Hungary and its capital of Budapest is being touted as the next London or Berlin for entrepreneurs, with competitive corporate tax rates and a booming economy. Here's what you need to know about hiring foreign talent in the country.
What's the number one European city in which to launch a business post-Brexit? Budapest, according to a recent study. And it's no wonder, when you consider Hungary's comparatively low corporate tax rate (9%) and labour costs. This agile and accelerating market stood out as one of the best-performing economies in the OECD in 2018, receiving a record amount of foreign investment. As its unemployment rate hits a new low of 3.65%, companies are starting to search further afield to fill vacancies across virtually all sectors.
Here's what you should know if you're looking to hire or maintain talent in Hungary. If you have any questions or need assistance, don't hesitate to make an enquiry with our local experts.
The employment of foreigners in Hungary is typically subject to authorisation by the Labour Centre or Immigration and Asylum Office. However there are exceptions that are partly related to the business activity, and partly to the person the company wishes to employ. Citizens of European Union (EU) or European Economic Area (EEA) countries and Swiss nationals can work in Hungary without needing a work permit.
Work and residence permit processing takes place through a so-called 'merged' process for third-country citizens who can expect an average wait-time of 21 days. To fulfil their tax obligations in Hungary, foreign employees must obtain local tax and social security numbers.
Payroll and penalties
Employees in Hungary are paid monthly by default, however exceptions to this rule do exist and are typically negotiated between the employer and employee. Payroll processing in Hungary has become more streamlined over the past decade thanks to legislative changes that have eased relevant taxation rules. But there still are numerous taxes that must be calculated by the employer along with specific allowances and other labour rules to factor in.
Constantly improving technological solutions have allowed for standardisation, digitalisation and increasing Robotic Process Automation (RPA) solutions in Hungarian payroll. While the technology is yet to reach full maturity in Hungary, integrated HR and payroll middleware solutions are available through reputable providers - such as ourselves - that allow companies to issue local-format digital payslips, easily access payroll data, allow for workflow task management and global payroll reporting.
Businesses new to paying employees in Hungary should get up-to-speed on the different systems of fines that can be imposed by the different local authorities. Employers can be investigated on the basis of objective and subjective bribery aspects. For example, the employer's social impact or how well documentation and data records are kept and organised in accordance with local rules. HR and payroll-related penalty amounts can range HUF 30,000 to HUF 20,000,000.
Unwritten employment practices
Foreign companies and employees in Hungary are often surprised to discover that those working in the country are entitled to paid annual leave based on their time spent at work, and that 'time spent at work' actually incorporates any duration of paid leave, including maternity leave or time off due to incapacity to work, however certain limitations apply.
Talk to us
Constantly advancing technologies for outsourced HR and payroll management in Hungary are making it easier for employers. TMF Hungary's local experts specialise in providing integrated solutions that are tailored to the needs of clients of all sizes.
Contact us to find out how we can help you.
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.