What to include in the labor contract in Hungary

The work permit issued to third country nationals in Hungary is always tied to a specific job. Because of this, there should be an agreement between the employer and the employee before the work permit application is submitted. The agreement is preferably a labor contract (although it can also be a preliminary agreement as well).

The labor contract is the document that protects the rights of both the employer and the employee, and it governs the employment relationship. It must include the following information:

1. Contracting parties

The main data of both your company and your employee-to-be should be included correctly. The data of the employee in the contract should match the data in their documents. This is especially important for employees coming from countries with non-Latin script languages. Make sure that when documents are translated, names are transcribed correctly and uniformly.

2. Position

The position indicated in the labor contract should match the position indicated in the Labor Demand section of the work permit application. This is important if the application is submitted outside the quota for foreign workers at your company (which is the normal procedure for small and mid-size companies).

3. First day of employment

Normally, a labor contract should indicate the first day of employment. With a work permit application, this can be tricky, since the date will depend on when the work permit is approved. However, you can still indicate a preferred first date of employment, which can be modified once the work permit is actually granted and you can see when your new employee can travel to Hungary to start their work.

4. The employment period

Normally, a labor contract can be either for a fixed or for an indefinite term. In case of a work permit application, it must be for a fixed term, for two years at most – since the work permit can be granted for two years at most (or until three months before the expiry of the employee’s passport). Of course, later you will be able to extend the labor contract, just as the work permit.

You should also indicate whether the job will be full-time or part-time. In Hungary, a full-time job is 8 hours a day, 5 days a week (so 40 hours a week). For a work permit application, it makes sense to bring in a foreign employee for a full-time job.

5. Gross salary

In Hungary, the gross salary must be indicated in the employment contract, together with any other forms of compensation (e.g. fringe benefits). However, the employee will receive only their net salary, after the employer has paid the employee’s taxes to the Tax Authority. These taxes may depend on various factors which do not have to be indicated in the labor contract as they are subject to change. (In any case, the employer must also pay taxes above the gross salary, but that is not the employee’s concern, so they are not included in the labor contract either.)

The gross salary must be above the minimum wage, which is adjusted almost every year. If the new minimum wage becomes higher than the gross salary, the employee must be given a raise and the labor contract must be adjusted.

Learn more about salaries in Hungary here.

6. Trial and notice period

The trial period is a period of probation at the beginning of the employment relationship when both the employer and the employee can terminate the relationship without giving any reasons and without notice. It is usually between 1-3 months, but it cannot be longer than 3 months.

Although the residence permit of the employee depends on the job, you are still permitted to terminate the employment during the probation period, and the employee is still permitted to quit. However, in that case, they will have a very limited time to find a new job in Hungary if they do not want to go back to their country of origin.

The notice period is the period for which the employee remains in employment after the decision is made to terminate the employment relationship. Unless that happens during the trial period, the notice period is usually between 1-2 months, and whether the employee must continue working during this time depends on which party initiated the termination (the employee or the employer).

Learn more about trial and notice with a Hungarian work permit here.

7. Place of work

The place where actual work is performed is usually the site of the employer. However, it can also be at other locations, e.g. in the home of the employee (in the case of teleworking) or on the go (in the case of drivers).

+1: Job description

Although not strictly part of the labor contract, every employee must have a job description. This is a separate document that elaborates on the responsibilities of the position indicated in the labor contract. It details the place of the position within the organization, lists the direct supervisor, subordinates and substitution, as well as the regular tasks and required skills.

+2: Information by the employer

Within 15 days after the actual start of the employment relationship, the employer must give the employee information about the job. This is again a separate document, and it includes details of the Labor Code which the employee should know, and how those details are implemented at the company. These include information on when to expect salaries to be paid, regular working hours, how the number of holidays is calculated and how holidays can be taken, and many more details.

Labor contract and work permit application in Hungary

Since the labor contract is normally a part of the work permit application, the labor contract should be ready and signed well before your future third-country national employee can start working at your Hungarian company. Compulsory elements are defined by law to protect the interests of both the employer and the employee.

If you enlist our expert team for the work permit application of your employee, you can also take advantage of our existing templates, and make sure that all required elements are included in the labor contract.