Hungary sits at the heart of Central Europe, offering an attractive gateway for businesses expanding into the region. With a highly educated, multilingual workforce, modern infrastructure, and competitive labor costs, it’s no surprise that global employers are setting their sights on Hungarian talent.

Key industries include IT, automotive manufacturing, logistics, and finance, with major hubs in Budapest, Debrecen, and Szeged. English proficiency is widespread, especially among young professionals and university graduates. However, employment laws in Hungary are comprehensive, and navigating compliance around contracts, benefits, taxation, and terminations is critical.

In this guide, we will break down the essential requirements for hiring in Hungary, from your employment options to payroll, leave, and legal obligations.

How to Hire Employees in Hungary

Before hiring anyone in Hungary, you’ll need to choose the right hiring structure. This will determine your legal responsibilities, compliance obligations, and the speed at which you can scale your team.

Set up a Local Entity

Establishing a legal entity in Hungary gives you full operational control over your employees and long-term presence.

This typically involves:

  • Registering with the Hungarian Company Court
  • Obtaining a tax identification number
  • Opening a local bank account
  • Registering with the Hungarian social insurance system
  • Appointing a local representative

This option is suitable for companies planning to build a large local team or establish permanent operations. However, setup is time-consuming and requires ongoing local administration and compliance management.

Working with an Employer of Record (EOR)

An Employer of Record (EOR) acts as the legal employer on your behalf. The EOR handles payroll, employment contracts, social contributions, benefits, and terminations in compliance with Hungarian labor law. Meanwhile, you retain full control over the employee’s day-to-day tasks and performance.

An EOR is ideal if you want to test the market, hire remote employees in Hungary, or avoid the complexity of setting up a local entity. You can onboard staff quickly and avoid the risks of noncompliance.

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Hiring Independent Contractors

Hiring freelancers or independent contractors offers flexibility and lower overhead, particularly for short-term or project-based work. However, Hungary monitors misclassification closely.

If a contractor behaves like an employee, for example, by following a fixed schedule or working under direct supervision, you could face fines, back taxes, and legal liabilities.

To minimize risk, contractors should operate independently and sign clear agreements that define the scope, deliverables, and duration of the project.

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Start hiring with an Hungary EOR

Let us handle the complexities of hiring, compliance, and payroll in Hungary while you focus on growing your team.

  • Hire employees in Hungary with a Hungary EOR
  • No local entity is needed
  • Pricing starts at USD 199 per employee
  • Remote People can also help you find the best talent in Hungary
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Hungary Employer of Record vs Legal Entity in Hungary

Before engaging the services of an EOR, it is important to first consider other options, like setting up a legal entity, and compare them to make the best choice.

To set up a legal entity in Hungary, you need to decide on the company’s legal form (e.g., limited liability company or joint-stock company), secure a unique business name, identify a registered office, and appoint directors or managers.

Also, you must prepare foundational documents such as articles of incorporation, register with local tax authorities, and open a business bank account. Depending on the company structure, a minimum share capital may also be required, such as HUF 3,000,000 for a limited liability company. 

This approach offers your company full autonomy, but it can be time-consuming and expensive. It demands compliance with Hungary’s tax, labor, and corporate regulations, alongside ongoing administrative tasks such as accounting and reporting.

On the other hand, working with an EOR allows you to bypass all these formalities. With an EOR, you can work with Hungarian employees without worrying about compliance and managing them administratively.

However, an EOR may offer less flexibility compared to running your own entity, as key employment decisions may be governed by the provider’s policies. The choice depends on your business needs and the level of control you require.

What is an Employer of Record in Hungary?

An Employer of Record handles the local legal and administrative obligations involved in hiring staff, so you don’t have to.

Here’s what an EOR typically takes care of:

  • Drafting compliant employment contracts in Hungarian
  • Registering employees with tax and social security authorities
  • Processing payroll, taxes, and deductions
  • Managing leave, benefits, and bonuses
  • Supporting work permits and visa applications
  • Providing onboarding and offboarding documentation
  • Offering local HR support and ongoing compliance monitoring

This setup is particularly useful if you’re hiring your first Hungarian employee or building a distributed team across Europe. You remain responsible for your team’s work, while the EOR takes care of legal obligations and administration.

