Employment of Guest Workers in Hungary: Key Considerations for Employers
The employment of third-country nationals, particularly guest workers, in Hungary is becoming an increasingly practical solution for many businesses seeking to address labour shortages. At the same time, employing guest workers imposes complex legal and administrative obligations on employers, as such employment simultaneously involves labour law, immigration, tax and social security rules.
Breaching these rules may entail significant exposure to fines; therefore, businesses employing guest workers should review the applicable requirements before establishing the employment relationship.
Guest workers are also subject to the Hungarian Labor Code
The employment relationship of guest workers is also governed by Act I of 2012 on the Labor Code.
Accordingly, in the case of guest workers, employers are also required to ensure:
- the conclusion of a written employment contract;
- compliance with working time and rest period rules;
- application of the rules on wages and wage supplements;
- the provision and recording of annual leave; and
- compliance with occupational safety rules and the principle of equal treatment.
An important characteristic is that guest workers are employed for a fixed term, which may not exceed the validity period of the residence and work permit issued to them. However, the fixed-term nature of the employment does not mean that the employee enjoys a lower level of labour law protection: the rules on remuneration, working time, rest periods, annual leave and termination of employment must be applied in full.
Restrictions arising from permit-based employment
A guest worker may work exclusively for the employer, in the position and at the place of work specified in their residence permit. In practice, this means that the employer may not freely transfer the employee to another site or position if this differs from the terms set out in the permit.
Changing the place of work or position without authorisation may constitute an immigration law infringement and may also result in labour law consequences and fines. This is particularly important for employers operating at several sites, using project-based work organisation or working within subcontracting chains.
Notification obligations towards the National Directorate-General for Aliens Policing (OIF)
No later than on the day the guest worker starts work, the employer must verify that the employee holds a valid residence permit authorising employment with the given employer.
The employer has notification obligations towards the National Directorate-General for Aliens Policing (OIF) in several cases. Among other things, the commencement of employment, the failure to commence employment, the termination of work, and, in certain cases, changes in employment conditions must be reported.
As a general rule, these notifications must be made within 5 days of the relevant event of becoming aware of the relevant circumstance, or of the receipt of the permit. Notifications must be submitted through the EnterHungary electronic platform operated by OIF.
It is important to note that a notification made to the Hungarian National Tax and Customs Administration (NAV) does not replace the notification obligation towards the immigration authority. The two authority notification systems are separate, and employers must therefore comply with their obligations in both directions.
Significant exposure to fines
Failure to comply with immigration notification obligations may have serious consequences. The employer may be subject to a public order protection fine, the amount of which may be up to 1,000,000 HUF (~2,800 EUR) per employee.
A particularly strict rule applies where the guest worker’s employment relationship terminates or is terminated. In such a case, the employer must ensure that the guest worker leaves the territory of Hungary no later than on the 6th day following the termination of the employment relationship. Failure to comply with this obligation may result in the immigration authority imposing a fine of 5,000,000 HUF (~14,000 EUR).
NAV, tax identification number and social security
Guest workers must have a Hungarian tax identification number due to the application of Hungarian tax and contribution rules. The employment relationship must be reported to the Hungarian National Tax and Customs Administration (NAV) no later than before the commencement of work.
As a general rule, a guest worker is considered insured in Hungary, and therefore the employer is required to deduct 15% personal income tax and 18.5% social security contribution from the employee’s gross salary. A Hungarian social security identification number, known as TAJ number, must also be obtained in order to access social security benefits.
An important difference compared to Hungarian employees is that if a guest worker takes unpaid leave, the validity of their TAJ number ceases, and it must be reactivated with the National Health Insurance Fund of Hungary following their return to work.
Tax allowances: important restriction from 2025
Guest workers are generally subject to the same tax rules as domestic employees. However, from 1st January 2025, tax allowances may only be claimed, in addition to Hungarian employees, by citizens of EEA Member States and citizens of non-EEA neighbouring countries of Hungary, namely Ukraine and Serbia.
This means that many guest workers are not eligible, for example, for the personal income tax exemption available to employees under the age of 25 and must therefore bear the full amount of public charges.
Subcontracting chains and joint and several liability
The employment of guest workers may pose risks not only for the direct employer. The main contractor and all participants in the subcontracting chain may be held jointly and severally liable if they knew, or should have known with due care, that the subcontractor was employing a third-country national who did not hold a permit entitling them to stay in Hungary.
In light of this, it is particularly important for main contractors to monitor the employment practices of subcontractors and to properly document permits, notifications and labour law records.
Summary
With appropriate legal and administrative preparation, the employment of guest workers can be an effective solution to labour shortages. At the same time, employers must pay particular attention to ensuring that all elements of the work performed are in line with the provisions of the residence permit, and that their obligations towards OIF, NAV and the social security authorities are fulfilled within the applicable deadlines.
In order to ensure lawful employment, it is advisable to establish an internal control and documentation system, especially for companies employing guest workers in larger numbers, at several sites or through subcontracting chains.
Should you have any questions regarding the employment of guest workers, our law firm is at your disposal to review the relevant labour law, immigration and employment compliance matters.
