Payroll Services in Hungary

Mercans is your premier partner for top-quality payroll services in Hungary, offering both Managed and SaaS solutions. Our steadfast commitment to delivering exceptional payroll outsourcing in Hungary is unmatched. With extensive experience in the payroll sector, Mercans ensures precise and compliant payroll services in Hungary, making us the preferred choice for businesses of all sizes.

Rely on Mercans for prompt and accurate payroll transactions, along with the convenience of multi-currency payments tailored to the Hungarian market. As your dedicated local provider of payroll in Hungary, we feature a team of in-country payroll specialists well-versed in local regulations, providing comprehensive assistance for a seamless payroll experience customized to your business requirements.

Payroll Provider in Hungary – Roles and Responsibilities

As a leading payroll provider in Hungary, Mercans delivers more than just basic payroll calculations. Our advanced technology minimizes administrative tasks for employers and enhances employee experiences. Here’s what you can expect from top payroll service providers:

• Automatic Payroll Processing: Automates wage calculations and employee payments, saving time and offering flexible payment options.
• Tax Withholding and Wage Garnishment: Accurately withholds taxes, garnishments, and other payroll deductions, ensuring timely payments.
• Tax Filing Services: Handles tax filings and assists with year-end reporting on behalf of clients.
• Compliance Expertise: Keeps clients informed about regulatory changes and ensures adherence to wage and tax laws through real-time updates.
• Payroll Reporting: Provides detailed reports on payroll operations, including wages paid, taxes withheld, and hours worked.
• Employee Self-Service: Empowers employees to manage their pay statements, update withholdings, and change personal information independently.
• Product Support: Offers expert support specialists for prompt assistance, with some providers available 24/7 via phone or online chat.

Payroll Solutions in Hungary

Experience streamlined payroll processing in Hungary with Mercans’ Global Payroll Solutions. Our versatile models ensure local compliance, handle multi-currency transactions, and seamlessly integrate with global Human Capital Management (HCM) and Enterprise Resource Planning (ERP) systems. With our payroll outsourcing in Hungary, accurate payments have never been easier.

Explore Our Adaptable Models

• SaaS (Software as a Service): Designed for large enterprises managing complex, multi-country payrolls with diverse data points, locations, currencies, and languages. Our SaaS model enhances operational efficiency.
• Managed Services: Ideal for mid-sized to large enterprises, this model offers on-demand HR expertise while ensuring security, reliability, and compliance across multiple countries.
• HRMS (Human Resource Management System): Perfect for growing businesses, our HRMS model provides a comprehensive range of functionalities, including payroll and benefits. Tailor the system to your specific needs for an effective solution.

Everything you need to know before running payroll in Hungary

Hungary Overview

Hungary, located in Central Europe, boasts a population of approximately 9.8 million as of January 2023. As a member of the OECD, NATO, the European Union, and the Schengen Zone, Hungary offers a strategic location with easy access to EU markets. The country features a skilled workforce and robust infrastructure, attracting major global companies like GE, Microsoft, and Coca-Cola to establish operations there.

With a strong focus on foreign direct investment (FDI), Hungary has modernized its industries, driven economic growth, and created numerous jobs. The cumulative FDI since 1989 exceeds USD 104 billion, particularly in sectors such as automotive, IT, and logistics. Recent reforms, including a significant reduction in corporate tax rates, have further encouraged investment. Despite facing challenges such as high inflation and reliance on Russian energy, Hungary remains a dynamic and competitive environment for international business and investment.

Minimum Wages

As of December 1, 2023, the minimum wage in Hungary is set at HUF 266,800.00 per month. This amount is before tax and is applicable through July 2024.

Here is the breakdown of the minimum wage:

Minimum Wage

• Per Hour: HUF 1,534.00
• Per Day: HUF 12,270.00
• Per Week: HUF 61,340.00
• Per Month: HUF 266,800.00

Minimum Wage for Professional Workers

• Per Hour: HUF 1,874.00
• Per Day: HUF 14,990.00
• Per Week: HUF 74,950.00
• Per Month: HUF 326,000.00

These rates reflect Hungary’s commitment to fair compensation and align with local economic conditions and labor market standards.