How Much Does EOR Cost in Hungary?

The cost of EOR services in Hungary typically depends on the provider and the services needed. Often, providers charge a management fee per employee, which ranges from $300 to $600 per month per employee in most cases.

Some providers may charge a percentage of the employee’s gross salary, often between 10% and 15%, while others might offer flat-rate pricing depending on the services the client company requires.

Employment and Labor Laws in Hungary

A Hungarian EOR manages payroll functions on behalf of the client company, ensuring that employees’ salaries are calculated correctly and in compliance with Hungarian labor laws. The EOR also ensures that the employees are paid on time, typically by the 10th of each month, aligning with Hungarian standards.

EORs in Hungary also calculate employees’ taxes, deduct them from their payroll, and remit them to the National Tax and Customs Administration. They ensure that all tax filings and payments are accurately calculated and quickly remitted to reduce the risk of fines or penalties.

Employment Contracts

Hungarian employment contracts must be written and comply with the Labour Code. Mandatory elements include job position, salary, workplace, working hours, benefits, probation periods, and termination terms. 

Most contracts are indefinite-term, though fixed-term arrangements are permitted. While contracts needn’t be in Hungarian specifically, both parties must understand the language used—bilingual contracts with Hungarian precedence are recommended best practice for dispute resolution.

Probation Periods

Hungarian probation periods last up to a maximum of three months. Both the employer and the employee can terminate the agreement immediately without reason during this time, but must provide written notice. Probation must be specified in the original contract – if omitted, no probation period applies.

Shorter periods can be extended once, but the total cannot exceed three months (six months under collective agreements). Probationary employees receive full minimum wage protections and equal working conditions. 

Note: Discriminatory termination is prohibited. These rules apply to both permanent and fixed-term contracts.

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Social Security

Hungary has a mandatory insurance-based social security system where employers and employees share contribution responsibilities as follows:

Employee-Only Contributions

  • Pension: 10% of gross wages
  • Healthcare: 4% of gross wages
  • Unemployment Insurance: 3% of gross wages
  • Work Accident Insurance: 1.5% of gross wages

Employer-Only Contributions

  • Social Contribution Tax: 13% of employees’ gross wages (covers the employer’s portion of all social security benefits)
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Working Hours

  • Standard Working Hours: Hungary follows a standard 40-hour work week, structured as 8 hours per day across five weekdays. Most workdays run from 8-9 AM to 4-5 PM, with mandatory meal breaks of at least 20 minutes for shifts exceeding 6 hours.

    The labor law permits flexible hour distribution averaged over 12 months, provided weekly averages don’t exceed 40 hours. By mutual agreement, employees aged 18 and above may work up to 12 hours daily and 48 hours weekly.

    Workers must receive a minimum of 11 hours of rest periods between shifts, ensuring adequate recovery time while maintaining operational flexibility for employers.

  • Overtime: Overtime encompasses any work beyond the standard 8 hours per day or 40 hours per week. Employees can work up to 250 overtime hours annually, extendable to 300 hours through collective agreements, with individual contracts allowing an additional 150 hours for a maximum of 450 hours yearly.

    Overtime compensation requires premium rates of at least 150% of regular wages for weekdays and 200% for weekends and public holidays. It is generally voluntary and must be mutually agreed upon by the employer and employee.

    Note: Employees can choose between overtime payment or compensatory time off for extra hours worked.

  • Non-Compliance: Hungarian labor law violations carry severe financial penalties starting at 150,000 HUF (390 EUR). Small to medium businesses face fines up to 25 million HUF (65,000 EUR), while larger enterprises encounter higher penalties. And safety violations can reach 100 million HUF (260,000 EUR).

    Common transgressions include unregistered employment, delayed wage payments, improper work records, and unauthorized foreign worker employment. Payroll errors and worker misclassification may also result in additional penalties, as well as interest.

    In recent years, labor inspections have intensified, so compliance is essential to avoid substantial financial and legal consequences.

