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Labour inspections are changing in Hungary: how?

Written by
CLV Partners, one of Hungary's best specialist firms.
Hungary has introduced changes to the rules governing labour inspection effective from 11 March 2021.

On 1 March 2021, the Hungarian act on labour inspection was repealed and replaced by a new Act CXXXV of 2020 on services and subsidies facilitating employment, and on the supervision of occupation.

The detailed rules are set out in a Decree (Gov. Decree 115/2021 (III.10.)), which was published on 10 March 2021. Its new rules apply from 11 March 2021.

The previous labour inspection has been replaced by the so-called ‘occupation supervision procedure’. Supervision remains the responsibility of Government Offices.

Below we set out the main aspects of the new regulation.

1. One significant change is that under the new occupation supervision procedure, the authority can supervise not only employment relationships, but also other forms of work. The new legislation has extended the concept of employment to any legal relationship performed for a fee under the direction of another person (the employer). As such, the authority has the right to supervise the minimum requirements of employment law in relation to all legal relationships including those that were exempted under the previous regulation. This means that self-employed individuals, employees working under service and supply contracts, personal contributors of companies and cooperatives and volunteers in the public interest can now be supervised.

2. A novelty with regard to the supervision of the employment of third-country nationals is that the authority can now also check the minimum requirements are observed for employment in this field. This means the authorities can now, for example, check the legal conditions for continuing the gainful employment of a private individual in Hungary are being observed. Previously the authorities could only check for the existence of permits and compliance with the relevant provisions of the Labour Code.

3. In accordance with the amended Posted Workers Directive, greater emphasis will also be placed on the supervision of cross-border employment within the EU and the EEA. In addition, the detection of infringements, and the exchange of information and cooperation between the Members States’ labour authorities with regard to enforcement of sanctions will be institutionalised.

4. Further, the legislation will focus on ‘disguised employment’ (veiled contracts). Reclassification of legal relationships is still an option, and its requirements and the rules of evidence have been defined in the new legislation. This is also partly an assistance for employers.

5. The minimum amount of labour fine is HUF 30 000 (EUR 82), while the maximum remains HUF 10 million (EUR 27,397) if the employer is a legal person or an entity without legal personality, and HUF 1 million (EUR 2,740) if the employer is a natural person.

For unlicensed employment of third-country nationals, as well as breaches of certain rules of employment within the framework of cross-border services, a predetermined fine can be imposed. The minimum level of this fine is determined on the basis of the applicable minimum wage; otherwise the actual fine that can be imposed depends on the payment made to the employee in question, according to the calculation method set out in the legislation.

6. The implementing regulation also affects the requirements for orderly labour relations, the rules on the official disclosure of offenders and the international tasks of the occupational-supervisory authority.

Marianna Csabai
Managing Partner - Hungary
CLV Partners