Sources of regulation
Hungarian labour law is regulated by Act No. 22 of 4 May 1992 on the Labour
Code (in force since 1 July
1992, and as amended by 2006). In addition, art.
70(B) of the Hungarian Constitution guarantees the right to work and
free choice of work and occupation.
Scope of legislation
Act No. 22 applies to all employment relationships under which work is performed
in the territory of the Republic of Hungary, as well as those under which
employees of Hungarian employers work abroad on missions. The employment
relationships of employees working on vessels or aircraft are also governed
by the provisions of the Act, provided that the vessel or aircraft bears
the Hungarian flag or marking (sec. 1(1-2), Act No. 22).
Certain provisions of Act No. 22 applies to employment relationships governed
by the Civil Code, pertaining to employees under 18 years of age, or to contracts
for the hiring out of workers between placement/temporary employment agencies
and user enterprises (sec. 1(5), Act No. 22).
The Labour Code also makes special provisions for “executive employees”
– an employer’s highest-ranking employees. Regarding such employees, employers
are neither bound by the restrictions regarding ordinary dismissal as defined
in sec. 90(1), nor must they justify such dismissals (sec.
190(2), Act No. 22).
Employees in the public service and those in publicly financed institutions
are governed by special provisions (sec. 2(1-2), Act No. 22).
Provisions regarding collective redundancy do not apply to crews of seagoing
vessels (sec. 94/G, Act No. 22).
Contracts of employment
Contracts of employment must be concluded in writing. They may not provide
for less favourable working conditions than law and applicable collective
agreements (sec. 76, Act No. 22).
In principle, the employment contract is established for an unlimited period
of time (sec. 79(1), Act No. 22), and is for full-time employment
(sec. 78/A, Act No. 22).
The probationary period established under the contract is 30 days. Under
a collective or individual agreement, the parties may specify a different
probationary period, but that period cannot exceed three months. The probationary
period may not be extended. During the probationary period, either of the
parties may terminate the employment relationship with immediate effect (sec.
81(1-3), Act No. 22).
The length of employment limited to a definite period of time cannot exceed
five years, including the establishment of any new employment relationship
(sec. 79(5), Act No. 22). If a fixed-term employment contract
is renewed or extended with the aim of compromising the rightful interests
of the employee, the employment will be deemed for an indefinite duration
(sec. 79(4), Act No. 22). Furthermore, a fixed-duration contract
will be considered open-ended if the employee works for at least one extra
day following the expiry of the contract with the knowledge of his or her
supervisor. (sec. 79(4), Act No. 22). However, if the original
contract was for 30 days or less, then the contract will only be extended
by the amount of time for which the original contract was established (sec.
79(6), Act No. 22).
Another type of employment contract is
the study contract, in which an employer agrees to provide financial support
for a person. In return, this person agrees complete his or her studies,
while working for the employer for a set period of time (sec. 110(1),
Act No. 22). A beneficiary of a study contract is not bound
by its provisions, if the employer fails to provide the contractually obligated
financial support, or if the employer breaches the contract in any way. If
the employer breaches the study contract in any way, the beneficiary may
seek compensation for any damages incurred by the breach of contract (sec.
113(1), Act No. 22). In case of non-respect of the study contract by
its beneficiary, the employer is entitled to demand reimbursement of provided
financial support (sec. 113(2), Act No. 22).
As regards temporary employment arrangements, an employee may
be ordered to perform work for another employer by virtue of an agreement
between his or her original employer and the new employer if (sec. 106(1),
Act No. 22):
- the
owner of the other employer is the owner of the original employer;
- at
least one of the two employers holds some ownership in the other employer;
or
- the
two employers have joint ownership of a third organization.
Only the original employer may terminate an
employee who is performing such temporary assignment (sec.
106(3), Act No. 22).
Termination of employment
The contract of employment can terminate, not at the initiative of the employer,
including by (sec. 86, sec. 86/B(1), Act No. 22):
- the
death of the employee;
- the
employer’s dissolution without a legal successor;
- the
expiry of a fixed term;
- the
changing of an employer who falls under the scope of Act No. 22, by the
decision of the employer or founder, to become a public or civil servant;
and by
- mutual
consent of the parties.
If the employee
does not terminate his/her employment according to the provisions of Act
No. 22, he or she must pay the employer compensation equal to his or her
average wages for the amount of time that his/her earnings failed the due
notice period (sec. 101(1), Act No. 22).