Working Hours and Overtime Pay

In Hungary, a full-time employee’s standard working hours are 8 hours a day and 40 hours a week. Employees are entitled to at least 20 days of paid leave each year, although this can increase based on factors such as age. While employers have the authority to set working hours and manage most vacation days, employee preferences are typically taken into account to ensure a balance between operational needs and personal convenience.

Overtime Regulations

Overtime work is permissible under the following conditions:

• Daily and Weekly Limits:

  • Employees may work up to 12 hours a day.

  • The total working hours per week can extend to 48 hours.

• Annual Overtime Limits:

  • The standard maximum for annual overtime is capped at 250 hours.

  • If a collective agreement is in place, this limit can be increased to 300 hours.

  • For “voluntary overtime,” employees may opt to work up to 400 hours annually.

Exceptions to Overtime

Certain employees are exempt from mandatory overtime:

• Mothers: Exempt from overtime from pregnancy until the child reaches 3 years old.
• Single Parents: With a child under 3 years old (may work voluntary overtime when the child is between 3 and 4 years old).
• Minors: Employees under 18 are not allowed to work overtime.

Overtime Compensation

Employees are entitled to a 50% premium on their regular rate of pay for overtime work. This premium applies to work performed beyond the standard working hours or during periods of time off.

For detailed regulations, refer to the Labor Code, Act I of 2012 (as amended), §§ 107–109 and 143.

Payroll Cycle

In Hungary, payroll is processed on a monthly basis. Salaries for work performed between the first and last day of a month are usually paid on the last day of that month. However, payments must be completed by the 10th of the following month at the latest.

13th Month Salary

In Hungary, a 13th-month salary is not a legal requirement. Nonetheless, employers have the option to provide bonuses at their discretion.

Termination and Severance Pay

Termination Process

In Hungary, employers may terminate a fixed-term contract for reasons such as business needs, personal reasons, or employee misconduct. The termination must be accompanied by a notice and a written explanation. For terminations due to misconduct, the employee must receive a warning and be given an opportunity to respond before termination.

When terminating an employment relationship with notice, the final salary payment must be made no later than the fifth working day following the end of the employment.

Severance Pay

Employees are entitled to severance pay if their employment is terminated for operational reasons. The severance amount ranges from a minimum of one month’s salary to a maximum of six months’ salary, depending on the terms outlined in the employment contract.

Company Registration in Hungary

Hungary, strategically located in Central Europe, offers a dynamic and accessible environment for businesses seeking growth and expansion. With its favorable economic conditions and well-developed infrastructure, it’s an attractive destination for entrepreneurs and investors alike. However, navigating the process of setting up a business can be complex. That’s where Mercans comes in. We offer expert consultancy and support to guide you through every step of establishing your business in Hungary. Here’s how we can assist you:

In-Depth Consultancy Services

Before initiating company registration, it’s essential to understand the Hungarian business environment. Mercans offers in-depth consultancy services to help you navigate the legal, tax, and market aspects of establishing a business in Hungary.

Consultancy Services Include:

• Legal Guidance: Understand Hungarian laws and regulations affecting business structures, corporate governance, and compliance.
• Tax Planning: Develop tax-efficient strategies that align with your business model, minimizing liabilities and maximizing returns.
• Market Insights: Gain valuable insights into industry trends, competitive landscapes, and growth opportunities to refine your business strategy.

Selecting the Appropriate Business Structure

Choosing the right legal structure is crucial for your business’s success in Hungary. Mercans provides detailed guidance on the various entity types available, helping you assess the advantages, disadvantages, and implications of each.

Key Considerations:

• Financial Responsibility: Understand the extent of personal liability and financial responsibility associated with different company structures.
• Operational Flexibility: Evaluate the scalability and flexibility of each entity type to align with your long-term business goals.

Document Preparation Assistance

Navigating the bureaucratic maze of document preparation can be daunting. Mercans assists you in gathering and organizing all necessary documentation, ensuring compliance with Hungarian regulatory requirements.

Required Documents Checklist:

• Identification: Passport copies, residency permits, and other identification documents for shareholders, directors, and authorized representatives.
• Address Proof: Verification of the registered office and principal place of business.
• Tax Identification Numbers: Obtain tax identification numbers for all relevant stakeholders.

Company Formation Execution

With your paperwork in order, it’s time to bring your vision to life. Mercans facilitates the signing and submission of all required documents, guiding you through the company formation process with precision and efficiency.

