Hiring in Hungary: A Comprehensive Guide for US-Based Companies

Hungary stands out in Central Europe as a strategic destination for international hiring. Its well-educated workforce, particularly in technology, engineering, and business services, makes it a top choice for companies seeking skilled professionals. 

The country’s business-friendly environment, robust infrastructure, and competitive labor costs further enhance its appeal for foreign employers.

Foreign companies hiring in Hungary benefit from:

• Access to a large pool of highly qualified talent.
• A central location within the European Union, ideal for regional operations.
• A stable legal framework and transparent employment regulations.
• Attractive incentives for tech and innovation-driven businesses.
• Cost-effective hiring compared to Western Europe.

For US-based organizations looking to expand globally, Hungary offers both strategic advantages and practical opportunities for building a successful international team.

How to Hire Employees in Hungary

Assess Your Hiring Needs

Before you begin, clarify your hiring goals:

• Full-time vs. project-based support: Decide if you need ongoing, long-term employees or short-term, project-based contractors. Full-time hires suit core roles, while contractors offer flexibility for specialized tasks.

• Local compliance requirements: Understand Hungary’s labor laws, payroll obligations, and reporting standards. Compliance is non-negotiable for avoiding penalties.

• Onboarding speed vs. long-term control: If you need to hire quickly, consider solutions that streamline onboarding. For greater control over company culture and HR, a local entity may be preferable.

Hiring Options in Hungary

You have two primary routes to hire in Hungary:

• Set Up a Legal Entity: Establish a local company to employ staff directly. This approach gives you full control but involves more setup time, costs, and administrative responsibilities.

• Partner with an Employer of Record (EOR): Use an EOR to legally employ workers on your behalf. The EOR manages compliance, payroll, and HR administration, allowing you to focus on operations.

EOR vs. Legal Entity: Side-by-Side Comparison

Feature	Employer of Record (EOR)	Legal Entity Setup
Onboarding Speed	Fast (days to weeks)	Slow (months)
Compliance Management	Handled by EOR	Your responsibility
Upfront Costs	Minimal	High (registration, legal, tax setup)
Ongoing Admin	Low	High
Control Over HR Policies	Limited (shared with EOR)	Full control
Suitable For	Quick market entry, pilot teams	Long-term, large-scale operations
Payroll & Tax Handling	Managed by EOR	Managed in-house or via local provider
Exit Flexibility	Easy (EOR contract-based)	Complex (entity dissolution required)

Looking for a streamlined solution? Learn how an Employer of Record can simplify your Hungary expansion.

Understanding Worker Classification

Employees vs. Contractors in Hungary

It’s crucial to distinguish between employees and contractors to ensure compliance. Here’s how they compare:

Aspect	Employees	Contractors
Legal Framework	Labor Code, employment contract	Civil Code, service agreement
Work Control	Employer sets hours, tasks, location	Contractor controls work methods
Benefits	Statutory (health, pension, leave)	None (self-managed)
Tax Withholding	Employer handles	Contractor responsible
Relationship Duration	Ongoing, indefinite or fixed-term	Project-based, temporary
Termination Rules	Regulated by law	Defined by contract
Social Security	Employer pays contributions	Contractor pays own

Legal Implications and Risks of Misclassification

Misclassifying employees as contractors can result in:

• Fines and back payments for unpaid taxes and benefits.
• Legal disputes and reputational damage.
• Retroactive social security contributions. Hungarian authorities closely monitor worker classification, especially for ongoing relationships or where the company controls work conditions. Always review roles carefully and seek local legal guidance if unsure.

Explore more about worker classification and compliance risks in global hiring.

Hiring Costs and Payroll

Hiring Costs Overview

• Minimum wage: As of 2020, HUF 161,000/month (unskilled), HUF 210,000/month (skilled). More recent figures may be higher—always check current rates.
• Employer contributions: Social security (18.5%), social tax (13%), training funds, and other levies.
• Additional costs: Health insurance, transportation, meal vouchers, bonuses, and onboarding.

Payroll Setup Steps

1. Register as an employer with Hungarian tax and social security authorities.
2. Collect employee tax IDs and bank details.
3. Calculate gross-to-net pay, including all deductions.
4. Submit monthly payroll reports and remit taxes/social contributions.
5. Issue payslips and maintain payroll records per legal requirements.

Income Tax Rates

• Employers must withhold personal income tax from salaries.
• Social security and other contributions are calculated on gross pay.
• Corporate tax is 9% on company profits, with additional local business taxes.

Payment Methods

• Direct deposit/EFT: Standard practice, paid in HUF to local bank accounts.
• International wire transfer: Used for unique cases, but less common due to fees and currency conversion.
• EOR payroll: If using an EOR, all payroll, tax, and compliance is managed for you.

Using Global Payroll Services

Global payroll providers or EORs help ensure:

• Accurate, timely payments in compliance with Hungarian law.
• Automated tax and social contribution calculations.
• Secure data management and reporting.

Discover how to pay international employees efficiently and compliantly.

How to Properly Hire and Pay Contractors

• Draft a clear service agreement specifying deliverables, payment terms, and duration.
• Confirm contractor status under Hungarian law to avoid misclassification.
• Pay contractors via bank transfer, with the contractor responsible for their own taxes.
• Monitor annual limits for simplified employment (e.g., 120 days, or 210 in agriculture from 2026).