Work Permits and Visas for Hungary

Hungary tightened work permit requirements for foreign workers as of January 1, 2025, under Government Decree No. 450/2024. Currently, only nationals from Armenia, Georgia, and the Philippines meeting specific “readmission” conditions can apply for Employment Purpose or Guest Worker Residence Permits.

Readmission conditions require the worker’s home country to either have a signed readmission agreement with Hungary or the EU, or maintain an officially recognized organization in Hungary guaranteeing the return of nationals who stay illegally. 

Available work visas include General Work Visas for non-EU nationals with job offers, EU Blue Cards for highly skilled professionals meeting salary thresholds, and Intra-Corporate Transfer Permits for multinational company employees. 

Applications now need proof of a valid Hungarian residence address and health insurance. Plus, employers must be registered in Hungary and demonstrate genuine sponsorship of foreign workers under stricter income verification and accountability measures.

Employee Leave in Hungary

Paid Leave / Time-off

Employees receive a minimum of 20 working days of paid annual leave annually, with entitlement increasing progressively with age, starting at 25 years old. One extra day is added every few years, reaching a maximum of 30 days from age 45 onwards. 

Employees with children receive additional leave: 2 days for one child, 4 days for two children, and 7 days for three or more children. 

Annual leave should be used within the year granted, though new employees starting after October 1 may use leave until March 31 the following year. While employees need their employer’s permission for leave, employers must grant at least 7 days of leave based on the employee’s preference and provide one continuous 14-day vacation block.

Public Holidays

Hungary observes 12 national public holidays, including:

  • New Year’s Day (January 1)
  • Revolution Day (March 15)
  • Easter Monday
  • Labour Day (May 1)
  • Pentecost Monday
  • Saint Stephen’s Day (August 20)
  • Republic Day (October 23)
  • All Saints’ Day (November 1)
  • Christmas (December 25–26)

Employees working on public holidays are entitled to double pay or equivalent time off.

Parental Leave

Hungary offers generous parental leave, allowing either parent with one year of service to take up to 44 working days off before their child turns three. Parents must provide employers with 15 days’ notice, although employers can postpone leave by up to 60 days for operational reasons or refuse it with written justification.

During leave, employees are paid 10% of their regular wage plus the potential Child Home Care Allowance (GYES) from the National Health Insurance Fund. Employers cannot terminate employment during parental leave. 

Beyond parental leave, Hungary provides 24 weeks of maternity leave at 70% pay and 10 days of paternity leave with full salary for the first five days, then 40% for the remainder.

Sick Leave

Hungarian employees receive 15 working days of paid sick leave annually, at 70% of their regular wage, which the employer pays. A medical certificate is required for any sick day. 

If illness extends beyond 15 days, state social security provides sick pay at 60% of gross income for home recovery (with at least 730 days of insurance coverage) or 50% if hospitalized or with fewer insurance days. 

State sick pay can last up to one year per illness, with possible extensions for long-term conditions. This system shares costs between employers for short-term illness and the state for extended periods.

13th Month Pay in Hungary

Offering a 13th-month salary is entirely at the employer’s discretion and depends on company policy, employment contracts, or collective agreements.

Employee Termination and Severance in Hungary

Termination Requirements

Employers can terminate through mutual agreement, dismissal with written notice and reason, or immediate termination for serious misconduct.

Notice periods start at 30 days but extend based on service length:

  • +5 days after 3 years of service
  • +15 days after 5 years
  • +20 days after 8 years
  • +25 days after 10 years
  • +30 days after 15 years
  • +40 days after 18 years
  • +60 days after 20 years (90-day maximum total)

Valid termination grounds include poor performance, misconduct, organizational changes, or medical incapacity.

However, pregnant employees and those on maternity, parental, or military leave receive special protection from dismissal. 

For serious breaches, such as fraud or gross negligence, employers can terminate immediately, but must act within 15 days of discovering the misconduct.

Severance Pay

Hungarian severance pay requires 3+ years of service and applies only when employers terminate with notice.

 Payment scales with tenure: 

  • 1 month after 3 years
  • 2 months after 5 years,
  • 3 months after 10 years
  • Up to 6 months for longer service.

