labor Law System

1.Legal System

Hungary operates under a civil law system.

2.Resources and Agencies

The main source of employment law is the Labor Code (Act I of 2012), supplemented by the Civil Code (Act V of 2013), data protection laws (GDPR + local DPA), occupational safety laws, pension and social security legislation, and EU directives.

02 Employment Qualifications and Classification

1.Employment Age

All persons entering into an employment relationship, as employees, must be at least 16 years of age, however: (i) a person of at least 15 years of age pursuing full-time studies may be employed during the school vacation period, (ii) a person under 16 years of age may enter into an employment relationship with the prior consent of the guardian authority for the purposes of performance in certain artistic, cultural, sports, or advertising activities permitted by law.

2.Qualifications for Foreign Employers

Foreign businesses can hire locally without establishing a permanent establishment.

3.Classification of Employment

Contracts of employment can be fixed-term or indefinite, full-time or part-time. The typical employment contract includes 8 hours of work per day and 40 hours per week, whereas specific rules apply to all other ‘atypical’ employment relationships respectively.

In Hungary the typical Anglo-Saxon EoR structure is not permitted.

4.Foreign Workers

The citizens of all EEA member states do not need to obtain a work permit for employment in Hungary.

Non-EEA nationals and citizens must obtain a residence and work permit prior to the commencement of employment in Hungary. An individual work permit, which must be applied for by the employer, may be granted for a maximum of two years and may be renewed.

03 Recruitment and Employment Contracts

1.Background Examination

GDPR rules are applicable to background checks of employees. If the background check is not absolutely necessary for the work, it is not justified to oblige the employee to issue that.

2.Contract Types

In general terms, employment contracts must be in writing. However, oral employment contracts may be valid if the employee fails to challenge the validity of the oral employment contract within 30 days of the start of employment.

3.Probationary Period

The probationary period may not exceed three months starting from the first day of the employment. This period, if shorter than 3 months, can be extended once, without exceeding 3 months in total. However, within the framework of a collective agreement the maximum probationary period is 6 months. 

04 Working Standards

1.Remuneration

The wage of the employee consists of a personal base wage and wages above the base wage including benefits. Wages can also be agreed in form of a performance-based wage on the basis of performance-related requirements specified in advance.

2.Statutory Benefits and Social Security

Social security covers old age, disability, unemployment, health, accidents. Social security contributions are paid by both the employer and the employee. An employee’s social security contributions must be deducted at source by the employer from the employee’s gross salary.

3.Working Hours

The standard working time is 8 hours per day and 40 hours per week. The employer and the employee may agree on a minimum of 4 and - in certain exceptional circumstances - a maximum of 12 working hours per day and 48 hours per week, overtime included.

4.Rest and Leave

Employers must provide two days of rest per week, including at least one Sunday per month. There are around 11-12 public holidays of rest per year.

05 Occupational Health and Special Protection

1.Occupational Health and Security

Trade Unions and Works Councils must be kept informed in relation to health and safety measures. Where the number of employees is at least 20, employees are entitled to elect one or more workers’ representatives for occupational safety. A local labor safety committee may be formed where at least 3 representatives are elected.

2.Special Protection

Employees shall only be employed for work of such nature which is not considered harmful with a view to their physical condition, development or health. In the event of any change in the employee’s health, the employer shall make adjustments in the working conditions and in the work schedule accordingly.

Terminating the employment contract by notice is prohibited during pregnancy, maternity/paternity/parental leave, a leave of absence taken without pay for caring for a child, in the case of women, while receiving IVF treatment for up to six months, and while providing care or support to relatives at home.

06 Personal Information and Privacy

1.General Rules

The collection, use and storage of employee data in Hungary is regulated by the Hungarian DPA (Act CXII/2011), the Act I of 2012 on the Labor Code, and the General Data Protection Regulation (“GDPR European Union”). The applicable regulations are supported by the guidelines issued by the Hungarian National Authority for Data Protection and Freedom of Information (“NADP”).

2.Transnational Transfer

In Hungary, international transfers of employees’ personal data outside the EEA are only lawful if the destination country benefits from an EU adequacy decision, or if appropriate safeguards such as Standard Contractual Clauses or Binding Corporate Rules are in place.

07 Anti-Discrimination and Anti-Harassment

1.General Rules

Under the Equal Treatment Act (Act CXXV/2003) the claimant only needs to make the discrimination plausible, i.e. show that they suffered (or were at risk of) a disadvantage and that they had a protected characteristic under the Act.

2.Protective Characters

The Hungarian constitution, Labor Code (Act I/2012), anti-discrimination and equal treatment (Act CXXV/2003) acts jointly prohibit discrimination on the grounds of sex, age, marital status, family status, sexual orientation, sexual identity, social background, financial circumstances, disability, race, ethnic origin, nationality, mother tongue, religion, political views or allegiance, trade union membership or taking part in trade union activities, part-time or fixed-term status.