If an employee is working
for an employer through a placement agency, the open-ended employment relationship
may be terminated by notice from both the placement agency and employee
(sec. 193/J(1), Act No. 22).
The employee can terminate
the employment relationship if there is a serious breach of employer regulations,
or if the placement agency agrees to the employment relationship’s termination (sec. 193/K).
The placement agency
may terminate the employment contract with an employee by notice if (sec.
193/J(3), Act No. 22):
- the
employee’s performance is inadequate;
- the
employee is unable to perform the required tasks;
- the
placement agency was unable to arrange employment within thirty days; or
- the
placement agency’s technical operation prohibits maintaining the employment
relationship.
In the event of such
termination, the placement agency has to attach an explanation of discharge
(sec. 193/J(2), Act No. 22). The period of notice has to be fifteen
days, unless the employment relationship existed for at least one calendar
year, in which case the notice period is thirty days (sec. 193/J(4),
Act No. 22).
Regardless of who terminates the employment relationship,
upon termination, the placement agency has to pay the employee his or her
average wages during the required notice period (sec. 193/J(6), sec.
193/K(7), Act No. 22), in addition to all other due benefits (sec.
193/L).
If the termination of employment relationship by the
placement agency is unlawful, and the employee was party to a fixed-term
contract, then the employee may request the agency to pay wages due for the
remaining period of employment, or a maximum of six months wages (sec.
193/M(5), Act No. 22).
Dismissal
During the probationary period, either party may terminate the employment without
prior notice (secs. 81(3) and 88(1), Act No. 22).
A contract for a definite period of time may be terminated by mutual consent
or by extraordinary dismissal. The employer
may also terminate the employment by paying the average wage due to the employee for the outstanding
period in advance (sec. 88(1-2), Act No.
22).
A contract established for an indefinite period of time may be terminated
by the giving of normal notice (sec. 89(1), Act No. 22). An employer
may only dismiss an employee because of:
- the
employee’s ability;
- the
employee’s behaviour in relation to the employment relationship; or
- reasons
relating to the employer’s operations.
An employee may not be terminated by ordinary dismissal (sec. 90(1),
Act No. 22):
- if
an employee is incapacitated because of illness, up to a maximum of one
year following the expiration of the sick leave period;
- during
entire time of eligibility of sick pay because of incapacity due to a work-related
accident or illness;
- while
the employee is using sick leave in order to care for a sick child;
- if
the employee is on a leave of absence without pay in order to care for
a close relative;
- during
pregnancy, for three months after giving birth, or during maternity leave;
- if
the employee is taking a leave of absence without pay in order to nurse
or care for
- children;
- while
the employee is fulfilling military duties or civil service; or
- if
the given reason is the change of employer by legal succession (sec. 89(4),
Act No. 22).
Either party may terminate the employment relationship
under extraordinary dismissal if the other party (sec. 96(1), Act
No. 22):
- wilfully
or by gross negligence gravely violates obligations arising from the
employment relationship; or
- engages in conduct that renders further existence
of the relationship impossible.
There are special provisions for “collective redundancies” which are defined
as a dismissal of (sec. 94/A):
- at
least ten workers, when the average number of employees over the past six
months is more than twenty but less than one-hundred;
- at
least ten per cent of the workforce, when the average number of employees
over the past six months is greater than one hundred, but less than three
hundred; or
- at
least thirty workers, when the average number of employees over the past
six months is three hundred or more, over a period of thirty days.
The Labour Code protects trade union activity by making illegal any termination
or discrimination based on trade union affiliation or activity (sec. 26(3),
Act No. 22). Furthermore, the employer needs prior consent of the higher-ranking
trade union body to terminate an elected trade union official by ordinary
dismissal. In case of an extraordinary dismissal of such an employee, the
employer has to ask a prior opinion of the relevant trade union (sec.
28(1), Act No. 22). In both cases, the trade union must communicate
its position in writing (sec. 28(2), Act No. 22).
The employer is given some leeway if the employee is reaching or is at an
age where he or she may receive a pension. If the employee is sixty-two
years old and is qualified to receive or is currently receiving a pension,
then the employer is not required to give a reason for the ordinary dismissal
of the employee (sec. 89(6), Act No. 22). However, employees between
fifty-seven and sixty-two years old receive special protections. The employer
may only terminate such employees in “particularly justified cases,” unless
the employee is already receiving pension benefits (sec. 89(7), Act
No. 22).
