Hire employees in Hungary using an Employer of Record

You've been interviewing for weeks. Finally found the right person in Hungary. Now you need to actually hire them legally. This is where most companies hit a wall.

Hungary's employment laws are employee-friendly, which means getting contracts wrong can void the entire agreement. Miss mandatory benefits like the 13th-month salary, and you'll owe back payments plus penalties when employees find out. Fire someone incorrectly? You're looking at 3-12 months of severance plus legal fees.

Here's the reality: you've got three ways to hire in Hungary, and each comes with different costs, timelines, and headaches.

Option 1: Set up your own entity

• Cost: €15,000-40,000 upfront, €8,000-15,000 annual maintenance
• Timeline: 4-6 months minimum
• Complexity: Full tax registration, payroll system, legal compliance, HR infrastructure
• Makes sense when: Hiring 20+ people long-term, permanent market presence

Option 2: Hire contractors

• Cost: None upfront, but limited control
• Timeline: Immediate
• Risks: Misclassification fines (€50,000+), back taxes, legal disputes
• Makes sense when: Short projects (< 6 months), specialized skills
• Note: Hire with Columbus also handles contractor agreements and payments

Option 3: Use an employer of record (Recommended for most)

• Cost: $179/month per employee (USD)
• Timeline: 2-3 days to hire
• Complexity: None - we handle everything
• Makes sense when: 1-50 employees, testing markets, multi-country teams

If you're hiring 1-10 people, entity setup costs more than 3-4 years of EOR fees ($179/month = $2,148/year per employee vs €15,000+ upfront). An EOR like Hire with Columbus handles employment contracts, payroll, taxes, benefits, and compliance updates so you can focus on managing your team, not Hungarian labor law.

Ready to hire in Hungary without the headaches? Get started with Hire with Columbus.

What employment types can you use?

You've got three ways to bring someone onboard in Hungary. The costs and risks are pretty different.

How can you hire in Hungary?

Before you worry about contract types, you need to decide how you'll legally employ someone. Each approach has different costs, timelines, and headaches.

Set up your own entity

This means incorporating a Hungarian subsidiary and becoming a local employer yourself.

Upfront costs: €15,000-25,000 for incorporation, legal fees, and initial setup. Then there's ongoing accounting (€800-1,200/month), payroll system setup, and annual compliance costs.

Timeline: 4-6 months to get everything operational. You'll need tax registration, social security registration, and a local payroll system before you can pay anyone.

When it makes sense: You're planning to hire 20+ people long-term and want permanent market presence. The math works when you've got enough employees to spread those fixed costs.

Reality check: Most companies underestimate the ongoing complexity. Hungarian labor law changes frequently, and you'll need local HR expertise to stay compliant.

Hire contractors or freelancers

You can work with Hungarian contractors immediately, but the rules are strict about what qualifies as genuine contractor work.

Speed advantage: Start tomorrow if you want. No entity setup, no payroll system.

The catch: Hungary's labor authorities actively hunt for misclassified employees. If your "contractor" works set hours, uses your equipment, or takes direction like an employee, you're looking at fines up to €50,000 plus back taxes and social contributions.

When it works: Short-term projects under 6 months, specialized consulting work, or genuinely independent services.

Note: Hire with Columbus also handles compliant contractor agreements and payments if you need that flexibility.

Use an employer of record (recommended for most companies)

Hire with Columbus becomes the legal employer in Hungary while you manage the day-to-day work and performance.

How it works: We handle employment contracts, payroll, tax compliance, benefits, and legal requirements. You focus on managing your team's work and performance.

Cost: $179/month per employee. No setup fees, no minimum commitments.

Timeline: Hire in 2-3 days instead of months. We've already got the legal infrastructure in place.

ROI example: Five employees costs $895/month with an EOR versus €25,000+ to set up your own entity, then ongoing compliance costs.

When it makes sense: You're hiring 1-50 people, testing the Hungarian market, building multi-country teams, or want to avoid entity setup complexity.

Employment contract types in Hungary

Once you've decided on your hiring approach, you need to pick the right contract type. Hungary recognizes several employment arrangements, each with specific rules.

