Independent contractors or freelancers are self-employed individuals who provide services to companies as a non-employee. This is one of the most common ways companies tend to hire non-local designers, engineers, support reps, etc.
For legal and tax purposes, independent contractors are not classified as employees. They may work for multiple clients, set their own work hours, negotiate their pay rate, and decide how a job gets done.
For example, the IRS says that if an independent contractor or freelancer does work that can be controlled (what will be done and how it will be done) by an employer then they are, in fact, classified as an employee.
As you can imagine, hiring someone as an independent contractor versus an employee is a fine line to tread.
While there are benefits when you choose the contractor route, there are quite a few drawbacks to consider and you’ll need to weigh them carefully to determine the best fit for your company.
A foreign subsidiary is a company that operates overseas as part of a larger company who’s HQ is in another country.
Establishing a foreign entity is great for having an international presence and accessing new markets. Though, setting up a subsidiary in Hungary can be expensive, stressful, and time-consuming. It's not for the faint of heart.
To set up a subsidiary in Hungary, you have to:
If you're lucky, this process can take months. If you're not so lucky, it can take up to a year. And on average, it costs about $50k-$80k, all-in-all, to get setup. And that's just for Hungary.
An employer-of-record (EOR) is a company that hires and pays an employee on behalf of another company.
An EOR is typically used to overcome the financial and regulatory hurdles that often come with employing remote workers.
Each country has its own payroll, employment, and work permit requirements for non-resident companies doing business in their jurisdiction. Meeting those demands can be a huge obstacle when it comes to hiring remotely.
At Panther, we help companies employ and pay people in over 160 countries, without having to set up a foreign subsidiary. Payroll, benefits, taxes, compliance, and more are all handled by us, at a fraction of the cost.
Outside of saving you months and tens of thousands of dollars, other advantages of using Panther are:
Because you no longer have to set up your own subsidiary, you’ll save a ton of time and tens of thousands of dollars using Panther.
Paying employees in Hungary is not the same as paying workers in your own country. Employees have to be paid using Hungary’s employment and payroll standards.
This means that you have to know, understand, and keep up with 1) fluctuating currency changes, and 2) local payroll and tax laws in the countries you’re looking to hire in.
Outside of the laws and regulations around payroll, there may be different conditions surrounding leave, overtime, termination, and more. As you can imagine, maintaining this kind of regulatory knowledge can be challenging. But it is crucial and necessary to follow local legislation.
After, you’ll have to determine the best way to pay your international employees. This can be done in a number of ways, including but not limited to:
One of the most challenging (and expensive) parts of paying international employees is setting up the infrastructure to do so.
Before you start to run payroll, you have to register your company as the local employer in the country the worker resides in. As you can see in the “Set up a subsidiary” section, this is a multi-step process that can take up to a year and put you on your way to bankruptcy.
Outside of EORs acting as the full admin employer, many also provide remote payroll.
For example, at Panther, in just 1-click, you’re able to pay your entire global team, anywhere in the world. We send you an invoice each month, charge you in US Dollars, and pay your employees the same amount in their local currency.
We factor in currency fluctuations and use the mid-market rate plus any applicable fee passed on by our provider at cost at the time of billing.
Full-time employment is considered 8 hours per day and 40 hours per week.
Overtime hours during the week are paid at a rate of 150%. Overtime hours on weekends and bank holidays are paid at a rate of 200%.
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The minimum wage is 167,400 HUF (basic amount). The guaranteed minimum wage is 219,000 HUF (when the job requires secondary educational and vocational qualifications).
Salaries are paid on a monthly basis by the 10th of the following month.
All employees are entitled to a minimum of 20 days of paid vacation per year. Starting at the age of 25, the number of annual vacation days is raised by 1 day every 3 years during their twenties, and every 2 years during their thirties and forties.
There are 11 public holidays in Hungary but its custom to grant additional days e.g. 2nd St Stephen’s day in order to have a long weekend.
Employees are entitled to 15 days of sick leave per year, paid by the employer at a rate of 70% of the salary.
From the 16 days, the payment varies between 50%-60% depending on the term of service. 1/3 of the payment is paid by the employer and 2/3 are paid by the National Health Insurance Fund.
Women have 24 weeks of maternity leave but are allowed to take up to three years off and receive maternity benefits. For the first six months, mothers are entitled Pregnancy and Confinement Benefit (CSED) at a rate of 70% of the salary.
For the next eighteen months, until the child’s second birthday, mothers are entitled to Child Care Fee (Gyermekgondozási díj – GYED) at a rate of 70% of the salary up to a maximum of double the minimum wage.
A benefit called Child Home Care Allowance (Gyermekgondozási segély – GYES) is available for parents or grandparents taking care of a child up to the age of three.
The benefits are paid by National Health Insurance Fund of Hungary (NEAK).
Following the birth of their child, fathers are entitled to five days of paid leave, which they may take in one or in several parts until the end of the second month after the birth. Any income and taxes related to this period of supplementary leave are reimbursed to the employer by the Hungarian State Treasury.
After the maternity leave is over, one parent can take parental leave up until the child reaches the age of 2 years old. This leave is paid at the rate of 70% but is capped at double the minimum daily wage.
In addition, one parent is entitled to additional paid time off:
2 additional days for 1 child
4 additional days for 2 children
7 additional days for more than 2 children
This additional leave is granted up until the child reaches the age of 16 years old.
Both the employee and employer must provide termination in writing and must contain a justified reason for dismissal.
Termination during probation is effective immediately.
Temporary (fixed-term) contract terminates at the end of fixed term.
Termination of a permanent contract requires a notice period of 30-90 days
Severance pay varies between 1-9 months depending on the length of service and age.
An employee will be entitled to severance pay in the following termination scenarios:
The probation period is optional and cannot exceed 3 months.