If an executive employee’s close relative becomes involved with a business
that engages in the same or similar activities as the employer or is in regular
business contact with the employer, then the employer is entitled to terminate
the employment relationship with the executive employee (sec 191(5),
Act No. 22).
Notice and prior procedural safeguards
As a general rule, the requirement of notice applies to contracts that are
concluded for an indefinite period of time (secs. 89 et seq., Act
No. 22). The minimum period of notice is 30 days, and it is extended by (sec.
92):
- five
days after three years of employment with the employer;
- 15
days after five years of employment with the employer;
- 20
days after eight years of employment with the employer;
- 25
days after ten years of employment with the employer;
- 30
days after 15 years of employment with the employer;
- 40
days after 18 years of employment with the employer; and
- 60
days after 20 years of employment with the employer.
Under no circumstances can the notice period exceed one year.
Once the employer uses ordinary dismissal to terminate
an employee, the latter is relieved of his/her duties for one-half the notice
period (sec. 93(1), Act No. 22). During this time, the employee is
entitled to his/her average earnings (sec. 93(3), Act No. 22).
If an employer wishes to terminate an employee for reasons
that are prohibited under ordinary dismissal in sec. 90(1), he
or she must give fifteen days’ notice if the employee is unable to come to
work for at least fifteen days, or thirty days’ notice, if the employee is
unable to come to work for at least thirty days (sec. 90(2), Act No.
22).
In the case of an extraordinary dismissal, the employer
must provide just reasoning for the dismissal, as it is required in sec.
89(2) for ordinary dismissal. Before the employer announces
an extraordinary dismissal, the employee must be given the opportunity to
learn about the charges brought against him or her, and to speak in his or
his own defence (sec. 96(2), Act No. 22).
Extraordinary dismissal may be exercised within fifteen
days and up to one year of gaining knowledge of the grounds for the dismissal. If
extraordinary dismissal is because of an employee’s criminal action, the
dismissal may not be applied after the statute of limitations of the crime
expires. If a committee has the right to exercise extraordinary dismissal,
than the date of gaining knowledge is the date that the committee, acting
as a body that can exercise employer rights, learns of the action (sec.
96(4), Act No. 22).
If an employer wishes to implement a collective redundancy,
he/she has to consult the workers’ council or, if a council does not exist,
a committee set up by the local trade union branch and the workers’ representatives. The
employer must consult one of these bodies fifteen days prior to the implementation
of a redundancy, and has to continue negotiations until the implementation
or until an agreement is reached (sec. 94/B(1), Act No. 22). In view
of coming to an agreement, the consultation must cover the ways to avoid
such a redundancy, the principles of redundancies, the ways to mitigate the
consequences of the redundancy, and how to reduce the number of employees
affected by such an employer’s action (sec. 94/B(5), Act No. 22).
At least seven days before such a consultation, the
employer is required to inform the workers’ representatives in writing regarding
the reason for the redundancy, the number of workers made redundant, and
the number of workers employed under the applicable part of sec. 94/A (sec.
94/B(3), Act No. 22). During the consultations, the employer has to
inform, in good time, the workers’ representatives in writing of the period
over which the projected redundancies are to be affected, the criteria proposed
for choosing which workers will be made redundant, and the criteria for determining
severance pay, outside of that determined by legislation and/or collective
agreement (sec 94/B(4), Act No. 22).
Should the employer actually implement the redundancy,
this notification must also be sent to the employment centre of the area
affected by the redundancy (sec. 94/D(1), Act No. 22).
Employees must be notified of the employer’s intent
of collective redundancy at least thirty days prior to the delivery of the
statement as required by sec. 88(2). A copy of this notice
must be provided to the workers’ representatives and to the relevant employment
centre (sec. 94/E(1), Act No. 22).
Following the consultation, if the employer decides
to implement a collective redundancy, he or she must specify the number of
workers affected by the redundancy and a timetable for the implementation
of the redundancy (sec. 94/C(1). Redundancies should be implemented
over 30-day periods.
When an employer gives notice, he or she must provide a clearly comprehensible
explanation for doing so. In the event of disagreement, the validity and
rationality of the reason for giving notice must be proven by the employer.
