An Employer of Record (EOR) is a third-party organization that takes on the legal and administrative responsibilities of employing workers on behalf of another company. The EOR handles payroll, benefits, taxes, and compliance with local labor laws, allowing businesses to hire and manage employees in Hungary without establishing their legal entity.
Hiring workers from Hungary offers several benefits due to the country’s strategic location in Central Europe and its skilled workforce. Hungary has a population of nearly 10 million people, with a well-educated labor force known for its expertise in various sectors, including IT, engineering, and manufacturing. The country’s membership in the European Union since 2004 has further enhanced its attractiveness as a business destination.
According to recent data, Hungary’s labor market continues to evolve, with a growing emphasis on innovation and technology. The government has implemented various initiatives to support foreign investment and business growth, making it an appealing option for companies looking to expand their operations in Central and Eastern Europe.
To effectively use an Employer of Record in Hungary, follow these 6 steps:
- Find talent to hire in Hungary
- Compare using an EOR to setting up a legal entity in Hungary
- Get the information needed from your talent
- Choose an EOR provider with expertise in Hungary
- Communicate your hiring needs to the EOR
- Have the EOR set up the contracts and hiring procedure
An EOR in Hungary manages payroll processing, ensures compliance with tax regulations, and administers statutory benefits such as social security contributions and leave entitlements. They also handle the complexities of Hungarian labor laws, including working hours, overtime pay, and termination procedures.
When hiring remotely in Hungary, it’s crucial to consider various labor laws. The country has protective employment regulations, including rules on employment contracts, working hours, and paid time off. Hungary mandates a minimum wage, and employees are entitled to a range of benefits, including annual, sick, and maternity leave.
The hiring process in Hungary typically involves identifying suitable candidates, conducting interviews, and ensuring compliance with local employment laws. Written employment contracts are mandatory in Hungary, and the EOR facilitates this process, ensuring all legal requirements are met and managing the onboarding of new employees.
1. Find talent to hire in Hungary
To find talent to hire in Hungary, businesses should explore a variety of channels, emphasizing both local and global platforms to maximize reach. While LinkedIn is widely used in Hungary, there are also local job portals that cater specifically to the Hungarian market.
Profession.hu and CVonline.hu are popular local job portals in Hungary. These platforms offer avenues for employers to advertise openings and are widely used by Hungarian job seekers. Employers can post their candidate requirements on these portals, allowing applicants to access them remotely.
Specialized recruitment agencies can provide tailored solutions for industries requiring specific expertise. These agencies manage the complexities of sourcing and vetting candidates, significantly easing the hiring process for companies.
Local job boards and regional networks can be advantageous for businesses hiring within specific industries or for particular roles. Hungary’s diverse economy offers a wide range of talent across various sectors, including IT, engineering, and finance.
It’s important to note that in Hungary, the hiring process often begins with drafting a detailed job description, followed by screening, shortlisting, interviews, and selection. Some roles may require candidates to demonstrate language proficiency, particularly in English, widely used in business settings.
2. Compare using an EOR to setting up a legal entity in Hungary
When working with employees in Hungary, you must consider working with an EOR versus setting up your legal entity. Here’s a comparison of the two options:
| Factor | Employer of Record in Hungary | Setting Up Legal Entity in Hungary |
|---|---|---|
| Setup Time | 1-14 days | 6-10 weeks |
| Initial Cost | Low (typically only employee costs) | High (often significant legal and setup costs) |
| Ongoing Cost | Moderate (EOR fees + employee costs) | Variable (operational costs, compliance, etc.) |
| Complexity | Low (EOR handles most administrative tasks) | High (requires understanding of Hungarian business laws) |
| Control over Operations | Limited (company directs daily work, EOR handles employment) | Full (complete control over all aspects of business) |
| Compliance Management | Handled by EOR (payroll, taxes, social insurance) | Company Responsibility (requires local expertise) |
| Scalability | Highly Flexible (easy to add or remove employees) | Less Flexible (changes may require legal procedures) |
| Local Expertise Required | Minimal (EOR provides guidance) | Extensive (need for local legal and tax advisors) |
| Suitable for | Market entry, testing Hungarian market, hiring < 10 employees | Long-term presence, hiring > 10 employees, full operations |
| Risk | Lower (EOR assumes employer liabilities) | Higher (company bears all legal and financial risks) |
| Customization of Employment Terms | Limited (must adhere to EOR’s policies) | Extensive (can create company-specific policies) |
| Handling of Modern Awards | Managed by EOR | Company must navigate complex regulations |
| Termination Process | Simpler (EOR manages most aspects) | More complex (company must handle directly) |
| Intellectual Property Protection | May require additional agreements | The company has full control |
An Employer of Record offers a quicker, less complex route to hiring local staff, bypassing the need for a formal company presence. This approach suits companies looking to test the Hungarian market or expand quickly without significant upfront investment.
On the other hand, setting up a legal entity in Hungary offers greater control and the ability to customize business operations and policies. However, establishing a legal entity involves complex registration processes, significant upfront fees, and a deeper understanding of local laws and tax regulations.
