Hungary has a prime location in Central Europe, which already makes it an attractive destination for international business ventures. In addition, the country has a notable pool of highly skilled workers and a high literacy rate. Both these factors further make Hungary an ideal location to hire independent contractors.

Hungary boasts a literacy rate of 99.1% for both men and women. Not only that, but digital literacy in the country is also as high as 97% for people aged between 26 and 39. So, the prime workforce is highly educated and tech-savvy, which is a big plus for businesses that want to work with local independent contractors.

The majority of these workers also speak English, as Hungary ranks 17 out of 116 countries on the English Proficiency Index. About 29.4% of the population between the ages of 25 and 34 has a tertiary education, which further provides a pool of educated workers for various projects.

The following statistics offer more insight into the attractiveness of Hungary as a business destination.

  • Hungary has a GDP of USD 212.39 billion, which represents 0.20% of the world’s economy.
  • Around 12.29% of the Hungarian workforce is self-employed, which means they work as independent contractors.
  • The median age in Hungary is 43.9 years, so businesses have access to a mature and experienced workforce.
  • Hungary’s major exports include electronic equipment, vehicles, machinery, and pharmaceutical products. In 2023, the value of electrical equipment exports was USD 40.7 billion, followed by vehicles with USD 27.54 billion.
  • Hungary has trade agreements with many countries, including the European Union (EU), the United States, Japan, and China. For businesses, this means easier access to markets and lower trade barriers.
  • The country offers a self-employed worker visa, which allows individuals to work as self-employed or freelancers in Hungary. Due to this, many entrepreneurs and freelancers choose to move to the country, increasing its population of independent contractors.

As impressive as all these factors are, it’s important to keep in mind that you can’t benefit from them unless you follow the local labor laws and tax regulations. Compliance is the first step in this process.

More importantly, you should know how and where to hire independent contractors in Hungary. In this guide, we explain all these topics. By the end, you will have a deep knowledge of the Hungarian independent contractor market and the local legislative structure in this regard.

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What Are Independent Contractors in Hungary?

Independent contractors in Hungary are self-employed professionals who provide services to businesses or individuals without being classified as employees. They operate as freelancers or sole proprietors, handling their own taxes, social security contributions, and business expenses.

Generally, independent contractors work with multiple clients, set their own schedules, bear financial risk in their operations, and use their own tools and resources. They do not get the same fringe benefits as full-time employees. Plus, they do not receive a steady paycheck from an employer.

Differences Between Employees and Independent Contractors in Hungary

Depending on their operations, companies may hire both full-time employees and independent contractors in Hungary. Let’s look at how they both differ.

Legal Classification

Full-time employees have fixed working hours in Hungary. Their jobs come with financial security, and they receive statutory benefits like severance pay and paid leave. They are also protected by the Labor Code (Act I of 2012), which outlines their rights and responsibilities.

Meanwhile, civil law contracts govern independent contractors. They have the freedom to determine their work schedules and set their own rates. However, they do not receive statutory benefits, nor are they protected by the Labor Code.

Benefits and Protections

Employees in Hungary are entitled to:

  • Social Security contributions are paid by both the employer and the employee
  • Paid leave, including vacation, sick leave, and parental leave
  • Health insurance and pension benefits
  • Severance pay if terminated under specific conditions

Independent contractors do not get these benefits. They have to pay for these themselves if they wish to have them. However, they do get the following advantages:

  • Deductions and tax credits for business expenses
  • Higher earning potential depending on their skills and demand for their services
  • Greater flexibility in choosing jobs and managing time

Payment and Taxes

Employees receive a fixed salary, often with additional benefits such as bonuses. Their income tax (15%) and social security contributions are deducted at source by the employer under Hungary’s Pay-As-You-Earn (PAYE) system.

Hungary offers various tax allowances that can be deducted from the consolidated tax base. These include:

  • Family Tax Allowance for parents with dependent children
  • First Marriage Allowance for young couples who are newly married
  • Mothers’ Allowance for women raising four or more children
  • Personal Allowance for individuals with severe disabilities
  • Youth Allowance for individuals under 25 years old
  • Mothers’ Allowance for Women Under 30

An alternative tax calculation method applies to fringe benefits and other specific benefits. In most cases, these benefits are subject to personal income tax and social tax, which the employer is responsible for paying.

One of the most common and tax-efficient fringe benefits is the SZÉP Card, a special voucher that can be used for restaurants and hotels. Other income types, such as dividends, interest, capital market transactions, capital gains, and the sale of real estate or personal property, are taxed separately.

