Payroll in Hungary: A Detailed Guide for Employers

Hungary is one of the few countries committed to ensuring ease of business for international employers. With a rank of 52 out of 190 participating countries, there’s no doubt Hungary is a preferred destination for ambitious entrepreneurs. Transparent laws and streamlined processes are among the many perks every Hungarian employer enjoys. 

Hungary is located in central Europe, allowing businesses to tap into the vast European market. Furthermore, tax incentives, affordable commercial land, and a highly skilled talent pool add more leverage to the country’s commitment to providing an excellent business infrastructure. 

While there are several advantages of running payroll in Hungary, employers comply with the local laws. Although there’s always a learning curve attached to one’s ambition, we ensure that this article provides the most valuable information for running a fluent payroll in Hungary in minimal time.

How Is Payroll Calculated in Hungary? 

The payroll policies and procedures in Hungary are straightforward. It supports wage entitlement and supplements for employers. 

According to the Hungarian payroll process, employers enjoy flexibility since they can provide temporary and permanent employment. However, the payroll process in Hungary follows the same calculations for both types of employment. 

A payroll in Hungary comprises base salary, monetary benefits, overtime pay, tax deductions, and net pay. Furthermore, the payroll policies and procedures in Hungary include the withholding tax system. In other words,  employers must deduct an employee’s taxes before crediting the net pay. 

The following formula highlights a payroll calculation. 

Net salary: Basic salary + Monetary benefits + Overtime pay – Applicable personal taxes – employee contributions

Important Elements of Salary Structure in Hungary 

Hungary’s payroll involves several areas discussing legal employment benefits and rights. The payroll rules and regulations in Hungary break down the salary structure elaborately. We will further explore these pointers focusing on minimum wage in this guide. Here are the factors that have made their way into 2023 – 

Gross salary 

• The gross salary is payment made in return for receiving an employee’s services. The hiring company and the employee mutually decide the pay. 
• However, the wage must be higher than HUF 296,000 per month. Per the latest updates in the payroll rules and regulations in Hungary, HUF 296,000 is the minimum wage applicable for every full-time employee. 

Deductions

Employers must deduct the necessary taxes from the employee remuneration. Employees pay 18.5% in payroll taxes, per the payroll policies and procedures in Hungary. Since the withholding taxes scheme is applicable, employers must deduct the amount before paying the net salary. 

Overtime

Per the payroll policies and procedures in Hungary, the employee gains overtime of

• A 100% bonus for working outside corresponding hours, mainly on a weekly off day (An employer can take it down to 50% on account of another weekly day off.)
• A 50% bonus for working overtime
• A 50% bonus on a general holiday, i.e., Sunday
• A bonus of 20% on working shifts between 7 pm and 6 am other than on the occasion of frequent changes in working hours.
• A 15% bonus for night shift carried out after 10 pm exceeding an hour

Net payout

The company’s total cost of the employee will include the factors mentioned above before the final payout.

How to Set Up a Payroll in Hungary 

Hungary’s payroll requirements vary with upcoming sanctions and ongoing legislation. Businesses can risk losing licenses in the absence of these required documents. The extent of one’s business determines the process of payroll establishment in Hungary. If it is a subsidiary, setting up HR payroll in Hungary can take significant time. 

Companies can register with these provisions to start processing payments- 

• A localized or national bank account (this is an optional pursuit)
• A local tax identification number
• A virtual company gateway for carrying out administrative services
• Registration with the National Health Insurance Fund of Hungary
• Additional registration with the National Tax and Customs Administration 

A Step-by-step Process of Payroll Processing in Hungary 

Setting up payroll in Hungary is easy due to high transparency. However, with laws at various levels, it might get cumbersome. One can follow these pointers to set up their payroll in Hungary in minimal time –  