Prior to notice of termination, the employee must be given an opportunity
to defend him or herself against criticism. Legal proceedings may be initiated
concerning decisions made by an employer, but the parties have to attempt
to reconcile their views prior to going to court. Conciliation procedures
are initiated in writing within 15 days from the date that the measure is
disclosed. If conciliation fails to result in an agreement within eight days
from its commencement, court proceedings can be initiated within 15 days
from the date that the conciliation procedure has failed (secs. 89(2),
(5) and (4); 199(3); 200(1); 201 and 202(1),
of Act No. 22).
The right to extraordinary dismissal can be exercised within three days
from the date upon which the underlying cause becomes known, or a maximum
of six months from the occurrence of the cause; or within a maximum of one
year if there are relevant provisions in the collective agreement, or within
the statutory limitation period if a crime was committed. A legal challenge
may be initiated against a decision made by the employer, but the parties
have to attempt to reconcile their views prior to going to court. Conciliation
procedures are initiated in writing within 15 days from the date the measure
is disclosed. If conciliation fails to result in an agreement within eight
days from its commencement, court proceedings can be initiated within 15
days from the date that the conciliation procedure has failed (secs. 96(3);
199(3); 200(1); 201 and 202(1), of Act No. 22).
If an employee’s capacity to work has been compromised during the course
of employment, employers are required to reassign those employees to positions
that their conditions allow (sec. 85(3), Act No. 22).
Severance pay
The employee is entitled to severance pay if employment
is terminated through normal notice by the employer or because of the liquidation
of the employer without a legal successor. If the employment relationship
is terminated because of liquidation, the employee is paid a sum equal to
his/her average wages due for the period of exemption from work during the
notice period, unless the employee is not entitled to severance pay (sec.
86/A).
Severance pay (sec. 95(4), Act No. 22) is equal the amount of:
- one
month’s wages for up to three years of employment with the employer;
- two
months’ wages for up to five years of employment with the employer;
- three
months’ wages for up to ten years of employment with the employer;
- four
months’ wages for up to 15 years of employment with the employer;
- five
months’ wages for up to 20 years of employment with the employer; and
- six
months’ wages for up to 25 years of employment with the employer.
An employee is not eligible for severance pay if he
or she is entitled to a retirement pension (sec. 95(1-5), Act
No. 22), nor may the period applicable for pay eligibility include:
- time
that the employee spent imprisoned;
- time
that the employee spent doing public service work; or
- time
from a leave of absence for over thirty days, except when that time was
used to care for a close relative or a child under ten years of age.
In addition to the above provisions, an employee who
has unused vacation time at the time of his or her termination must be paid
financial compensation for unused vacation time (sec. 136(1), Act
No. 22).
If an employer terminates the
employment of an executive employee during bankruptcy or liquidation proceedings,
the executive employee gets standard severance, in addition to a maximum
of six months’ average wages (sec. 190(4), Act No. 22).
Avenues for redress
As a general rule, the term of limitation of any claims relating to employment
relationships is three years. Claims against criminal activity can be brought
within the period of five years (sec. 11(1), Act No. 22). This time
can be extended if the claimant is unable to enforce his or her claim for
an excusable reason; he or she may still enforce his/her rights within six
months of cessation of the hindrance (sec. 11(3), Act No. 22).
If a court of law declares that the employment was illegally terminated,
the employee must be reinstated to the original position if he or she so
requests (sec. 100(1), Act No. 22). At the employer’s request
and under some conditions, the court may refrain from reinstating the employee
to the original position (secs. 100(2) and (3) of Act No. 22).
In case of unlawful dismissal, the court orders the employer to compensate
the employee. The amount of this compensation depends on particular circumstances
of the case, but cannot be less than two and no more than twelve months’
average wages of the employee concerned (sec. 100(4), Act No. 22).
If an employee has been unlawfully terminated by the
placement agency, the employee may request a minimum of one month and a maximum
of six months of average pay, depending on the severity of the unlawful termination
(sec. 193/M(2), Act No. 22). In addition, the employee is compensated
for any lost wages and benefits and for damages (sec 193/M(3), Act
No. 22). If the employer does not give notice when he or she terminates
the employment relationship, the employee is also entitled to his or her
average wages due for the period when relieved from work duty (sec. 193/M(4),
Act No. 22).
In the case of a labour-related legal dispute, the affected
parties may file a lawsuit within thirty days of notification of the action
(sec. 202, Act No. 22).
Trade unions are entitled to contest any unlawful action by the employer
by demurrer, if such an employment action directly affects the employees
or the employees’ representation (sec. 23(1), Act No. 22).
Further information
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