The answer greatly depends on the type of your business, however, outsourcing HR functions can be highly cost-effective for a new company. Typically, smaller organizations hire their first HR professional when they reach between 20 to 50 employees. Often, this HR person will take on additional tasks, but maintaining a ratio of one HR professional per 50 employees is standard practice.

First of all, to avoid future disputes, the labor contract should be in Hungarian (it can also be bilingual). This way the Hungarian employee cannot claim that they did not understand the terms of the contract before signing. However, a simple translation is not enough.

• Hungarian laws might be different from those in your country of origin, and the contract should not refer to laws or concepts that do not exist in Hungarian law.
• Moreover, you should be careful that there is nothing in the agreement that is not legal according to Hungarian law.
• At the same time, the labor contract has a few mandatory elements which should always be included.

While you can use your existing template as a basis for your agreement with your Hungarian employees, you must make sure they match local requirements. For that purpose, it might make more sense to create a new labor contract using a Hungarian template. The HR support offered by Helpers covers this type of consultancy as well, while we also work together with labor lawyers who can make sure the final version of the agreement will match both your intentions and Hungarian regulations.

In Hungary, when you are employing e.g. an office assistant or a salesperson, they will most probably have an employment contract of indefinite duration, meaning that 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 the 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

When ordinary termination is applied, there is always a notice period that is at least 30 days according to the Hungarian Labor Code (it might be more based on the labor contract). 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, in case the employment contract is terminated by the employer, the employee will be exempt from work for at least half of the notice period.

Vacation days not yet assigned to the employee (calculated in proportion to how much of the calendar year has already passed) must be paid with the final salary.

If the employment lasted at least 3 years, a severance pay is to be made.

3. Ordinary termination by the 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 are obliged to work until the end of the notice period.

4. Termination by mutual consent

At any given 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 vacation days 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, making 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 the employment relationship 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.