Essential Steps:

• Articles of Incorporation: Draft and file the foundational document outlining your company’s purpose, structure, and governance.
• Shareholder Agreements: Define the rights, responsibilities, and ownership stakes among shareholders to ensure clarity and transparency.
• Director Declarations: Certify compliance with legal requirements, including financial contributions and conflict of interest disclosures.

Ensuring Legal Compliance

Once your company is officially registered, it’s important to complete mandatory registrations with relevant Hungarian authorities. Mercans manages these formalities to ensure your full compliance with local laws and regulations.

Mandatory Registrations:

• Tax Office Registration: Register for tax purposes and obtain tax identification numbers.
• Chamber of Commerce Enrollment: Join to access business support services, networking opportunities, and industry resources.
• Statistical Office Reporting: Provide necessary business data for economic research and analysis.

Establishing Financial Foundations: Bank Account Setup

A robust financial infrastructure is essential for your business operations. Mercans guides you through the process of opening a local bank account with reputable Hungarian banks, ensuring smooth financial transactions and operations.

Banking Essentials:

• Currency Options: Assess your currency needs and select suitable banking solutions for your business.
• Bank Selection: Get recommendations on top-tier banks such as OTP Bank, Raiffeisen Bank, Erste Bank, and K&H Bank.
• Account Maintenance: Understand ongoing fees and requirements to maintain a seamless banking experience.

Ready to take the next step in establishing your business in Hungary? Mercans is here to support you through every phase of the process.

Payroll Compliance in Hungary

Ensuring payroll compliance in Hungary requires a thorough understanding of the country’s regulations and requirements. Mercans is here to guide you through the complexities of payroll management, from registration to ongoing compliance. Here’s a detailed look at what’s involved:

Regulatory Requirements

Business Registration Process

In Hungary, businesses must comply with Act CL of 2017 on the Rules of Taxation. For employers, this involves:

• Tax Registration: Register with the Hungarian National Tax and Customs Office (Hungarian Tax Authority).
• Government Gateway Setup: Establish an account with the Government Gateway.
• Health Insurance Registration: Note that as of January 1, 2024, this registration is no longer required.
• Statistical Office Registration: Complete registration with the Hungarian Central Statistical Office.

Required Procedures

New businesses must obtain a tax number and are required to communicate electronically with state authorities. This includes managing document submissions and receipts via the Government Gateway (Cégkapu) service. Companies can appoint an authorized representative for administrative tasks, who must be officially documented and authorized. From a payroll perspective, it’s mandatory to register new hires and terminations with the Hungarian Tax Authority. This includes submitting forms with employer and employee details and employment information. Note that all forms are available only in Hungarian.

Fees for Registration

There are no fees associated with these registrations.

Compliance and Reporting

Monthly Payroll Reporting

Employers must submit a monthly payroll return detailing all employees’ income, benefits-in-kind, and related liabilities. This includes:

• Personal Income Tax: Withheld at 15%.
• Social Security Contribution: 18.5% withheld from employees’ gross salaries.
• Social Contribution Tax: Paid by the employer at 13%.
• Rehabilitation Contribution: Required if employing more than 25 employees.

Tax treaties and social security agreements may affect the taxable base and contributions, potentially exempting certain incomes from Hungarian taxation.

Pension Contributions

Pension contributions are included in the monthly payroll return and forwarded to the National Pension Fund by the Hungarian Tax Authority. No separate registration is required for pension purposes.

Payroll Management

Key Payroll Responsibilities

Payroll obligations under Hungarian Labour Law and Personal Income Tax are governed by various authorities including the National Health Insurance Fund and Tax Authority. Key responsibilities include:

• Employee Record Management: Register and de-register insured employees.
• Payroll Calculation: Compute monthly payroll, taxes, and contributions.
• Monthly Returns: Prepare and submit payroll returns.
• Income Certification: Issue income certificates as needed.
• Financial Transactions: Transfer net salaries, perform payroll consulting, and manage accounting reports.
• Benefits Administration: Handle benefits-in-kind, health insurance benefits, and allowances (e.g., sickness, childcare).

Additional Considerations

For payments from parent entities, a separate agreement is needed. Review and settle liabilities on a case-by-case basis.