• Set-up costs of organization – Before initiating a payroll process, businesses must develop a concrete build of their organization’s morales, products, services, models, and policies. On completion, companies can start the pre-payroll phase.
• Location of work – The ideal work location should abide by all policies according to local guidelines. Payroll policies and procedures in Hungary require different office locations in the country to develop and maintain collective policies.
• Business model – A business can be set up in correspondence with the government guidelines, and it can mandate the existing and upcoming rules and regulations Hungary puts forth. This documentation is necessary to consider any payroll process as valid.
• Policy for attendance – The attendance policy comprises a vast share of the payroll policies, which is vital to the process. An integration of attendance trackers can be beneficial in this department. At the same time, it should comply with the labor laws of Hungary and include overtime or reduced time charges.
• Policy for leave – Leaves account for all the missed days at work and the paid leaves. The leave policy should comply with Hungary’s labor laws, without which there will be a severe penalty. 
• Schedule of pay – Businesses must pay their employees a monthly wage by the 10th of every month. 
• Legal components – Regarding payroll rules and regulations in Hungary, businesses and employers must fulfill the local employment legislation mandates. An employer can hire a compliance team to inspect the components of the licenses, thereby making a better decision and avoiding all possible penalties.
• Other components – The primary role of payroll is to fulfill employee payment duties. Businesses can plan a salary depending on the base rate, company policies, market standards, and benefits such as health care and provident fund.
• Collection of employee information – Employers should mandatorily update employee information as it is an integral part of the Hungary payroll process. Overall, it requires the passage of sensitive information apart from receipts for reimbursements, invoices, and approvals for shift adjustment.

Payroll Contributions

The payroll contribution covers the taxes to benefit the country’s interests. Concerning payroll rules and regulations, Hungary requires its employers and employees to pay a significant fee to the government. 

Employer contribution

Per the payroll compliance checklist in Hungary, the employer’s contribution rate, or the social security tax, requires Hungary’s employers to pay 13% to the government in part of the business.

Employee contribution

The employee’s social contribution can also amount to 18.5%, which applies to minimum wage.

Employee payroll contributions

Employee income tax

Payroll Cycle 

The payroll cycle or the scheduling of payments is done monthly in Hungary. Employees receive a payment within the 10th of each month for work started between the first and the last day of any month.

The payroll policies and procedures in Hungary require full-time work hours to be limited to 40 hours a week, divided into five days a week. The expected working hours are between 8 am to 6 am, which can lead to a violation of the employment contract.

One must implement the payroll system with the exact documentary requirements in terms of temporary employers or ones employed daily. In this case, the temporary employee is paid their share at the end of the day.

Hungary Payroll Options for Companies 

In Hungary, the payroll process follows a simplified procedure. Per these mandates, payroll policies, and procedures, Hungary are as follows.

• Internal payroll – This type of payroll is committed chiefly to benefiting companies already established themselves and looking forward to developing successful subsidiaries. Internal payroll caters to businesses in Hungary wanting to grow their outreach. At the same time, the Hungary payroll process needs to employ human resources best at handling employment and compliance laws.
• Remote payroll – According to the Hungary payroll guide, you can establish a remote employee payroll system under a parent company’s payment processing system. It can give rise to confusion as the payroll system may differ between the parent companies and the subsidiaries.
• Hungary’s payroll processing company – The Hungarian payroll process is tricky to comply with due to several laws. Established businesses tend to work with  third-party companies to figure out the best way to enable a payroll system without many complications.
• Hungary’s outsourcing of payroll – When it comes to optimizing the payment process, payroll outsourcing can be an excellent option. It can handle payroll and compliance needs, thereby expelling the need for a dedicated HR team. Companies that can afford to outsource when it comes to businesses make it easier for the payroll process. Overall, the Hungarian payroll process is straightforward yet time-consuming if done manually.

Entitlement and Termination Terms 

As an employee working for Hungary’s businesses, the payroll rules and regulations in Hungary can be an easy guide. Let’s start with the entitlement policies first.

Entitlement terms in Hungary

Paid Leave

At any point, the employees can take 20 days of paid leave which can change per the employees’ age bracket. 

It can also go up to 30 to 45 days per the Hungary payroll guide. Other leaves include

Public holidays

Hungary’s businesses should offer their employers and employees 11 paid leaves during public holidays.

Here is a table listing all the public holidays.

Sick Leaves 

1 – Employees can claim annual sick leave, which equals 70% of the regular salary. However, the salary is payable for the first 15 days.  