Permanent contracts (határozatlan idejű munkaviszony)

This is your standard full-time employment contract with no end date.

When to use: Core team members, long-term roles, anyone you want to keep around. About 85% of Hungarian employees work on permanent contracts.

Benefits: Maximum job security for employees, easier to build company culture, full integration into your team.

Notice periods: 30 days during probation, then 30-90 days depending on tenure. More on this in the compliance section.

With Hire with Columbus: We draft compliant permanent contracts and handle all the ongoing obligations. Your employee gets full Hungarian benefits and protections.

Fixed-term contracts (határozott idejű munkaviszony)

These contracts have a specific end date and can't exceed 5 years total (including renewals).

When to use: Project-based work, seasonal needs, maternity leave coverage, or when you're genuinely unsure about long-term needs.

Restrictions: You can only renew twice before the contract automatically becomes permanent. Hungarian courts scrutinize these heavily. If the work is ongoing and permanent in nature, you should use a permanent contract.

Termination: Usually ends automatically on the specified date. Early termination requires the same notice as permanent contracts.

Reality check: Don't use fixed-term contracts just to avoid permanent employment obligations. Hungarian labor authorities will convert them to permanent contracts if the work is ongoing.

Part-time contracts (részmunkaidő)

Any contract under 40 hours per week counts as part-time.

Rights: Part-time employees get proportional benefits and protections. Someone working 20 hours gets half the vacation days, but the same hourly rate protections.

Flexibility: You can structure this as specific days (Monday-Wednesday) or reduced daily hours (9am-1pm daily).

Social contributions: Still required, calculated on actual wages. There's no minimum threshold that exempts part-time workers.

Common setup: Many companies use 30-hour contracts for roles that don't need full-time coverage.

Probationary periods

Every employment contract can include a probation period, but the length depends on the contract type.

Standard probation: 3 months for most positions. During this time, either party can terminate with just 15 days' notice.

Senior roles: Up to 6 months for managerial or specialized positions requiring specific qualifications.

Fixed-term contracts: Probation can't exceed 15 days if the contract is 6 months or less.

What you can't do: Extend probation periods or restart them if someone changes roles internally.

Which contract type should you choose?

For core team members: Permanent contracts. They provide stability and show you're committed to the Hungarian market. Use 3-month probation periods to evaluate fit.

For project work: Fixed-term contracts, but only if the project genuinely has an end date. Don't use these for ongoing business needs.

For flexible arrangements: Part-time permanent contracts work better than trying to use fixed-term contracts for reduced hours.

For testing the waters: Permanent contracts with probation periods give you flexibility without the legal risks of fixed-term arrangements.

With Hire with Columbus: We help you choose the right contract type based on your actual needs, not just what seems easier. We've seen too many companies get burned by using fixed-term contracts incorrectly.

The bottom line? Most international companies hiring their first Hungarian employees should use permanent contracts through an EOR. It's faster, legally safer, and lets you focus on growing your team instead of dealing with Hungarian employment law.

How does payroll and taxation work?

Your €60,000 employee actually costs €82,200 per year in Hungary. That's a 37% markup once you factor in employer social contributions, which are some of the highest in the EU.

Hungarian payroll isn't just about cutting monthly checks. You're dealing with complex tax brackets, mandatory 13th-month bonuses, and social contributions that can hit 18.5% on top of base salary. Miss a deadline and you're looking at penalties starting at €500.

Income tax brackets

Hungary uses a flat personal income tax rate, which makes calculations simpler than most EU countries. But don't get too comfortable - the social contributions are where things get expensive.

That's it for income tax. Hungary switched to a flat rate system, so whether your employee makes €30,000 or €100,000, they pay 15% personal income tax.

Social security contributions breakdown

This is where your costs really add up. Hungarian social security contributions are split between employer and employee, but you're paying the bigger share.

Employer contributions (18.5% total):

• Social contribution tax: 13%
• Vocational training contribution: 1.5%
• Rehabilitation contribution: 5% (for companies with 25+ employees)

Employee contributions (18.5% total):

• Pension contribution: 10%
• Health insurance: 7%
• Labor market contribution: 1.5%

The employee contributions get deducted from their gross salary, but you still need to calculate and remit everything to NAV (the Hungarian tax authority).