There’s no severance for resignations, mutual agreements, misconduct dismissals, or retirees. Severance pay is based on regular salary and cannot be waived by contract.

Compliance and Procedures

Hungarian employers must provide written termination notices that include clear reasons and document employee tenure, the grounds for termination, and the calculations for severance pay in case of potential audits. Severance must be paid by the last working day using accurate calculations based on regular salary and service length. 

Employees cannot waive severance rights. Any contract clauses excluding severance are void. Labor courts strictly enforce severance entitlements, and inspectors may audit procedures. Employers transferring operations remain responsible for severance obligations, and collective agreements may require additional payments beyond legal minimums.

Payroll and Income Taxes in Hungary

Minimum Wage in Hungary

Hungary’s minimum wage is HUF 322,800 monthly (approximately $988). Workers in positions requiring secondary education or professional qualifications earn a guaranteed minimum of HUF 373,200 monthly (roughly $1,147). Hourly rates are HUF 1,856 ($5) for standard minimum-wage positions and HUF 2,145 ($5.77) for guaranteed minimum-wage positions.

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Payroll Compliance

Employers must register all employees with the Hungarian Tax Authority (NAV) electronically before work begins and report changes within 8 days.

Monthly obligations include withholding 18.5% social security contributions from employees and paying 13% social contribution tax on gross wages. 

Detailed payroll returns must be filed by the 12th of each month, with payments due by the deadline. Employers must maintain digital payroll records, contracts, and payment proofs for 5 years and use official platforms like Cégkapu for submissions.

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Income Tax

Employers withhold 15% income tax from employee wages and calculate eligible tax allowances, including family benefits, young worker deductions, and personal allowances that reduce tax liability. These allowances must be applied appropriately and documented in monthly tax filings to NAV.

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Hiring Contractors in Hungary

Income Tax Withholding

Hungarian contractors with valid tax numbers and certificates handle their own taxes directly with NAV, so no withholding is required from you. However, if they can’t provide proper documentation, you’ll need to withhold 20% tax on professional service payments. 

Foreign contractors follow different rules. Their withholding rates depend on applicable tax treaties and the type of services they provide. Always verify contractor documentation upfront and consult a tax advisor when you’re unsure about requirements.

VAT (Value-added Tax)

If you hire a contractor that’s VAT registered in Hungary, they’ll charge you 27% VAT (or applicable reduced rates) on top of their service fees, which increases your project costs.

However, if your business is also VAT registered, you can reclaim this VAT from NAV. You’ll need to verify their VAT registration status and ensure their invoices meet Hungary’s strict digital reporting standards, as any documentation issues could affect your own VAT compliance.

Be aware that reverse charge rules might apply for certain services, meaning you could be responsible for handling the VAT accounting instead of the contractor. Confirm their VAT status upfront to budget accurately and avoid compliance complications.

Social Security Contributions

Contractors are responsible for managing and paying their own social security contributions.

Workers' Compensation in Hungary

Hungary’s workers’ compensation system is administered by the National Health Insurance Fund (NEAK) as part of the comprehensive social security framework.

It provides complete protection for work-related injuries, accidents, and occupational diseases, including medical treatment, rehabilitation services, temporary disability payments, permanent disability benefits, survivor benefits, and vocational retraining programs.

Employers contribute through social security premiums that include work accident and occupational disease insurance components, typically ranging from 1.5% to 2.5% of payroll, depending on industry risk classification. 

Coverage is universal. All workers receive identical protection regardless of nationality, ensuring foreign employees have the same comprehensive benefits as Hungarian workers.

Expand into Hungary Easily with Remote People’s Employer of Record in Hungary

Hungary is a dynamic market with a skilled, multilingual workforce and attractive operating costs. However, labor laws and tax requirements can be complex and time-consuming for foreign companies.

An Employer of Record is a reliable solution for hiring in Hungary without needing to establish a local company. With the right support, you can onboard employees quickly, stay compliant, and focus on your growth strategy.

If you’re planning to hire in Hungary, contact Remote People today to find out how we can help you stay on track from day one. Get in touch with our team to learn how we can support your global hiring goals.