When you are operating a company in Hungary, your business will probably need one or more employees. For finding the best candidates, you can always rely on an expert recruiter. But what to do when you want to terminate the employment? Read on!
Terminating employment contracts of indefinite duration
In Hungary, if you are employing e.g an office assistant or a salesperson, they will most probably have an employment contract of indefinite duration, that is, no termination date is set in the contract. In that case, you have the following options. (For fixed-term contracts, different conditions apply.)
1. Termination during trial period
During the probation period, either party may terminate the employment contract with immediate effect and without giving justification. In that case, salary has to be paid until the day the employment is terminated.
2. Ordinary termination by Employer (with notice period)
If you as an Employer wish to terminate the employment after the trial period, you are obliged to give clear and sufficient justification for doing so. Reasons may include comments on:
- the Employee’s abilities
- the Employee’s behavior regarding the employment
- the Employer’s operation.
In case of ordinary termination, there is always a notice period that is at least 30 days according to the Hungarian Labor Code. The employment is automatically terminated once the notice period expires, when the employee is exited from the company.
Both parties’ rights and obligations arising from the employment relationship continue to exist during the notice period. However, if the employment contract is terminated by the employer, the employee will be exempt from work for at least half of the notice period.
The remaining holidays (calculated in proportion to how much of the calendar year has already passed) must be paid with the final salary.
If the employment lasted 3 years or more, a severance pay is to be made.
3. Ordinary termination by Employee
The same rules apply as to ordinary termination by the Employer. The Employee has to provide their reasons for termination in writing, although the scope of possible reasons is wider for them than for the Employer.
If termination was initiated by the Employee, they will have to work until the end of the notice period.
4. Termination by mutual consent
At any time, you as the Employer and your Employee can agree to terminate the employment by mutual consent. This agreement has to be set in writing. Remaining holidays still must be paid, but apart from that, you are free to set any terms and conditions. These usually include:
- The date of termination (obligatory)
- Setting / waiving a notice period
- Settlement of all payments due (obligatory)
- Compensation and/or severance pay
- Waiver/confirmation/addition of a non-compete clause
For both the Employer and the Employee, it might be more advantageous to terminate employment via an agreement of mutual consent. It is more transparent than simply following regulations, which makes it simpler and more flexible at the same time.
5. Immediate termination (extraordinary termination)
Both you or your Employee can terminate the employment with immediate effect if:
- either of you significantly violates a substantial employment obligation, either willfully or through gross negligence;
- either of you acts in a way that renders the continuation of the employment relationship impossible.
If you discover a reason for extraordinary termination, you have the right to terminate employment within 15 days.
Most employment related lawsuits are connected to not observing all relevant laws when terminating employment immediately. As a result, please always consult a labor law specialist when considering extraordinary termination – whether you are an Employer or an Employee.
Need help? Just ask!
Your accountant and payroll specialist will be able to tell you which option is the best for your current situation – or can direct you to an employment law specialist.
Just call us on +36.1.317.8570 or write an email to email@example.com.