How to Hire an Employee Through an EOR in Hungary

Companies that want to build a presence in a stable and growing European market can benefit by operating in Hungary. Hiring Hungarian workers offers several advantages to companies, including cost-effective labor and a business-friendly environment.

However, legally hiring international employees can take time and effort. Companies will need to register with the local tax authorities, manage staff, and handle all employer obligations such as payroll, tax deductions, and even manage employee relationships.

One of the major ways companies can navigate the complexities of global hiring and avoid noncompliance penalties is by partnering with an Employer of Record. EORs in Hungary eliminate the need to set up a local entity and can help you efficiently build a talented international team.

This article will tell you how to hire through an employer of record, and how they can streamline the hiring process.

Reasons to Hire in Hungary

There are several reasons hiring in Hungary can help international businesses increase productivity and build a presence in Europe.

Cost-Effective Workers

Companies can benefit from employing workers in Hungary as they have access to a talent pool with lower average wages than many other European countries.

The average income in Hungary for skilled workers is 493,000 Hungarian Forints per month, which is roughly EUR €1,285, USD $1,357, or CAD $1,884 per month. In contrast, the average salary for a worker in other major European markets such as Germany is roughly €3,975 per month before taxes, while French workers make an average of €2,340 monthly.

Setting up a legal system for employment in Hungary can help companies hire workers with specialized knowledge in a cost-effective way.

Skilled Workers

In addition to the opportunity to recruit from a cost-effective workforce, employers in Hungary can access highly skilled workers. In 2023, Hungary’s education system was ranked 30th best in the world, providing employers ample opportunity to hire talented workers in various industries. Hungary’s top-ranked schools include the University of Szeged, Semmelsweis University, and Eötvös Loránd University.

Additionally, Hungary boasts a 99.10% literacy rate and around 20% of the population can speak English, potentially minimizing challenges such as language barriers and cultural differences. Companies operating out of major Hungarian cities can typically hire from a talent pool that boasts a higher percentage of fluency in English.

Access to a Growing European Economy

Companies that are looking to engage an employer of record platform in Hungary can also benefit by building a presence in a stable and growing European economy. As of 2023, Hungary has the 55th largest economy in the world in terms of GDP. The Hungarian GDP is estimated to reach roughly USD $178.25 billion by the end of 2023, providing plenty of growth opportunities for global companies.

Hungary’s location in Europe also provides several benefits, such as reaching other major nearby markets including Italy, Austria, and Germany. This can also potentially reduce time-zone constraints among your international staff if you are planning to hire workers in other nearby European countries.

Hungary’s biggest industries include automobiles, information technology, engineering, pharmaceutical and medical technology, electronics, and more. Meaning there are a plethora of sectors available for you to hire from.

What an Employer of Record Can Do for You

Companies looking to build a presence in Europe can tap into significant growth opportunities by looking to Hungary to hire skilled workers. An employer of record in Hungary can help you grow your international staff without worrying about complicated international labor laws.

An employer of record is a third-party organization that will act as a local business entity on behalf of your company when hiring in Hungary. This means that your company will not be required to set up its own local entity to legally hire Hungarian employees. Your EOR of choice will also help to hire and onboard new employees and quickly acclimate them to important policies or cultural requirements within the company.

An EOR in Hungary will also handle complicated aspects of global employment, such as payroll and benefits administration, giving you more time and focus to spend on managing your international team. EORs allow you to maintain managerial control over your workforce while they handle all relevant administrative duties. EORs also stay up-to-date with constantly changing labor laws and local regulations to minimize the risk of non-compliance.

How Can an Employer of Record Benefit Your Company?

An employer of record can provide companies with several significant benefits when looking at employment options in Hungary.

Reduced Barriers to Market Entry

An employer of record in Hungary will act as your local entity in the country, meaning you will not have to set up your own entity to legally hire employees. This also means your company will not have to wait for applications and other paperwork to be filed and approved, so you can begin hiring almost right away by partnering with an EOR.

This allows companies to effectively build a global workforce without worrying about local rules or regulations. EORs allow you to build a presence without needing to wait for administrative approval or other employment-related responsibilities.

Compliance

An employer of record has extensive expertise about the local rules and regulations in the country you wish to hire from. This can ensure your company remains compliant with all relevant laws as you expand your business operations and grow in international markets.

With an employer of record, you can be sure that all aspects of the hiring and onboarding process are carried out correctly and legally. EORs ensure that all employment obligations are met and that employees receive accurate paychecks within the appropriate payroll cycle.

Your employer of record can also help you classify independent contractors and employees correctly. Partnering with an employer of record can drastically reduce the risk of noncompliance or misclassifying employees as independent contractors and so on.

Intellectual Property Protections

Companies that partner with an EOR platform in Hungary can also receive more robust protections for intellectual property. An employer of record will make sure that all necessary terms are defined in the employment contract, including any relevant confidentiality clauses or other terms of employment. Hiring employees through an EOR instead of engaging contractors can ensure that all intellectual property is handled correctly.

What Does an Employer of Record Handle?

EORs in Hungary will handle various aspects of employment and help reduce the cost of hiring, which can help to streamline the hiring and onboarding process. Using an EOR platform in Hungary can provide leadership with additional time and energy to find the right candidate and manage global teams.

