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Hungary – New overtime rules labelled the ‘slave act’ adopted

Written by
CLV Partners, one of Hungary's best specialist firms.
Hungary’s controversial ‘slave act’, which increases the limit on employee overtime to 400 hours and potentially delays payment for this overtime for three years has now been adopted. This article sets out details of the new rules and comments on their possible impact.

The Hungarian Parliament has adopted new rules, labelled the ‘slave act’ in the Hungarian media, incorporating increased overtime and a 36-month framework for payment for overtime into the Labour Code. The new rules have not yet been ratified by the Hungarian President, which is a condition for their entry into force. Once ratified, they would be applicable from 1 January 2019.

The new rules allow an employer to increase annual overtime, and workers can be asked to undertake up to 400 hours instead of the current 250 with the written consent of the employees but without consultation with the trade unions if there is no collective bargaining agreement. Where a collective bargaining agreement currently allows 300 hours overtime annually, the employee may voluntarily undertake an additional 100 extra hours. There can be no valid agreement to overtime above 400 hours, but in practice the employer may implement a six-day week.

In addition, in line with the new provisions, if the collective bargaining agreement allows, the employer to increase the timeframe over which working hours are calculated up to 36 months, meaning that employees will receive the overtime payment at end of the three-year period, if the trade union approves this.

A further legal anomaly is that while employees may agree to the increased overtime annually, the employer can have three years to compensate them for this overtime, whether with increased leave or pay. The trade unions’ view is that this will leave employees unprotected, as the employees’ ‘consent’ would be a mere formality. All employees would be expected to give consent and they would not be in a position to impose conditions, so in reality there will be no ‘voluntary overtime’ and refusing to consent might lead to detrimental consequences for an employee.

The new rules include a vague and formal provision giving some protection to employees, according to which they can cancel the consent agreement on overtime by the end of any calendar year. However in practice, employees who are dismissed would have difficulty proving that their dismissal was connected with the cancellation of overtime consent.

It is true that the Hungarian labour market has struggled for years with a huge shortage of skilled workers in almost all areas, so it is assumed that the government was trying to solve this shortage issue. However with this anomaly in the rules, their solution fails. Employees cannot reasonably be expected to work 400 hours overtime per year and be paid 36 months later (unless the employer gives them rest time as compensation instead of payment).

The reality is that the employees are ready to work overtime for 50% or 100% overtime bonuses to compensate for low wages, but if the new regulations could result in uncompensated overtime of up to 400 hours per year, it is understandable that the media describes the reforms as slavery.

There is still hope that the President may refuse to ratify the new rules, but he does not have the power to definitively and completely prevent them from passing if the government resubmits the same proposal to Parliament for approval.

Marianna Csabai
Managing Partner - Hungary
CLV Partners