Banking and Payroll Payments

Payment Procedures

According to Act I of 2012 on the Labour Code, salaries must be paid by the 10th of each month. Payments should be in local currency and preferably via wire transfer, though cash payments are permissible with proper documentation. Employers and employees must agree on payment methods in writing, with cash payments recorded by both parties. On payday, employees must receive a pay slip (electronic or paper) detailing gross and net salaries and all deductions for the month. Payroll taxes and contributions must be settled by the 12th of the following month.

Payroll Taxes in Hungary

Social Security Contributions

Understanding the intricacies of social security contributions and minimum wage regulations is essential for both employers and employees in Hungary. Here’s a detailed overview for 2024:

Minimum Wage Requirements

Starting January 1, 2024:

• Standard Minimum Wage: HUF 266,800 per month.
• Guaranteed Minimum Wage: For positions requiring at least secondary education or vocational training, the minimum is HUF 326,000 per month.

Employers in Hungary are obligated to handle both social security payments and electronic submission of monthly payroll data. Non-Hungarian employers have similar duties, but if they default, employees will need to manage these responsibilities themselves.

Social Security Contributions

In Hungary, social security contributions are calculated based on employees’ gross income:

• Employer’s Contribution: Social tax is set at 13%.
• Employee’s Contribution: The rate is 18.5%. However, employees may deduct 15% of any unused child tax base allowance from their total social security contribution of 18.5%.

Healthcare Contributions

For individuals over 18 years of age, healthcare services are available only if contributions are made. Uninsured individuals are required to pay HUF 11,300 per month in 2024.

Social Tax Allowances

Employers can reduce their employment costs by applying for social tax allowances. These allowances are designed to support:

• Jobseekers
• Jobseeker mothers with three or more young children
• Individuals with reduced work ability
• Researchers

Eligibility and the amount of these allowances vary depending on the employee’s specific circumstances. Employers have the flexibility to choose the most advantageous allowance based on their situation.

Social Security for Foreign Nationals

The application of Hungarian social security contributions to foreign nationals depends on several factors:

• Employment by a Hungarian Company: Foreign nationals working directly for a Hungarian employer are subject to Hungarian social security contributions.
• EU and Treaty Nationals: Employees from EU member states or countries with social security agreements with Hungary may be subject to Hungarian contributions if they cannot stay covered by their home country’s system.
• Third-Country Nationals: Those assigned to Hungary from non-EEA countries for over two years are typically subject to Hungarian social security contributions.

For personalized advice and assistance with payroll and compliance issues in Hungary, contact Mercans. Our experts are ready to help you navigate these regulations and ensure your business remains compliant.

Personal Income Taxes

Taxable Income Categories

Hungarian personal income tax (PIT) applies to the following types of income:

• Domestic-Source Income: Income generated within Hungary.
• Foreign-Source Income: Income earned abroad by individuals who are residents of Hungary.
• Employment Income in Hungary: Earnings from employment activities performed within Hungary, regardless of whether the payment originates from abroad.

Income derived from employment in Hungary qualifies as domestic-source income even if paid from a foreign entity. In such cases, income tax is due whether the income is transferred electronically, through bank transfer, or brought into the country in cash.

Personal Income Tax (PIT) Rate

The PIT rate in Hungary is 15% of the taxable gross income.

Employee Benefits in Hungary

Navigating employee benefits in Hungary is crucial for ensuring both compliance with local regulations and providing valuable support to your workforce. Benefits in Hungary fall into two primary categories: mandatory and supplementary. Here’s an in-depth look at each category to help you understand what’s required and available.

Mandatory Employee Benefits

Pension System

Hungary’s pension system has evolved significantly since the major reform in 1997. Initially, mandatory private pensions (Pillar II) were introduced to supplement the state pension (Pillar I). However, these private contributions were reintegrated into the state system between 2010 and 2012 to address fiscal challenges. The current structure of the pension system includes:

• First Pillar: State pension managed by the Hungarian State Treasury.
• Second Pillar: Mandatory contributions for existing members, largely absorbed into the First Pillar.
• Third Pillar: Voluntary private pensions for additional retirement savings.
• Fourth Pillar: Contributions to specific savings accounts.

Retirement Age

• 1954: 63.5 years
• 1955: 64 years
• 1956: 64.5 years
• From 1957: 65 years

Women with at least 40 years of insurance can retire at any age, with special provisions for those with child-rearing or disability history. Pensionable salary contributions are based on an employee’s salary, with a contribution rate of 10% effective from July 1, 2020. Employer contributions are at least based on the minimum wage.

