Employment vs. outsourcing – when to hire an employee in Hungary?

In the tables below, you will see a comparison of the different rights and obligations, alongside the benefits and disadvantages of hiring an employee or a contractor, taking on the role of an employer or a customer.

• Getting work done in Hungary
• Employer responsibility
• Management and organization
• When outsourcing is not an option
• HR compliance and payroll services
• FAQ

Getting work done in Hungary

Being an employer and being the client of a contractor come with very different rights and obligations. As an employer, you will have the power to tell your employee what needs to be done when and how, so you will have tight control over the whole workflow. At the same time, you will have to take care of payroll taxes, while the employment relationship will be government by the Labor Code. Outsourcing tasks to a contractor, on the other hand, you will only have to consider the results instead of the entire workflow, and relevant administration will be reduced to paying the bills of your provider.

In the tables below, you will see a comparison of the different rights and obligations, alongside the benefits and disadvantages of hiring an employee or outsourcing tasks to a contractor (which can be a freelancer or another company), starting with the broader aspects, moving on to practical details.

As long as you have intermittent, smaller tasks to take care of, it is probably easier to outsource them. Once you have enough work to occupy a full-time employee, however, it will probably make more sense to hire one. While payment and administration may seem simpler while outsourcing work to a contractor, the associated costs might not be lower, since the contractor may incorporate those into their own prices.

For example, it makes sense to outsource payroll and accountancy to a provider like Helpers Finance as long as you have only a handful of employees. However, as your business grows, you might start to consider if it is worth employing an accountant in-house.

Employer responsibility in Hungary

Employee rights in Hungary are protected by the Labor Code. The same protections will not apply to contractors, but the relevant aspects will still have to be considered, and there is a high chance that the contractor will include them in their contract.

Terminating employment is strictly regulated, offering protections to both the employer and the employee. The same can be spelled out in a provider’s contract under the rules of cancellation – including a cancellation fee, depending on the nature of the service. When and how employees can take paid leaves is also regulated. Since a client cannot order a contractor around, requesting paid time off does not apply, which has both advantages and disadvantages, since you will not have control over when the provider is available.

Management and organization

As already mentioned above, as an employer you will have full control and full responsibility over the entire workflow. If you work with a contractor, they will be your partners instead of your subordinates, and they will have more control over what they do – as well as more responsibility, which will likely be reflected in their prices.

When outsourcing is not an option

As you can see above, getting work done in-house or outsourcing tasks involves very different rights and obligations for the parties involved. The more control you want over the workflow, the more responsibility it will require. When outsourcing tasks, you will relinquish control in exchange for reducing liabilities.

In line with this, expecting to maintain control while reducing liabilities is not realistic, and possibly not lawful. The concept “disguised employment” covers cases when instead of hiring an employee, a business a contracts a freelancer – on paper for performing specific tasks, but in reality expecting them to behave exactly as an employee while they have to assume full responsibility over their own work. This should be avoided not only to evade ethical concerns but also to prevent getting fined by the Hungarian Tax Authority.

HR compliance and payroll services with Helpers Finance

The Helpers Team is ready to help you not only with accounting a payroll administration, but also with HR compliance. Tell us more about what you need, and we will help you with planning, recruitment, onboarding, and ongoing tasks, providing advice on how to remain compliant with Hungarian labor law and other regulations while making the most of your business.

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