Find best practices for paying international contractors.

Compliance Risks

Incorrect Payroll Contributions

• Errors in social security, tax, or training fund payments can result in fines.
• Payroll systems must be updated for changes in rates and reporting rules.

Permanent Establishment Risk

• Hiring employees or conducting significant business in Hungary may create a “permanent establishment,” triggering local tax obligations.
• Even remote employees can create PE risk if they represent the company in Hungary.

Read more on permanent establishment and compliance.

Statutory Benefits

• Employers must provide statutory benefits, including healthcare, pension, and paid leave.
• Failure to offer required benefits leads to legal penalties.

Misclassification Risks

• Treating employees as contractors to avoid benefits is illegal.
• Hungarian authorities enforce strict limits and monitor for abuse.

Provincial/Regional Law Variances

• Hungarian labor law is national, with minimal regional variation.
• Always check for local business tax differences in specific municipalities.

Overview of Intellectual Property Rights

• Employment contracts should address ownership of IP created during employment.
• NDAs and confidentiality clauses are recommended to protect trade secrets.
• For contractors, ensure IP transfer clauses are included in service agreements.

Onboarding Process

Before Their First Day

• Prepare a compliant employment contract (job title, salary, hours, probation period).
• Register the employee with tax and social insurance authorities.
• Arrange necessary work permits for non-EU nationals.
• Set up payroll and benefits enrollment.

On Day 1

• Conduct orientation on company policies and Hungarian labor law.
• Introduce the new hire to their team and manager.
• Provide access to IT systems, tools, and workspaces.
• Complete safety and compliance training.

During Their First 90 Days

• Schedule regular check-ins and feedback sessions.
• Review performance goals and expectations.
• Ensure completion of all onboarding paperwork.
• Offer additional training and integration support.

Offer Letter Essentials

• Clearly state job title, start date, compensation, benefits, working hours, and notice period.
• Include probation period terms and any variable compensation details.

NDAs and Confidentiality

• Use NDAs to protect sensitive company information.
• Include confidentiality and IP ownership clauses in all employment and contractor agreements.

Running Background Checks

• Obtain candidate consent for background screening.
• Check references, education, and previous employment as permitted by Hungarian law.

Explore onboarding best practices for global teams.

Remote Employee Management

Managing remote employees in Hungary requires clear processes and robust security:

• Computer and App Access: Provide secure access to company systems. Use VPNs and multi-factor authentication.
• IP Protection: Ensure employment or contractor agreements specify IP ownership. Use NDAs and monitor for data leaks.
• Best Practices:
  • Set clear communication protocols and expectations.
  • Schedule regular video check-ins and team meetings.
  • Offer remote-friendly benefits and support for home office setups.
  • Monitor compliance with data privacy and labor laws.

Get tips for managing remote and distributed teams.

Labor Law Compliance

Key Working Condition Requirements

• Standard workweek: 40 hours (8 hours/day).
• Overtime: Up to 250 hours/year with written agreement, paid at premium rates.
• Leave: Minimum 20 days paid annual leave, plus sick, maternity/paternity, and special leave.
• Rest periods: Minimum 11 hours between workdays; 48 hours continuous weekly rest.

Working Conditions by Employment Type

• Full-time employees receive full statutory protections and benefits.
• Part-time and fixed-term employees are entitled to proportional benefits.
• Contractors are not covered by labor law protections.

No At-Will Employment

• Hungary does not allow at-will termination. All dismissals must follow legal procedures, with notice and valid reasons.

Trade Unions and Collective Bargaining

• Trade unions play a significant role in workplace negotiations.
• Collective agreements may provide additional benefits and protections beyond statutory minimums.

Learn more about employment compliance and its importance.

Termination Guidelines

Acceptable Termination Reasons

• Termination must be for just cause, such as redundancy, performance issues, or misconduct.
• Fixed-term contracts end automatically unless renewed.
• Special protections apply to certain groups (e.g., pregnant employees, those on parental leave).

Notice Periods and Legal Protections

• Notice periods depend on length of service, typically ranging from 30 days to several months.
• Severance pay may be required for redundancy or long service.
• All terminations must be documented in writing and comply with statutory procedures.

See more on severance regulations across countries.

Benefits of Hiring in Hungary

Foreign companies enjoy several advantages when hiring in Hungary:

• Skilled Talent Pool: Highly educated workforce, especially in tech and engineering.
• Cost Efficiency: Lower labor costs than Western Europe.
• Strategic Location: Central EU position, ideal for regional operations.
• Business-Friendly Environment: Transparent regulations and government support for innovation.
• Modern Infrastructure: Reliable digital, transport, and office facilities.
• Time Zone Compatibility: Overlaps with both Western Europe and US East Coast for real-time collaboration.

Hire Skilled Talent While Staying Fully Compliant

Hungary offers a compelling mix of skilled talent, cost savings, and a stable business environment for international employers. 

By understanding local hiring options, compliance requirements, and best practices, foreign companies can build a strong, compliant presence in this dynamic market. Whether you choose to set up a local entity or use an Employer of Record, Hungary provides a robust foundation for global growth.

Ready to expand into Hungary? Get started with Tarmack’s global hiring solutions.