Payment schedule and bonuses

Hungarian employees expect their salary on the 10th of each month for the previous month's work. This isn't negotiable - it's in the Labor Code.

You also need to budget for mandatory bonuses:

• 13th month bonus: Required for most employees, typically paid in December
• Holiday allowance: Additional payment before summer vacation period
• Christmas bonus: Common practice, though not legally required

These aren't optional perks. The 13th month bonus alone adds 8.3% to your annual payroll costs.

Total employment cost example

Let's break down what a €60,000 annual salary actually costs you:

Base salary: €60,000 Employer social contributions (18.5%): €11,100 13th month bonus: €5,000 Holiday allowance: €2,000 Administrative costs: €500

Total annual cost: €78,600

That's before you factor in office space, equipment, or any additional benefits. Most companies budget 35-40% above base salary for total employment costs in Hungary.

Payroll cycle and deadlines

Hungarian payroll runs on strict deadlines that NAV actually enforces:

Monthly cycle:

• Salary payment: By 10th of following month
• Tax and contribution filing: By 12th of following month
• Payment to NAV: By 20th of following month

Annual requirements:

• Annual tax returns: By March 31st
• Year-end reconciliation: By January 31st
• Employee tax certificates: By January 31st

Miss the 20th payment deadline and penalties start immediately. NAV charges 1% per day on late payments, which adds up fast on large payrolls.

Common payroll mistakes

We see the same errors repeatedly from companies running their own Hungarian payroll:

Wrong contribution calculations: The rehabilitation contribution only applies to companies with 25+ employees, but many smaller companies still pay it unnecessarily.

Missed bonus payments: Forgetting to budget for 13th month bonuses creates cash flow problems in December.

Late NAV filings: The 12th vs 20th deadline confusion trips up many companies. Filing is due on the 12th, payment by the 20th.

Incorrect holiday pay: Hungarian vacation pay calculations include average bonuses from the previous 12 months, not just base salary.

Currency conversion errors: If you're paying in EUR but reporting in HUF, exchange rate timing matters for NAV compliance.

Setting up compliant payroll in Hungary yourself means hiring local expertise or risking significant penalties. Most accounting firms charge €300-500 monthly per employee, plus setup costs around €2,000.

With Hire with Columbus, you pay $179/month per employee and we handle all calculations, filings, and compliance automatically. No setup fees, no penalty risk, and no need to understand the specific details of Hungarian tax law.

What benefits and leave are required?

Maternity leave in Hungary is 24 weeks at 70% pay, with fathers getting 5 days. But that's just the start of what you'll need to provide.

Beyond salary, benefits in Hungary add roughly 35-40% to your employment costs. Here's what's mandatory and what happens if you skip them.

Annual vacation

Hungarian employees get a minimum of 20 working days of vacation annually, but it increases with age and education. Employees over 25 get 21 days, over 28 get 22 days, and it continues up to 30 days for those over 45.

If your employee has a university degree, add 5 extra days to whatever their age-based entitlement is. So a 30-year-old with a degree gets 27 days total.

Vacation days accrue monthly (roughly 1.67 days per month for the base 20 days). Employees can carry over unused vacation to March 31st of the following year, but after that, you must pay it out at their current salary rate.

Sick leave

Employees can take up to 15 calendar days of sick leave per year without a doctor's note for minor illnesses. For anything longer, they need medical certification.

Here's how the payment works: You pay 70% of their daily wage for the first 15 days. After that, social insurance takes over and pays 60% of their daily wage for up to one year (or two years for certain chronic conditions).

If an employee is hospitalized, social insurance pays from day one instead of you covering the first 15 days.

Parental leave breakdown

Maternity leave: 24 weeks at 70% of average earnings, paid by social insurance. This includes 4 weeks that must be taken before the due date.

Paternity leave: 5 working days within 2 months of birth, paid at 100% by you as the employer.

Childcare allowance: After maternity leave, parents can take childcare allowance (GYED) for up to 2 years at 70% of previous earnings, capped at roughly €2,100 per month in 2025.

Childcare benefit: A flat-rate benefit (GYES) available for up to 3 years, currently around €95 per month in 2025.