Independent contractors also have to pay the same income tax rate. However, their payment is on a per-project rather than a monthly basis. Also, their employers do not use the PAYE model to pay their taxes. Instead, independent contractors must take care of their own tax payments and submit an annual tax return.

Work Flexibility

Since full-time employees work according to the company time, they have fixed schedules. Independent contractors do not follow this schedule, so they work on a more flexible basis. They can choose when and where to work as long as they meet the project deadlines.

Risks of Misclassifying Employees

If you want to transition an independent contractor into a full-time employee, follow these steps:

  • Review the Working Relationship: Check if the contractor meets the legal criteria for employment.
  • Draft an Employment Contract: Include salary, benefits, working hours, and job responsibilities per Hungarian labor laws.
  • Register with Authorities: Notify the Hungarian Tax Authority (NAV) and relevant social security offices.
  • Adjust Payroll & Benefits: Start deducting income tax and social security contributions as required for employees.

Advantages of Hiring Independent Contractors in the Hungary

Are you planning to hire independent contractors in Hungary? The following reasons may further convince you to do so.

Lower Employment Costs

Hiring independent contractors helps reduce employment costs. Unlike full-time employees, contractors:

  • Do not require paid leave, health insurance, or pension contributions from employers
  • Are not entitled to severance pay or other benefits mandated under Hungarian labor law

For reference, the average gross annual salary in Hungary is around HUF 727,700. Employers must also contribute approximately 17% to 20% in additional costs for social security and benefits. But when you hire independent contractors, you pay none of this.

Simplified Administration and Compliance

Independent contractors handle their own tax filings and similar administrative tasks. So you don’t have to do much. Since they are not covered by Hungarian labor laws governing termination, businesses also have more flexibility in ending contracts without complex legal processes.

Access to Skilled Professionals

Hungary has a well-educated and highly skilled workforce, particularly in fields like IT, engineering, marketing, and finance. When you hire from this pool, you get specialized expertise without long-term commitments.

With per-project recruitment, you can get the right expertise for every job. You also have a wider pool to choose from, which can be of immense value for high-quality or niche work.

Flexible Workforce Scaling

Independent contractors help businesses scale operations without the financial risk of permanent hires. The following businesses can benefit the most from this arrangement:

  • Startups and small businesses that need agility in workforce planning
  • Companies with seasonal or fluctuating demand, such as tourism or e-commerce
  • Project-based work, where expertise is only needed for a limited period

This way, you can scale your business while saving money and getting professional assistance from the best talent in the market.

Labor Laws in Hungary Explained

We’ve already mentioned the Hungarian labor laws briefly. Let’s discuss them in detail.

Working Hours

In Hungary, full-time employees typically work 40 hours per week (8 hours per day). Overtime is permitted but is regulated, requiring additional pay or compensatory time off. Some industries allow flexible or extended work schedules, depending on agreements with employers.

Independent contractors do not have to follow these working hours. They can set their own schedules in mutual agreement with their employers.

Holidays and Leave

Employees in Hungary are entitled to paid annual leave, which starts at 20 days per year and increases based on age and tenure. Additional leave may be granted to parents, disabled employees, and those in hazardous professions.

Key employee leave entitlements include:

  • Maternity Leave: 24 weeks (paid at 70% of the average salary)
  • Paternity Leave: 10 working days (paid)
  • Sick Leave: Paid at 70% of the average salary for up to 15 days

Independent contractors do not receive paid leave benefits. If they require time off, they must account for lost earnings and manage their own schedules accordingly.

Payment System

Employees typically get monthly salaries in their bank accounts. Their employees handle social security contributions and payroll taxes. Independent contractors can get paid in many ways.

Besides bank accounts, they may be paid via online payment transfers or freelance marketplaces. They decide on the best payment method in mutual agreement with their clients.

Termination of Employment

When businesses terminate full-time employees, they provide a written statement that explains the reason for dismissal. They must also give notice of termination or provide payment in lieu of notice according to the length of service. In some cases, severance pay may also be required.

Independent contractors are not entitled to such benefits upon termination. However, they have the freedom to terminate their agreements with clients at any time.

Fringe Benefits

Hungarian employees often receive additional perks, including:

  • Meal vouchers or SZÉP Cards (for food and leisure expenses)
  • Transportation allowances
  • Private health insurance (in addition to state healthcare)
  • Retirement savings contributions

These benefits are not available to independent contractors. They have to make their own arrangements for retirement and healthcare.

