Hiring Employees in Hungary (2025): Payroll, Contracts, and Labor Law Compliance

A Complete HR and Payroll Guide for Foreign Investors

Hiring your first employees in a foreign country is a critical step that requires mastering local labor law, payroll structure, social security, and HR compliance. Hungary provides a competitive, skilled, and multilingual workforce, but employers must navigate specific, digitized administrative obligations.

This updated guide for 2025 provides international investors with a clear, comprehensive overview of employment relationships, mandatory employer duties, detailed payroll structure, benefits, and compliant termination rules under the Hungarian Labor Code (Act I of 2012).

 Table of Contents

• 1. Why Choose Hungary for Talent Acquisition?

• 2. Employment Contracts and Types of Work

• 3. Mandatory Employer Obligations (Before Day One)

• 4. Hungarian Payroll Structure (Taxes and Contributions)

• 5. Working Time, Annual Leave, and Benefits

• 6. HR & Data Compliance Requirements

• 7. Termination Rules and Notice Periods

• 8. Partnering with ITL Group for HR and Payroll Management

1. Why Choose Hungary for Talent Acquisition?

Hungary has become a preferred strategic location for companies seeking high-value talent combined with cost efficiency in Central and Eastern Europe (CEE).

• Skilled Workforce: Highly educated professionals, particularly in IT, engineering, finance, and shared business services.

• Multilingual Talent: High fluency in English, German, and other major European languages.

• Competitive Labor Costs: Attractive total labor costs compared to Western European peers.

• EU Alignment: Employment laws are generally aligned with European Union labor standards, providing a familiar framework.

⚠️ Key Compliance Challenge: Accurate payroll administration and stringent HR reporting requirements demand deep local knowledge and adherence to the Labor Code.

2. Employment Contracts and Types of Work

The employment contract is the foundation of the relationship and has strict legal requirements.

A. Standard Employment Contract (Mandatory Requirements)

B. Other Employment Relationships

• Fixed-term Contracts: Must specify a clear end date and are not subject to unjustified constraint on future employment.

• Part-time / Teleworking: Flexible arrangements are legally supported, requiring specific safety, equipment, and reporting protocols for remote work.

• Temporary Agency Work: Companies can hire personnel through licensed staffing agencies (e.g., ITL HR Solutions) for flexible workforce management.

3. Mandatory Employer Obligations (Before Day One)

Compliance starts before the employee begins work. Failure to complete these steps on time can result in penalties from the Tax Authority (NAV).

• Employer Registration: The foreign entity must register as an employer with the Tax Authority (NAV).

• Employee Registration: The new employee must be registered in the Electronic Filing System (using the T1041 form via the Ügyfélkapu portal) before they start work.

• Information Provision: The employee must receive written information regarding working time, breaks, rest periods, internal policies, and GDPR/Privacy rules.

ITL Group Service: We manage all complex employer and employee registrations, ensuring 100% compliance with NAV deadlines on behalf of foreign investors.

4. Hungarian Payroll Structure (Taxes and Contributions)

Hungarian payroll involves strict monthly deadlines and a defined structure for calculating the Gross-to-Net Salary and the Total Employer Burden.

A. Employee (Deducted from Gross Salary)

B. Employer (Paid on top of Gross Salary)

C. Salary Rules

• Currency: Salaries must be defined and paid in gross HUF (Hungarian Forint).

• Payment Deadline: Payment must be made monthly, no later than the 10th of the following month.

• Minimum Wage (2025): Subject to annual update, split into two tiers: the general Minimum Wage and the higher Guaranteed Wage Minimum (for positions requiring secondary education/qualification).

5. Working Time, Leave, and Benefits

A. Working Time and Overtime

• Standard Hours: 40 hours per week (8 hours/day).

• Flexibility: Working time can be arranged in shifts or through a working time banking system, provided the weekly average remains compliant.

• Overtime: Allowed within strict legal limits and requires mandatory extra pay.

B. Annual Leave

• Base Leave: 20 days per year.

• Additional Days: Increase based on the employee’s age (up to 10 extra days by age 45) and special circumstances (e.g., parental leave, disability).

C. Benefits and Allowances

• Fringe Benefits (Cafeteria): Popular non-monetary benefits (e.g., SZÉP card allowances) are taxable at a favorable rate, offering tax efficiency for both parties.

• Sick Leave: The employer pays 70% of the daily average salary for the first 15 days. Social security covers subsequent days.

• Allowances: Meal and transport allowances are common and often expected, especially in the manufacturing and logistics sectors.

6. HR & Data Compliance Requirements

Hungary’s compliance system is highly digitized, requiring monthly filings and strict adherence to data protection.

A. Monthly Payroll Obligations

Employers must ensure:

• Accurate monthly calculation of gross-to-net salary.

• Withholding and payment of all taxes (PIT and contributions) to NAV by the 12th of the following month.

• Submission of comprehensive monthly payroll reports to NAV.

B. GDPR & Internal Regulations

• GDPR: Handling of employee personal data must strictly comply with the EU GDPR and supporting Hungarian privacy laws.

• Internal Policies: Companies must implement and provide employees with mandatory policies, including Work Safety, IT/Cybersecurity, Overtime, Home-Office, and Code of Conduct regulations (often required in Hungarian/bilingual format).

7. Termination Rules and Notice Periods

Termination must follow the strict provisions of the Hungarian Labor Code.

ITL HR Solutions: We provide full labor law support, drafting compliant termination documents and managing the severance calculation process.

8. Partnering with ITL Group for HR and Payroll Management

Managing payroll and HR compliance in Hungary is complex due to the detailed legal code and digital reporting requirements.

ITL Group’s integrated, one-stop-shop structure ensures seamless and secure operation for foreign companies:

• ✔ Outsourced Payroll: Monthly calculations, tax submissions, social security administration, and detailed reporting.

• ✔ HR Compliance: Drafting localized contracts, mandatory internal regulations, and managing GDPR alignment.

• ✔ Recruitment & Staffing: Permanent placement, executive search, and flexible Temporary Staffing solutions.

• ✔ Legal Support: Labor law consulting, contract review, and dispute resolution via Lajos Law Firm.

By partnering with ITL Group, you secure your operations with decades of local experience, ensuring your Hungarian workforce is compliant, efficient, and well-managed.