In comparison, using an EOR is generally less expensive. It involves less risk, making it a suitable option for small to medium-sized businesses or those in the initial stages of market exploration. It eliminates the need for a local expert or dedicated legal and tax teams, as the EOR handles these aspects.
3. Get the information needed from your talent
You’ll need to collect essential personal information and employment details to hire employees in Hungary. This typically includes:
- Employee’s full name
- Address
- Date of birth
- Hungarian tax identification number (adóazonosító jel)
- Social Security number (TAJ szám)
- Bank account details for salary payments
- Comprehensive job description, including title, duties, and place of work
In Hungary, written employment contracts are mandatory. These contracts should detail the terms of employment, such as:
- Effective wages, rates, overtime pay, and any allowances
- Working hours and schedule
- Annual leave entitlement
- Notice period required for termination
- Probationary period, if applicable
It’s important to note that in Hungary, collecting this data before the employee starts working is crucial for compliance with local labor laws and regulations, including social security registration and tax reporting.
4. Choose an EOR provider with expertise in Hungary
When choosing an EOR provider to work with in Hungary, selecting one with deep expertise in the Hungarian market and a strong understanding of local labor laws to ensure compliance and smooth business operations is crucial.
Evaluate the provider’s experience managing employee onboarding, payroll, and legal compliance in Hungary. Look for a provider with a proven track record of working successfully with companies similar to yours, and check their reputation through client case studies or reviews.
Assess the range of services offered to see if they align with your needs, such as work permit support for non-EU nationals, employee benefits management, and payroll processing. It is important to choose a provider that offers comprehensive employment services and is flexible enough to adapt to changes in Hungarian labor laws.
Consider the provider’s technology and platforms, ensuring they offer secure, user-friendly systems with strong data protection measures. Evaluate their pricing models, looking for transparency in fees, whether they charge a fixed monthly fee or a percentage of the employee’s salary, and assess the cost-effectiveness for your business.
Finally, choose an EOR provider that demonstrates a commitment to staying up-to-date with Hungarian employment laws and can provide proper guidance and support to ensure your business remains compliant while operating in Hungary.
What are the best EOR providers to use in Hungary?
Based on the available information and market presence, here’s a table of EOR solutions for Hungary:
| EOR Provider | Why It’s a Good Fit for Hungary |
|---|---|
| Deel | – Well-established in Hungary with a deep understanding of local business culture – Offers specialized support for Hungary’s work permit and visa processes – Provides guidance on Hungary’s collective bargaining agreements – Expertise in managing Hungary’s unique paid leave and public holiday system |
| Remote | – Strong presence in Hungary with local legal entity – Expertise in managing Hungary’s unique employment regulations – Offers comprehensive benefits packages tailored to Hungarian market – Provides support for Hungary’s stringent data protection laws |
| Remofirst | – Competitive pricing for the Hungarian market – Offers localized contracts compliant with Hungarian labor laws – Provides guidance on Hungary’s specific termination procedures – Assists with navigating Hungary’s social security and healthcare requirements |
| Multiplier | – Well-established in Hungary with a deep understanding of local business culture – Offers specialized support for Hungary’s work permit and visa processes – Guides Hungary’s collective bargaining agreements – Expertise in managing Hungary’s unique paid leave and public holiday system |
| Rippling | – Comprehensive HR and payroll platform with global capabilities – Offers streamlined onboarding and employee management tools – Provides compliance support for Hungarian labor regulations – Integrates payroll, benefits, and HR functions for Hungarian employees |
5. Communicate your hiring needs to the EOR
Communicating your hiring needs to the EOR to ensure the process aligns with company goals and legal requirements is important. Provide a detailed job description, including title, responsibilities, required qualifications, and skills.
Specify the job’s expected start date, location, and whether it’s remote or onsite. Outline the proposed salary, bonuses, commission structures, and other compensation benefits. Clarify the contract length, whether permanent or fixed-term and detail the working hours, including any flexibility or shift requirements.
Discuss the company culture, growth plans, and how the position fits into future expansion. Specify equipment needs and onboarding procedures. By accurately representing these aspects, the EOR can find the right talent and ensure legal and administrative compliance.
Additionally, communicate any specific requirements related to Hungarian labor laws, such as the need for social security registration or any industry-specific regulations that may apply to your business. In Hungary, it’s particularly important to discuss language requirements, as proficiency in Hungarian may be necessary for certain roles or interactions with local authorities.
6. Have the EOR set up the contracts and hiring procedure
Once you have chosen which provider to work with and communicated your hiring needs, the EOR will set up the contracts and hiring procedure, ensuring compliance with local labor laws and employment practices.
The EOR will draft employment contracts that comply with Hungarian labor laws, including specific terms regarding job details, working hours, and termination procedures. They’ll also manage the necessary documentation for tax, social security, and payroll setup, adhering to mandatory withholdings and reporting requirements.