Public holidays 2025

Hungary has 11 public holidays in 2025. If employees work these days, you pay double their normal rate.

Mandatory benefits

Three benefits are non-negotiable in Hungary: social insurance, pension contributions, and vocational training contributions.

Social insurance contributions (2025 rates):

• Employee pays: 18.5% of gross salary
• Employer pays: 13% of gross salary

Pension contributions:

• Employee pays: 10% of gross salary
• Employer pays: included in the 13% social insurance rate above

Vocational training contribution:

• Employer only: 1.5% of gross salary

You'll also need to provide occupational health services if you have more than 5 employees, which typically costs €50-100 per employee annually.

Optional competitive benefits

Most Hungarian companies offer a 13th-month salary (Christmas bonus) and meal vouchers worth up to €150 per month tax-free. Company cars, private health insurance, and flexible working arrangements are becoming standard for professional roles.

Cafeteria benefits are popular - you can provide up to €465 per month tax-free through vouchers for fuel, recreation, or other approved categories.

Common benefit mistakes

The biggest mistake? Miscalculating vacation days based on age and education. Get this wrong and you'll face back-pay claims plus penalties.

Another trap: not registering employees for occupational health services within 15 days of hire. The labor inspectorate fines companies €500-2,000 per violation.

Many companies also forget that sick pay calculations use "average daily wages" from the previous 12 months, not just base salary. Include bonuses, overtime, and other regular payments.

Administering these benefits correctly requires:

• Local HR expertise: €50,000+ annual salary
• Benefits administration software: €200-500/month
• Legal compliance reviews: €5,000-10,000/year
• Risk of calculation errors: €2,000-10,000 in potential fines per mistake

Hire with Columbus handles all benefit administration, calculations, and compliance for $179/month per employee. We track vacation accruals, manage sick leave payments, and ensure you're meeting all statutory requirements without the headache of Hungarian labor law.

What are the compliance requirements?

Written contracts are mandatory in Hungary. Verbal agreements don't count and expose you to claims. Miss one mandatory contract clause and the entire employment agreement can be voided, leaving you liable for back payments and penalties.

Employment contract requirements

Every employment contract in Hungary must be in writing and signed before the employee starts work. The contract must be in Hungarian unless both parties agree to another language (though Hungarian law still applies).

Mandatory contract clauses include:

• Employee and employer identification details
• Job title, duties, and workplace location
• Start date and contract duration (if fixed-term)
• Working hours and schedule
• Base salary and payment frequency
• Notice periods for termination
• Applicable collective bargaining agreement (if any)

You don't need to register employment contracts with authorities, but they must comply with the Hungarian Labor Code. Missing any mandatory clause can void the entire contract.

Probation periods

Standard probation periods in Hungary are 90 days for most positions. You can extend this to 180 days for managerial roles or positions requiring special qualifications.

During probation, either party can terminate employment with just 3 days' written notice. No severance pay is required during this period. After probation ends, full employment protections kick in immediately.

Working time regulations

The standard work week is 40 hours over 5 days. Maximum working time is 48 hours per week, including overtime. Daily working time can't exceed 12 hours.

Overtime rules:

• Maximum 250 overtime hours per year
• Overtime pay: 150% of regular hourly rate
• Employees can refuse overtime beyond 200 hours annually

You must provide a 20-minute break for shifts over 6 hours and an 11-hour rest period between working days. Keep detailed records of all working hours - labor inspectors check these regularly.

Notice periods

Notice periods depend on length of service and who initiates termination:

Notice periods start from the first day of the month following notification.

Termination process

You can only terminate employees for just cause (performance issues, misconduct, redundancy, or business closure). "At-will" termination doesn't exist in Hungary.

Required termination steps:

1. Document performance issues or misconduct
2. Provide written warnings where applicable
3. Consult with works council (if one exists)
4. Give proper written notice with specific reasons
5. Pay all outstanding wages and accrued vacation

For redundancies affecting 20+ employees, you need government approval and a 45-day consultation period. Skip these steps and face reinstatement orders plus legal fees.

