Nothing lasts forever, not even business. When the life cycle of a business comes to an end, the labor contracts of employees are automatically terminated, and employees will be eligible for compensation same as if the employer ended the contracts. But what happens to foreign employees in Hungary? Can they stay or do they have to leave? What options do they have? Read on to find out.
Employment and liquidation
Normally, employees would have a notice period of 1 to 3 months which could provide some protection to them, as they would have a better chance to find a new job and stay in Hungary. However, that might not apply when a business is liquidated. At the same time, the start of the liquidation must be announced to employees in time.
When a business is liquidated, its labor contracts cannot be maintained. As a result, labor contracts will be terminated the latest on the day when the business is dissolved and deleted from the Company Registry. This will be true for protected employees too, e.g. those on maternity leave or sick leave, who cannot be terminated otherwise.
When a labor contract is canceled automatically as a result of the liquidation, employees will have the same rights as if the employer terminated the contract. This includes not only compensation up to the last day of employment, but also compensation equivalent to the time the employee would not be required to work during a regular notice period (even if that is not realized) as well as severance pay.
If there is a windup, employees need to file a request for compensation with the executor of the windup process in 40 days after the fact of the windup was published. When the assets of the company are liquidated to cover its debts, salaries and other relevant claims are prioritized. Employees may also apply to the Hungarian Wage Guarantee Fund (“Bérgarancia Alap”). Consult a specialist to learn how to do these.
Residency and liquidation
Additional rights of the employees will depend on their country of origin and their residency status.
Country of origin
If the employee is from a country the nationals of which are allowed to enter Hungary without a visa, they can fall back on their visa-free visitor status. In most cases, this will mean 90 extra days in Hungary, while some countries have bilateral agreements in Hungary allowing 180 days of visa-free stay instead. If a person from a visa-free country wants to stay in Hungary, they can use their visa-free days to find a job, and then apply for a new work permit without leaving Hungary.
Residency status
- Permanent residency / any status with an address card: Residency is not tied to employment, so these employees may stay in Hungary without issues. They may even qualify for unemployment benefits.
- Family unification + work permit: Residency is primarily based on family unification. When the employment is terminated, the employee can fall back on their family unification status, they just need to report this to the Immigration Office. Once they find a new job, they can reapply for the additional work permit. Please note: procedure may vary depending on the nationality of both the applicant and the spouse.
- EU Blue Card: While this type of residency is tied to employment, it allows for a grace period of at least 3 months after employment is terminated (6 if the Blue Card is older than 2 years). The employee will need to renew their residency once they find a new job. Details will depend on whether the new job still qualifies for the EU Blue Card.
- Residency for employment and other work permits: Residency is based on the employment relationship. The employee should have a new job lined up by the time the labor contract is terminated, otherwise they will need to leave Hungary when their contract ends. They will need to wait for the new permit before they can start working for the new employer.
Closing a business neatly
Even if your Hungarian business operation has run its course, you can still support your foreign employees by providing them accurate information about their rights and options. The sooner your employees learn about the closure, the more chance they will have to secure a new job and continue their life in Hungary.
Helpers offers assistance with work permit and residency applications for business owners and employees alike. We focus on working with foreign business owners and help them navigate Hungarian bureaucracy to make business setup and operation a breeze.
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