Wages

An employer of record will ensure that all Hungarian workers are compensated appropriately. Hungary’s current minimum wage is HUF 232,000 per month, though companies will need to consider the average income in Hungary when determining compensation.

Your employer of record will also administer overtime premiums to employees who work more than 40 hours per week.

Leave Entitlements

EORs in Hungary will also ensure that employees receive the appropriate amount of time off when needed. In Hungary, an employee’s leave entitlements are based on the worker’s age and length of service.

Hungarian workers under the age of 25 can take up to 20 days of paid time off per year, while workers 45 and older can take up to 30 days of paid annual leave. All employees who have worked at least 12 consecutive months are entitled to paid time off throughout the year.

New mothers who are employed in Hungary are entitled to a minimum of 24 weeks of maternity leave. New fathers can take up to ten days of employer-paid paternity leave as well. Employees with at least one year of service can also take up to 44 days of paid parental leave until the child’s third birthday, though the actual entitlement can vary depending on the number of children. Additionally, workers in Hungary may take up to 15 days of sick leave if necessary.

Companies will also need to understand that Hungary has eleven public holidays that are observed each year.

Payroll

Partnering with an EOR platform in Hungary can ensure that companies have a proper payroll system in place. The employer of record will handle all aspects of payroll and provide employees with accurate paychecks within the payroll cycle. Typically, Hungarian workers receive compensation once per month.

EORs are responsible for deducting the necessary amounts for tax and social security contributions from each employee on payroll. This can help companies efficiently navigate all relevant tax regulations and requirements. Employers in Hungary must withhold the following amounts:

18.5% towards social security
15% for income tax

The employer of record will also keep accurate and up-to-date tax records on behalf of your company.

Termination

EORs handle all aspects of employment in Hungary and can ensure that all applicable termination rules are met. Hungary does not recognize at-will termination, meaning employers have certain obligations to legally dismiss an employee.

Employers must give employees a minimum notice period before termination. The required notice period varies depending on an employee’s length of service with the company. Hungarian workers who have worked up to two consecutive years must receive at least 30 days’ notice, while the notice period for experienced workers with over 20 years of service is 90 days. Hungary does not have a mandated minimum probationary period, but the period cannot exceed 90 days.

All legal terminations in Hungary must be provided in writing and have a clear reason for dismissal. Employment contracts can be ended for the following reasons:

Mutual agreement
Dismissal notice for reasons such as performance or inappropriate employee behavior
Economic factors

In some cases, the legal employer can terminate an employee immediately if a severe breach of the employment agreement has occurred. Employees with at least three years of service are entitled to severance pay based on their tenure. Generally, severance pay ranges from one month’s to six month’s salary for more experienced workers.

Benefits

Your employer of record in Hungary will make sure that all employees are enrolled in a benefits program and receive all mandated benefits. Mandatory benefits include pension, paid time off, and certain medical coverage. However, companies may find it beneficial to provide supplementary benefits when recruiting highly sought-after talent.

Employment Contracts

EOR platforms can minimize potential risks by drafting valid employment agreements that include all necessary terms of employment. Having proper documentation can also reduce other liabilities such as the risk of misclassification, which occurs when a company wrongly classifies an employee as an independent contractor.

Your Hungarian employer of record can also help navigate different types of employment contracts, and help hire permanent, part-time, or temporary workers as needed.

Who Should Use an Employer of Record?

Using an EOR in Hungary to build a skilled workforce can benefit companies in several ways, but some organizations may benefit from EOR services more than others. It’s important to have a clear understanding of your long-term business goals when deciding to hire through a third party.

Generally speaking, an employer of record is an excellent option for small to medium-sized businesses that want to build a presence in international markets quickly. Additionally, companies that want to hire a smaller global team may find hiring through an EOR more beneficial than incorporation.

On the other hand, companies that want to build a physical infrastructure or hire larger teams may benefit by operating a local entity in Hungary.

What to Look For in an Employer of Record

Companies that decide to partner with an EOR platform in Hungary can benefit by streamlining their hiring process, but there are important considerations that must be made to make the right choice. Your EOR should have certain traits to help support long-term business goals. There are several important questions companies should ask when deciding.

Knowledge About Local Laws

A global employer of record should have a comprehensive understanding of all Hungarian labor laws and regulations to help you remain compliant. Additionally, your EOR in Hungary must have extensive knowledge regarding payroll, taxation laws, and other employment standards.

Range of Services

Companies that are considering an employer of record will also need to be aware of the services that the organization provides. This can be an important factor when calculating the employment costs of hiring through an employer of record.

Customer Service

A quality employer of record should be available to you should any issues arise. Additionally, EORs should have human support instead of automated responses to guide you through any potential challenges.

What is Borderless?

Borderless is an employer of record that offers a comprehensive range of services, including payroll, onboarding, and more. Borderless also offers an all-in-one platform that makes it easy to pay and manage your international teams.

Borderless provides extensive expertise regarding local employment laws in Hungary and can help you remain compliant through all stages of the hiring process. In contrast to other third-party organizations such as a professional employer organization, an employer of record guarantees compliance, reducing the risk of operating in a foreign country for your company.

Borderless also has a transparent cost structure with no hidden fees or up-front deposits, making it a good choice for growing businesses.