Severance pay

Severance pay is required for employer-initiated terminations (except for serious misconduct):

Severance is based on average monthly earnings over the last 12 months. No severance is required for resignations or terminations during probation.

Data protection

Hungary follows GDPR rules for employee data. You need explicit consent to process personal information beyond what's required for employment. This includes background checks, medical records, and performance monitoring.

Key requirements:

• Designate a data protection officer for companies with 250+ employees
• Implement data security measures
• Allow employees to access and correct their data
• Report data breaches within 72 hours

GDPR violations can cost up to €20 million or 4% of annual revenue - whichever is higher.

Common compliance mistakes

Invalid employment contracts: Missing mandatory clauses or using non-compliant terms. Result: Contract void, back payments owed, potential €2,000-5,000 fine per violation.

Wrong termination process: Firing without just cause or proper notice. Result: €5,000-15,000 in compensation plus potential reinstatement order and legal fees.

Overtime violations: Exceeding maximum hours or underpaying overtime rates. Result: €1,000-3,000 fine plus back payment of wages owed.

Missing work time records: Failing to track working hours properly. Result: €500-2,000 fine per employee affected.

Penalties for violations

Hungary's labor inspectors conduct regular workplace audits. Common penalties include:

• Improper dismissal: €5,000-15,000 compensation plus reinstatement
• Contract violations: €2,000-5,000 fine plus contract deemed invalid
• Working time breaches: €1,000-3,000 fine plus back wages
• Data protection violations: Up to €20 million or 4% of revenue
• Wage payment delays: 8% annual interest on unpaid amounts

Hire with Columbus ensures every contract and termination follows Hungarian law exactly. Our legal team handles all compliance requirements, from mandatory contract clauses to proper termination procedures, so you avoid these costly mistakes entirely.

What has changed recently?

Hungary's been busy tweaking its employment rules this year, and some changes might catch you off guard if you're not paying attention.

The biggest shift? Hungary raised its minimum wage to HUF 290,000 per month (roughly €760) in January 2025, up from HUF 266,800 in 2024. That's an 8.7% jump that affects your budget calculations, especially for entry-level roles.

New digital nomad visa rules

Hungary launched its "White Card" digital nomad visa program in March 2025, making it easier for remote workers to live there while working for foreign companies. The catch? If your remote employee stays longer than 183 days, they become a Hungarian tax resident, which changes your withholding obligations entirely.

This matters because many companies accidentally trigger permanent establishment rules when their remote workers overstay. You'll need to track days carefully or risk creating a taxable presence in Hungary.

Updated data protection penalties

Hungary's data protection authority got more aggressive in 2025, with new guidelines specifically targeting international employers. They're now issuing fines up to €20 million for mishandling employee data during cross-border transfers.

The practical impact? Your employee contracts need updated data processing clauses, and you can't just wing it with generic privacy policies anymore. Hungarian employees are also more aware of their rights and increasingly willing to file complaints.

Social security contribution changes

Good news here: Hungary reduced employer social security contributions from 18.5% to 17.5% for 2025. It's not huge, but it saves you roughly €50-100 per employee per month depending on their salary.

They also simplified the healthcare contribution calculation, removing some of the weird brackets that made payroll a headache. Your payroll provider will appreciate this one.

Parental leave extensions

Hungary extended paid parental leave from 24 to 30 weeks in 2025, with the government covering the additional costs. This doesn't directly hit your budget, but it means longer absences to plan around.

The twist? Fathers can now take up to 10 weeks of this leave (up from 5), and it doesn't have to be consecutive. Expect more complex leave scheduling requests.

Work permit processing delays

The frustrating part? Hungary's immigration office is taking 45-60 days to process work permits in 2025, up from the previous 30-day target. They blame it on increased applications from the digital nomad program.

Plan ahead if you're hiring non-EU citizens. What used to be a 6-week process is now pushing 10-12 weeks when you factor in document preparation time.

When you're dealing with these constant regulatory shifts, an EOR like Hire with Columbus handles the compliance updates automatically. We track these changes across all our markets and adjust payroll, contracts, and processes without you having to monitor Hungarian labor law developments. At $179/month per employee, it's often cheaper than hiring a local HR consultant to keep up with all these changes.