Legislated Leaves

Hungarian labor law mandates various types of leave:

• Annual Leave: Employees receive 20 days of paid annual leave. This increases with age, adding up to 10 additional days for those over 45.
• Family Leave: The amount of leave depends on the number of children, ranging from 2 to 7 days.
• Unpaid Leave: Includes family care leave, military service leave, and short-term sickness benefits for different caregiving situations.

Maternity and Paternity Benefits

• Maternity Leave: 24 weeks, paid at 70% of the employee’s average salary.
• Paternity Leave: 5 days (7 days for twins), paid at 100% of the employee’s salary.
• Family Allowances: Monthly payments vary based on the number of children, with higher amounts for single parents and disabled children.

Eye Exams

Eye exams are part of the mandatory Occupational Health Examination. Vision benefits typically include coverage for eyeglasses and frames, although specifics depend on company policies.

Supplementary Employee Benefits

Retirement Benefits

In Hungary, supplementary retirement benefits enhance the standard pension offerings. These include:

• Pension Insurance: Both corporate and individual policyholders can benefit from this insurance, with individuals receiving tax refunds for their contributions.
• Voluntary Pension Funds: These funds provide additional retirement savings options, though corporate contributions are subject to taxation.

Summary

Supplementary retirement benefits in Hungary offer both corporate and individual policyholders opportunities for additional retirement savings. Individual contributions are incentivized through tax refunds, while voluntary pension funds provide extra savings options despite the tax implications for corporate contributions.

Healthcare/Medical Insurance

Due to the long waiting times in Hungary’s public healthcare system, supplementary healthcare and medical insurance is highly valued. Coverage typically includes:

• Preventive Screenings: Annual screenings to detect health issues early.
• Outpatient Services: Coverage for various outpatient medical services, either limited or without any restrictions.
• Extensive Diagnostic Tests: Access to high-value diagnostic tests such as MRI, CT, PET CT, X-ray, and ultrasound.

Summary

Supplementary healthcare and medical insurance in Hungary is essential due to the long wait times in the public healthcare system. It includes preventive screenings, outpatient services, and extensive diagnostic tests, offering employees a comprehensive health coverage option.

Group Life, Accident, and Health Insurance

This insurance provides comprehensive coverage, including:

• Term Life Insurance: Coverage for a specified term.
• Accidental Death and Disability: Benefits in case of accidental death or disability.
• Critical Illness: Coverage for severe illnesses.
• Daily Hospitalization: Benefits for hospital stays due to accidents or illnesses.

Summary

Group life, accident, and health insurance in Hungary offers extensive coverage, including term life, accidental death, disability, and critical illness benefits. These policies are popular for their comprehensive coverage despite being taxable.

Employee Perks

Employee perks in Hungary include various wellness and lifestyle benefits, though they are less popular due to their taxation as salary. Common perks include:

• Stipends for Massages: Financial support for massage services.
• Wellness Programs: Access to wellness activities and programs.

Summary

While employee perks like massage stipends and wellness programs are available in Hungary, their popularity is diminished due to taxation as salary. These perks offer additional support but are less favored compared to other benefits.

Streamline Payroll with Mercans’ Technology and Integrations

• Technology: Explore the forefront of innovation with Mercans’ cutting-edge technology that powers our global payroll solutions. Learn more about our technological prowess here
• Integrations: Seamlessly integrate your Human Capital Management (HCM) systems with Mercans’ solutions, enhancing efficiency and connectivity. Discover the power of integration here
• Recognitions: Join a partner recognized for excellence. Mercans has earned accolades for its commitment to delivering exceptional payroll services. Explore our awards and recognitions here

Outsource to Payroll Company in Hungary

In Hungary’s dynamic business environment, Mercans emerges as the premier partner for navigating the complex local regulations and labor laws. With our unwavering commitment to ensuring full compliance and our extensive expertise in Hungarian employment practices, we offer unparalleled support to businesses seeking to thrive in this vibrant market. Our comprehensive suite of services is designed to streamline your operations, maintain statutory compliance, and drive sustainable growth. Rely on Mercans to manage the intricacies of Hungarian business regulations, so you can focus on achieving success and expanding your ventures in Central Europe with confidence.