Taxation Laws

Taxation is an integral part of compliance, so you should be familiar with the country’s tax regulations. Here’s the gist.

Income Tax

Since independent contractors are considered self-employed, they pay their own personal income tax (PIT), which is set at a flat rate of 15% on all taxable earnings. They must declare and pay their taxes themselves, either through a sole proprietorship (egyéni vállalkozó) or another business structure.

On top of this, contractors may also be subject to the local business tax (Helyi Iparűzési Adó – HIPÁ), which varies by municipality but is typically around 2% of revenue.

Social Security Contributions

Independent contractors in Hungary must contribute to the social security system. The key contributions include:

  • Social Contribution Tax: 13% of taxable income
  • Pension Contribution: 10%
  • Health Insurance Contribution: 18.5%

These payments grant access to state healthcare, pension benefits, and other social services, but unlike employees, contractors must handle these payments themselves.

Value-Added Tax (VAT) Requirements

Most independent contractors must register for VAT (ÁFA) unless they qualify for an exemption. The standard VAT rate in Hungary is 27%, one of the highest in Europe. However, some services may be eligible for reduced rates of 18% or 5%.

Contractors with an annual income below HUF 12 million (approximately EUR 30,000) can apply for the KATA (Small Business Tax) regime or a VAT exemption, depending on their business structure.

How to Pay an Independent Contractor in Hungary?

Let’s look at some commonly used methods to pay independent contractors in Hungary.

Bank Transfers (Domestic & International)

Many businesses prefer direct bank transfers due to their security and reliability. You can choose from:

  • Local Bank Transfers: If your contractor has a Hungarian bank account, you can transfer payments through banks like OTP Bank, K&H Bank, and Raiffeisen Bank. These transactions are typically fast and cost-effective.
  • International SWIFT Transfers: If you’re paying from outside Hungary, SWIFT transfers via Deutsche Bank are a common option.

Online Payment Platforms

You can also use a digital payment solution or freelance marketplace to pay your independent contractors. Just make sure they are also okay with the platform you choose.

Top Independent Contractors Providers in the Hungary

The following independent contractor providers can help you find the best talent in Hungary.

Horizons

Horizon new homepage

Horizons is a prominent global payroll provider with a vast presence, including Hungary. They handle everything from payroll management to contract creation, making sure that both contractors and businesses are protected legally.

Horizons also offers support in work permit processing for contractors and employees. Their platform provides a smooth onboarding experience and saves from a lot of administrative burden.

Deel

Deel homepage

Deel is another top choice for hiring independent contractors in Hungary. Known for its user-friendly platform, Deel provides businesses with tools to onboard, manage, and pay contractors while staying compliant.

Their platform has features like automated contract generation and electronic signatures. Deel also supports a variety of payment options and handles currency conversions, making it an excellent choice for companies working with international contractors.

Velocity Global

Velocity Global homepage

If you’re looking for a provider with AI-powered solutions, Velocity Global is just the choice. They have an AI-backed platform to simplify contractor onboarding and payment processing.

The EOR also assists companies in contractor classification and compliance. Since their platform integrates HR support and risk management, your business is covered on all fronts.

Oyster

Oyster HR homepage

Oyster offers its services in more than 180 countries, which means you can benefit from a global talent pool without opening an entity in Hungary or any other country. You can use Oyster’s services to hire contractors and convert them into full-time employees, too.

Oyster’s experts also help you in creating compliant employment agreements. All it takes is a few clicks, and you’re ready to hire professionals from around the world.

Expand and Succeed with Independent Contractors in the Hungary

Hungary is home to talented individuals in fields ranging from IT and marketing to customer service and business consulting. The high literacy rate of 99.1% means that you get a blend of education and skills.

But how do you find these independent contractors? RemotePeople can connect you with pre-vetted talent from across the globe, including Hungary. We find you top independent contractors in your field in just a matter of days so that you can focus on growing your business.

Reach out to us to learn how you can hire your first independent contractor in Hungary today.

Frequently Asked Questions

Independent contractors in Hungary are subject to personal income tax, social security contributions, and VAT if applicable. These taxes must be filed and paid by the contractor themselves.

Some penalties for misclassification include retroactive taxes, legal action, unpaid benefits, and fines. Businesses also risk tainting their reputation in the country.

You can use talent-sourcing platforms like RemotePeople to find vetted independent contractors. Alternatively, use freelance platforms like Upwork and Fiverr.