The EOR also registers employment with relevant Hungarian authorities, such as the National Tax and Customs Administration (NAV) and the National Health Insurance Fund (NEAK), to ensure the company is properly licensed and authorized to operate and hire employees in Hungary.
They’ll ensure your company complies with local regulations related to working hours, minimum wage, and leave entitlements. Additionally, the EOR administers benefits and handles formal onboarding, including the introduction to company systems and culture.
What help does an EOR provide in Hungary’s payroll, taxes, and benefits administration?
The EOR will support all of Hungary’s payroll, taxes, and benefits administration, ensuring compliance with complex local laws. It calculates and processes employee salaries, withholds the correct tax amounts, and handles social security contributions.
The EOR manages payslips that reflect mandatory withholdings for personal income tax (15% flat rate) and social security contributions (18.5% for employees), adhering to Hungarian regulations. It files monthly tax returns and social security reports, which have strict deadlines in Hungary.
For benefits, the EOR ensures compliance with statutory requirements, such as annual leave (20 days minimum, increasing with age), sick leave, and maternity leave (24 weeks). It can also administer additional benefits common in Hungary, such as meal vouchers or annual bonuses.
The EOR also calculates and pays severance pay when applicable, ensuring compliance with Hungary’s labor protection laws. This includes managing the complex rules around notice periods and termination procedures, which vary based on the length of employment.
What labor laws do you need to consider when hiring in Hungary?
When hiring in Hungary, there are several key labor laws to consider. Hungary’s approach to labor laws generally provides strong protection for employees while maintaining flexibility for employers. Here are some of the most important aspects:
Employment contracts
Written employment contracts are mandatory in Hungary. These contracts should detail the terms of employment, including job responsibilities, compensation, working hours, and termination conditions.
Working hours and paid holidays
The standard work week in Hungary is 40 hours, with a maximum of 48 hours, including overtime. Employees are entitled to at least 20 days of paid annual leave, which increases with age. Hungary has several public holidays, during which employees are entitled to time off with pay.
Taxes
Hungary has a flat personal income tax rate of 15%. Both employers and employees contribute to social security, with the employer’s contribution being 13% and the employee’s 18.5%.
Severance pay
Employers are responsible for providing severance payments based on the length of service, typically starting after three years of employment. The amount increases with the duration of employment.
| Law / Regulation | Key Points |
|---|---|
| Employment Contracts | Mandatory written contracts detailing job terms, wages, and conditions |
| Working Hours | 40-hour standard work week, maximum 48 hours with overtime |
| Minimum Wage | Set annually by the government |
| Paid Holidays | At least 20 days annually, increasing with age |
| Social Security | Employer contributes 13%, employee 18.5% |
| Income Tax | Flat rate of 15% |
| Severance Pay | Based on length of service, starting after 3 years |
| Leave Entitlements | Annual leave, sick leave, and maternity leave (24 weeks) |
| Overtime | Maximum 250 hours per year, paid at 150% of regular wage |
| Probation Period | Maximum 3 months |
| Public Holidays | 11 public holidays with paid time off |
| Sick Leave | Maximum three months |
| Parental Leave | Maternity leave: 24 weeks Paternity leave: 10 days Adoption leave: Same as biological parents |
| Termination of Employment | Must comply with statutory requirements, notice periods, and severance pay conditions |
How does the hiring process work in Hungary?
When hiring staff in Hungary, employers typically follow these steps:
- Identify the vacancy and create a detailed job description
- Advertise the position through various channels, including local job portals like Profession.hu and CVonline.hu
- Review applications and shortlist candidates
- Conduct interviews and assessments, which may include language proficiency tests
- Select the preferred candidate and make a job offer
- Negotiate and finalize the employment terms
- Complete necessary paperwork, including social security and tax registration
- Onboard the new employee
Employers must ensure compliance with Hungary’s labor laws and regulations throughout this process, including anti-discrimination legislation and data privacy requirements. It’s also important to be aware of cultural nuances in the Hungarian hiring process, such as the importance of formal communication and punctuality.
Is Hungary a relatively easy country to hire employees remotely through an EOR?
Hungary is generally considered a relatively easy country to hire employees remotely through an Employer of Record. The country’s well-developed infrastructure, skilled workforce, and membership in the European Union make it an attractive destination for international hiring.
Pros of hiring employees in Hungary:
Cons of hiring employees in Hungary:
Hungary’s labor laws protect employees and are clear and well-established, making compliance manageable with the help of an experienced EOR. The country’s robust digital infrastructure facilitates remote work arrangements.
However, while hiring through an EOR in Hungary is relatively straightforward, employers still need to be mindful of local labor laws and cultural nuances. An experienced EOR can navigate these requirements effectively, ensuring compliance while simplifying the hiring process for foreign companies.
In conclusion, Hungary’s combination of a skilled workforce, strategic location, and established legal framework makes it a viable option for companies hiring remote employees through an EOR, provided they partner with a knowledgeable and experienced EOR provider.
