Payroll in Hungary
What tax considerations are there?
Personal Income Tax (PIT)
Hungarian residents are taxed on all income regardless of whether it is obtained from within Hungary or an international source. Non-residents are only taxed on income from Hungary. The Personal Income Tax rate is 15%. In addition to PIT, Hungarian residents pay a social security contribution of 18.5% of their gross income. This is divided into 10% for a pension, 7% for health insurance, and 1.5% as an unemployment contribution.
Corporate Income Tax (CIT)
As will PIT, Corporate Income Tax applies to both non-resident and resident companies – with the latter paying CIT on income derived from both national and international sources. CIT is set at a rate of 9% of the positive CIT base. There are also specific CIT regulations for Real estate holding companies, energy suppliers, and advertisements. Municipalities are also entitled to levy a Local Business Tax – however this is capped at 2% by law.
HR in Hungary
What are the regular working hours in Hungary?
As with many European countries, in Hungary the working day is usually 8 hours starting from between 8am and 9am. Friday is usually a shorter day, with many offices closing at around 4pm. Most banks open at 8am and close early, and shops often stay open until 6pm from Monday to Friday.
Vacation, maternity and sickness
In Hungary there are 16 public holidays for which employees are entitled to the day off. As well as this, employees are allowed 20 days of annual leave – this number increases with age. Parents are also allowed additional days depending on the number of children they have. For one child they can have an additional two days, for two children it’s four days, and it will increase up to the value of seven days in one calendar year.
Maternity leave in Hungary is 24 weeks, which must start four weeks before the predicted birth date. During this time, the employee is entitled to 70% of her average salary. After the birth of the child, the mother is also entitled to two hours of work time allowance every day for nursing, for the first six months, and then one hour after that until the child is nine months old.
Employees are entitled to 15 days of paid sick leave as long as they are enrolled in the national social security scheme. During this time, the employer must pay 70% of their salary. After 15 days the employee is paid at a rate of between 50% and 60% depending on their length of service. One third of this is paid by the employer and the remaining is paid by the state.
Employees and employers must provide 30 days notice to terminate a contract. After three years of employment the notice period must be increased by five days, and increased again at set intervals of service up to the amount of 60 days after 20 years of employment. In the event that the employer chooses to terminate the contract, the employee is entitled to severance pay – as long as the employee has not acted unlawfully. Severance pay can vary from one month’s salary to six month’s salary, depending on their length of service.