Hungary: Bonus Claims - Evolving Court Practice

Although performance-based compensation has long been an integral part of Hungarian employment law, neither the Labour Code nor the relevant commentaries provide a clear-cut definition of a 'bonus'. As a result, the definition and key legal principles governing bonuses have been developed by court practice. This update examines some notable decisions that illustrate the development of this practice. To better understand the developments, it will first consider the definition of a 'bonus' in court practice.

Definition of 'bonus'

The Labour Code's definition of 'wages' is broad. It includes any remuneration – provided directly or indirectly, in cash or otherwise – based on an employment relationship. This definition draws on international treaties, such as International Labour Organisation Convention 95 concerning the Protection of Wages and Section 157 of the Treaty on the Functioning of the European Union. These treaties define wages in the context of the equal pay principle. Thus, the definition can be unhelpful when courts try to define the exact legal nature of bonuses.

In a strict legal sense, a bonus falls within the above definition of wages, but courts tend to interpret it as a special type of remuneration outside the general wage concept. For example, Hungarian law does not recognise bonuses as being part of an employee's regular wages when it comes to absence pay (ie, a payment due in lieu of wages when someone is exempted from work or during sick leave).

The key characteristics of a bonus, according to court practice, are as follows:

  • A bonus is based on performance, but is not the counter value of the performance of standard duties under an employment contract.
  • A bonus is payable based on the employer's undertaking and the employee's exceptional performance.
  • A bonus compensates exceptional performance. However, it does not compensate additional performance in general, as this is usually compensated by allowances. Rather, it compensates exceptional performance that was expected and that the employer undertook to compensate.

Courts use the above characteristics to define whether the remuneration in question can be regarded as a bonus. The decisive factor in such a decision is not the remuneration's title, but its legal nature and the concept behind it. Thus, to establish the legal nature of the remuneration in a particular case, the underlying documentation and the practice that was followed must be considered.

In addition to bonuses, Hungarian law also recognises the concept of a 'reward', with which an employer can compensate exceptional performance. A reward differs to a bonus as it is paid solely at the employer's discretion with no criteria set in advance, whereas a bonus is legally payable and enforceable if its preconditions are met.

Eligibility: evolving court practice

Unsurprisingly, most legal disputes regarding bonuses concern eligibility. As there are no regulations governing the payment of bonuses, courts usually base their decisions on:

  • the parties' agreements (written or verbal);
  • the employer's internal regulations (ie, bonus scheme);
  • the parties' practice; and
  • general legal principles (excluding the equal pay principle).

The most notable cases usually arise from disputes in which these elements are contradictory or which involve questions that fall outside their scope. Below are examples of some important decisions over the past decade that have shaped court practice.

Employer's undertaking

The most important precondition for eligibility is that the employer undertook to pay the bonus. This can be done in an employment agreement or unilaterally. In accordance with court practice, a verbal promise cannot be considered a concrete commitment or undertaking and, therefore, no bonus claim can be enforced on this basis. Instead, an employee's bonus claim must be based on the employer's concrete written commitment.

If an employer undertook to pay a bonus, and the tasks or preconditions detailed in the undertaking have been completed, the bonus is automatically payable. In accordance with court practice, additional action (eg, an approval or request) that is not prescribed by the underlying documents is not required.

Partial performance of tasks

Another important question that the courts have to address is what happens if the tasks are determined correctly in advance by the employer and the employee completes them only partially. Court practice is not fully consistent regarding this question, but Supreme Court decisions from 1997, 1999 and 2002 adopted a rather employee-friendly approach, as they established that – in the absence of appropriate exclusion covenants in the employer's original undertaking – the employee may be entitled to a relevant part of the bonus.

Failure to set tasks

In a memorable 2004 judgment, the Supreme Court declared that a bonus could be payable even in the absence of the employee's performance if the employer:

  • fails to determine the exact tasks to be completed by the employee; or
  • determine the tasks so late (eg, in the penultimate month of the financial year, as in the case at hand) that the employee could not have been reasonably expected to complete them.

Most commentators interpreted this judgment to mean that if an employer undertakes to pay a bonus on the completion of certain tasks (eg, in the employment contract), it cannot escape its obligation to pay the bonus by failing to determine the tasks.

From an employer's perspective, this practice was further aggravated by the fact that courts considered an employer's general practice – for example, if an employer paid 80% of an annual bonus for the 50% completion of a task, employees may have based their claim on such practice. In response, employers tried to mitigate the risk of such court practice by applying more sophisticated bonus schemes and making less concrete undertakings.

After the economic crisis and the adoption of the new Labour Code in 2012, court practice in Hungary shifted; it seems that courts now try to strike a better balance between employee welfare and employers' economic interests. A sign of this change may be that recent court decisions addressing employee eligibility for bonuses (the most important of which is from 2014) seem to follow a more employer-friendly approach. Courts now seem to accept that an employer's undertaking to pay a bonus can be less concrete and that a bonus payment can be determined optionally.

In a recent decision, the Curia (Supreme Court) declared that an employee's bonus claim is not well founded if it is linked to the performance of certain tasks which were not determined conclusively. The Curia accepted that it is within an employer's liberty not to set out any bonus tasks and that, in such cases, the employee is not entitled to a bonus.


The courts' new approach is not guaranteed and it is always better to prevent disputes than pursue them. Therefore, it is always worth seeking legal advice before determining bonus schemes, especially if they are more sophisticated. This article was edited and first appeared on 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.