How to Hire Remote Employees In

Hungary

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The Basics

Currency
Forint (HUF)
Employer Taxes
17.00%
Payroll Frequency
Monthly
Official Language
Hungarian
OVERVIEW

Employment in

Hungary

Hire Independent Contractors

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.

Benefits of Hiring Independent Contractors

  • Reduced overhead: Lower cost in expenses, payroll, benefits, and more.
  • Greater flexibility: Contractors can be brought on as-needed. If not a good fit, you simply don’t have to move forward with the contract.
  • Reduced legal risk: Contractors aren’t usually protected by employment anti-discrimination and workplace safety laws.

Disadvantages of Hiring Independent Contractors

  • Risk of Misclassification: Not only does this deny workers their proper protections, it can also result in steep penalties and damage to your company. If the IRS determines that employee misclassification has occurred, you will be liable for a percentage of the employees wages, FICA contributions, penalty fines, unpaid taxes, up to a year in prison, and more.
  • Lack of Control: Contractors are drawn to being independent because it gives them greater control over the work they perform and who they work with. Because they’re not employees, you can’t tell them what to work on and how it should be done.
  • Lack of Loyalty: Contractors come and go as-needed. Many companies hire contractors for short-term work, which makes it difficult to cultivate loyalty.
  • Increased Scrutiny: Using Independent Contractors typically leads to an increased risk of being audited.
EMPLOYMENT IN
Hungary

Set up a subsidiary in

Hungary

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:

  1. Register your business name and file articles of incorporation
  2. File for local bank accounts
  3. Learn and keep track of the local employment laws
  4. Set up local payroll
  5. Hire local accounting, legal, and HR people

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.

EMPLOYMENT IN
Hungary

Use an Employer-of-Record (EOR)

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:

  • Ability to attract talented and motivated employees from all over the world.
  • Full legal compliance: There is no risk of violating local employment laws.
  • Transparency: Employees are still your employees. All the work, processes, operations and day-to-day business belong to you, the company, just like with any other employee. Panther just takes on all of the responsibilities, obligations and admin work related to your team's employment.
  • No risk of misclassification

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.

Hire with Panther

Paying Remote Employees

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:

Pay through a local entity

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.

Work with an EOR

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.

Hungary

 Specific Information

Working Hours

Full-time employment is considered 8 hours per day and 40 hours per week.

Overtime

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%.

What’s a Rich Text element?

The rich text element allows you to create and format headings, paragraphs, blockquotes, images, and video all in one place instead of having to add and format them individually. Just double-click and easily create content.

Static and dynamic content editing

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

How to customize formatting for each rich text

Headings, paragraphs, blockquotes, figures, images, and figure captions can all be styled after a class is added to the rich text element using the "When inside of" nested selector system.

Taxes

Payroll Tax

Employer

17.00% - Employer Contributions
- Employer Contributions

Minimum Wage

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).

Payroll

Pay Cycle

Salaries are paid on a monthly basis by the 10th of the following month.

13th Salary

Not applicable.

Leave

Paid Time Off (PTO)

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.

Public Holidays

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.

Sick Days

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.

Maternity Leave

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).

Paternity Leave

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.

Parental Leave

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.

Other Leave

None.

Marriage Leave

None.

Bereavement Leave

None.

Termination

Termination Process

Both the employee and employer must provide termination in writing and must contain a justified reason for dismissal.

Notice Period

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

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:

  • by the employer
  • upon the dissolution of the employer without succession
  • if during a transformation as a legal succession or a business transfer, the transferee employer is not covered by the labor code.

Probation Period

The probation period is optional and cannot exceed 3 months.