Hungary's employment legislation has undergone significant revision, and foreign employers operating there face a tightening compliance environment. Companies that miss the updated requirements risk financial penalties and disruption to their Hungarian workforce. The changes touch employment contract documentation, dismissal notice requirements, and social security contribution obligations – areas where international businesses frequently hold assumptions formed under different legal systems.
Hungary has amended its labour legislation, with the updated rules taking effect from January 1, 2025. Foreign employers with staff in Hungary. whether through direct employment, a local subsidiary. Alternatively. A posted-worker arrangement. must align their employment contracts and termination procedures with the revised standards before the compliance deadline of June 30, 2025. Failure to do so exposes the employer to administrative sanctions and potential invalidity of termination procedures already initiated.
This alert sets out what changed, which business categories are affected, and the immediate steps international companies should take to remain compliant.
What changed and when it takes effect
Hungary's amended labour legislation introduces three substantive changes relevant to foreign employers.
Employment contract documentation. Every employment contract must now explicitly state the place of work with greater specificity. A general reference to Hungary is no longer sufficient. Where the role involves multiple locations, each must be identified. This applies to new contracts from January 1, 2025, and to existing contracts upon the next material amendment.
Dismissal notice and termination procedure. The amended rules extend minimum dismissal notice periods for employees who have completed longer service periods. The extension is graduated – employees with between five and ten years of service receive additional notice time, and those beyond ten years receive a further increment. Employers who issue termination notices without observing the updated schedule face a risk that courts will void the dismissal. The Kúria (Supreme Court of Hungary) has consistently interpreted notice period defects strictly, treating them as substantive rather than procedural errors.
Social security contribution base. Changes to the social security rules affect how certain allowances and in-kind benefits are characterised. Benefits that were previously excluded from the contribution base now fall within it, increasing the effective payroll cost for employers who offer supplementary packages common in international company compensation structures.
For businesses operating across the EU, Hungary's amendments also interact with the posted workers directive as transposed into Hungarian law. Companies sending employees from another EU member state into Hungary for assignments must verify that the updated local standards. particularly on termination procedure and social security. are reflected in the applicable collective agreement or. There. No collective agreement exists, in the individual employment contract.
To understand how these changes interact with your broader corporate structure in Hungary, our analysis of corporate law matters in Hungary provides relevant context on entity-level obligations.
To receive an expert assessment of your employment compliance exposure in Hungary, contact us at info@ferrazwhitmore.com.
Who is affected and the compliance deadline
The amendments apply to a broad range of business categories. The threshold is not size-based: any foreign employer with at least one employee in Hungary falls within scope. This includes:
- Foreign companies with a registered Hungarian subsidiary employing local staff
- Foreign employers posting workers into Hungary under EU posted-worker rules
- International groups operating Hungarian branches without a separate legal entity
- Foreign employers engaging Hungarian nationals on contracts governed by Hungarian law
Businesses operating under a collective agreement should not assume automatic compliance. Collective agreements that pre-date the amendment may not yet reflect the updated notice periods or social security treatment. Where the collective agreement is silent or less favourable than the statutory minimum, the statutory minimum prevails.
The compliance deadline for aligning existing employment contracts and internal HR policies is June 30, 2025. Termination procedures initiated after January 1, 2025, using notice periods calculated under the old rules are already at risk. Employers who have issued dismissal notices since the effective date should audit those immediately.
Our team advising on employment law matters in Hungary can assess whether your existing contracts and notice procedures meet the revised statutory standards.
Immediate actions for international companies
Five steps should be taken before the June 30, 2025 deadline.
1. Audit all employment contracts. Review every contract with a Hungarian-based employee. Confirm that the place of work, notice period schedule, and benefit characterisation reflect the amended requirements. Contracts executed after January 1, 2025 that pre-date an internal review are the highest priority.
2. Recalculate notice periods. Map each employee's service length against the revised dismissal notice schedule. Where a notice period already issued is shorter than the updated minimum, seek legal advice before the notice period expires. Corrective action may still be available.
3. Review your collective agreement coverage. If your Hungarian employees are covered by a collective agreement, obtain the current text and confirm it meets or exceeds the updated statutory floor. Where it does not, the statutory minimum applies regardless.
4. Reassess the social security contribution base. Instruct your payroll team or provider to identify all allowances and in-kind benefits currently excluded from the social security base. Apply the updated characterisation rules and quantify any additional liability from January 1, 2025 onward.
5. Brief HR and line managers. Many compliance failures in Hungary arise not from legal misunderstanding but from line managers initiating termination processes without legal sign-off. Ensure that no dismissal notice is issued without a mandatory internal review step that checks the updated notice period and documentation requirements.
For international employers also monitoring changes in other EU jurisdictions, our alert on employment regulation updates in Portugal covers parallel developments relevant to businesses with Iberian operations.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our employment law practice supports international employers managing workforce obligations across European markets, including Hungary. We advise on employment contract structuring, termination procedures, social security compliance, and collective agreement interpretation – combining Portuguese civil law expertise with English common law tradition to deliver cross-border solutions. The firm's European employment team has experience before labour courts and administrative authorities across multiple EU member states. Engaging a lawyer in Hungary with cross-border experience is particularly valuable when regulatory changes interact with multi-jurisdictional payroll and HR structures. As an international law firm advising on Hungarian employment matters, Ferraz & Whitmore helps clients identify gaps before they become enforcement events. To discuss how these changes apply to your operations in Hungary, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.