2 – An employee can claim sick leave for up to a year, where the employee receives one-third of the standard payment or two-thirds of it as mandated by the Hungary National Health Insurance Fund (NEAK). 

3 – The employee can claim a leave for unlimited days in work-related accidents with the same mandate stated above.

4 – Employees with children under 16 years of age – Employees with an underage child below 16 can get up to two working days’ leave, whereas those with two and three children consequently get four and seven days’ rest.

5 – Employees with a specially-abled child underage child – Per the payroll rules and regulations in Hungary employees can take a maximum of two additional paid leaves in addition to the usually paid leaves.

Maternity leave

1 – Per the payroll rules and regulations in Hungary, employees get a paid maternity leave for up to 24 weeks with a 70% salary. 

2 – As mandated by Hungary, the Pregnancy and Confinement Benefit (CSED) takes care of that. It can extend up to 3 years, and the employee receives a Child Care Fee of 70%.

3 – If the grandparents take care of the child, the NEAK offers a care allowance up to the age of 3 years of the child.

Paternity leave

An employed father can claim up to 5 days of paternity leave and seven days of complicated/twin or multiple births. 

Parental leave

1 – Parents can claim this leave within two months after birth. One parent can claim this leave until the child is two years. 

2 – The remuneration is  70% of the parent’s salary, taking the leave. 

Bereavement leave

Employees can take two days of paid leave in case of an immediate family member’s death.

Termination terms in Hungary

The termination policy in Hungary is detailed below.

• Payroll rules and regulations in Hungary allow employers to terminate a person for personal or professional misconduct. 
• The employee is given a notice and a written explanation.
• The employee can explain their actions in terms of termination.
• The employee also receives the final payment by the 5th working day after termination.

Severance pay 

• The employee can claim a cut in severance if their employer terminates them solely on the grounds of operational disturbances. 
• However, this depends on the rules put forward in the employment contract. 
• The payroll rules and regulations in Hungary require employers to offer a severance pay of a minimum of a month and a maximum of 6 months. 

Notice Period

During termination, employers must provide a 30-day notice period to their employees. According to the payroll policies and regulations in Hungary, the tenure increases per the employment length. The table below refers to the stipulated period.

Note: According to the Hungary payroll guide, the notice period can extend to 6 months.

Probation

The probation period offered to an employee should be at most three months. However, during probation, an employer can reduce the trial period. 

Hungary Payroll Processing Company 

An ideal payroll processing company in Hungary will take care of the payroll system in precedence with the following areas – 

• Income tax filing – A Hungary processing company can aid businesses in filing their employees’ taxes. At the same time, they can help retrieve and collect necessary personal documents for the same process.
• Payroll collection and calculation – The payroll collection system gets more accessible with a processing company. A payment processing company can take care of Hungary’s payroll tax rate accurately. In this regard, the company can figure out gross and net salary calculations.
• Distribution of payment slips and subsequent administration – A payroll processing company generates invoices and stores them in online encrypted files. It also makes distribution easier using online portals while, at the same time, working with the payment orders.
• Statutory and management reporting – Reporting of statutory and management-related tasks resulting in a more efficient Hungarian payroll process. It includes regular visits to the local tax office, labor spaces, and insurance companies. In addition, a third party can help maintain regular communications with essential authorities.
• Employee support – A payroll processing company can include regular feedback and management of concerns and complaints regarding the payroll.

How Multiplier Can Help With Global Payroll 

Payroll in Hungary covers all aspects of deductions and remunerations, which makes the process systematic yet time-consuming. The Hungary employer payroll taxes, employer contribution, and withholding tax system play a huge factor in determining the payroll process. Furthermore, registering a company and setting up the payroll in Hungary will require capital, time, and effort. 

Multiplier is a Saas-based Employer of records platform that bridges this gap and allows companies to set up payroll in Hungary and 150 other countries instantly. In addition to its payroll management services, Multiplier can manage reporting with minimal capital requirements. It makes it easier for businesses and organizations to handle their payroll systems dexterously without complications. If you currently work in an organization and want to upscale your payroll capabilities, opt for Multiplier today.