08 Internal Policies

1.Applicability

The Hungarian Labor Code (Act I/2012) explicitly allows employers to adopt internal policies. All employees regardless of contract type must comply with the internal policies of the employer.

2.Validity

Employee consent is common; however it is only for practical enforceability and proof not a legal requirement for the validity of the internal policy.

3.Whistleblowing

With effect from 1 January 2014 the Act CLXV of 2013 on complaints and public interest reporting has regulated whistleblowing in Hungary.

09 Transactions

1.Employment Relationship

Where an acquisition is in the form of a business sale (equity sale), the employment contracts will continue in force and the employees will automatically transfer to the buyer.  Transferred employees have no right to object to the transfer. 

2.Compensation

Compensation arises only if the employee is dismissed or there’s a contractual or collective agreement benefit.

10 Termination of Employment

1.Termination Grounds

An employer must comply with strict rules in relation to the termination of employment. Non-compliance with these rules may result in the invalidity of the notice of termination, re-instatement and compensation obligations.

2.Termination Procedure

There is a 30 days minimum notice period in case of termination by notice, increasing up to 90 days depending on the length of the employment relationship. Longer notice period of up to 6 months can be agreed.

3.Termination Protection

The employer may not terminate employment by ordinary dismissal during the following periods: pregnancy, maternity leave, paternity leave, parental leave, unpaid leave taken for the purpose of childcare, voluntary reserve military service, medical treatment of a woman in connection with human reproduction procedures, but for no longer than six months from the commencement of such treatment.

4.Severance and Compensation

The Hungarian Labor Code (Act I/2012) establishes the right to severance pay. Severance is due if the employer dismisses the employee for reasons not connected to employee misconduct. Severance pay ranges from 1-6 months’ absence fee depending on the length of the employment served. Employees close to pension age are entitled to an additional 1-3 months absence fee depending on the length of service.

5.Wrongful Termination

The court may order reinstatement only in specific situations. In the case the employee is reinstated, the employee is entitled to a compensation of up to 12 months of absence fee in addition to restoration of seniority, benefits etc.

6.Mass termination and Layoffs

Not available.

11 Confidentiality, Non-Compete, and Non-Solicitation

1.Confidentiality

In Hungary signing a confidentiality agreement is common practice, however since all employees are legally obliged to protect the employer’s business secrets and confidential information in connection with the employment relationship, it is not mandatory to sign a separate confidentiality agreement with any group of employees.

2.Non-Compete and Non-Solicitation

Non-compete clauses are enforceable post-termination in Hungary. The maximum duration of restrictive covenants is two years. 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, not less than one third of the employee’s previous remuneration.

12 Work Representation and Trade Unions

1.Work Representation

The Hungarian Labor Code (Act I/2012) regulates the establishment of employee representatives in the workplace. Where the number of employees exceeds 50, the election of a Works Council is compulsory.

2.Trade Unions

All associations under Hungarian law whose purpose is the representation of employees’ interests in connection with their employment qualify as Trade Unions. If the Trade Union has members employed by the employer, Trade Union representatives are free to enter the employer’s premises in order to perform their tasks relating to the employees’ representation.

13 Dispute Resolution

1.Procedures & Enforcement

Employees are encouraged to raise disputes with employers directly. Some companies use conciliation through works councils or trade unions. Labor disputes are handled by the labor courts, which are civil courts specialized in labor matters. The claims can be individual or collective.

2.Waiver & Enforcement

In Hungary employees generally cannot fully waive their statutory rights to potential employment claims.

14 Others

1.Latest Development & Trends

Hungary is currently in the process of preparing to implement the EU Pay Transparency Directive (Directive (EU) 2023/970), which mandates that all EU Member States transpose its provisions into national law by 7 June 2026.

2.Cultural and Religious Considerations

Hungary has strong worker protection laws and a generally pro-employee judicial approach.

* To avoid ambiguity, this article should not be regarded as legal advice.

Authors

Éva Bognár is heading the Employment and Labour Law Practice of LKT bringing over 20 years of experience in the legal profession, including Magic Circle firms. She is a recognised advisor (top ranked by London legal directories) on the full scope of labour law issues, advising on restructuring schemes, SE transformation projects, conducting negotiations with works council, outsourcing of services, executive contracts and terminations and labour disputes. Éva has also extensive expertise in international legal environment, including cross-border M&A, complex multi-jurisdictional deal management, joint ventures, corporate governance. Besides her native Hungarian, she is fluent in English and German.

Translator

Jin Dongjie, Master of Laws, associate at Anli Partners. Area of expertise: Labor Law, ESG Compliance, Dispute Resolution.