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State support for reduced working time: Hungary announces outline of new measures

Written by
CLV Partners, one of Hungary's best specialist firms.
Authors
Marianna Csabai
Managing Partner - Hungary
CLV Partners
Hungary
20.04.20
4
The Hungarian Government has announced state support measures for employers who are required to reduce employees’ working time in the context of the coronavirus crisis.

On 10 April 2020 the Hungarian Government announced it would provide state aid for reduced working time employment during the state of emergency (the ‘Wage Subsidy’) in Gov. Decree No. 105/2020. This Decree can be interpreted as a form of declaration of intent, given that the detailed rules for requesting Wage Subsidies have not yet been established. Overall, the Wage Subsidy, which is a meagre amount in comparison to known measures of other countries, is provided based on rather complicated and vague conditions in a procedure the details of which have not been developed or announced, with no possibility of legal remedy. It is also exclusively available to companies that are able to employ their employees on reduced working time.

In order to request the Wage Subsidy, the applicant’s compliance with the strict requirements must be substantiated by fully comprehensive and detailed documentation. The substantive conditions of these have not yet been defined, meaning their interpretation will be determined by practice. In view of this, we have summarised the conditions announced so far and entering into effect on 16 April 2020 below.

1. The application for Wage Subsidy can be submitted from 16 April 2020. The application shall be submitted electronically. It must be filled out by both employer and employees and signed by all concerned parties, then submitted simultaneously for all employees concerned by the employer through the ‘Company Gateway’ (“in Hungarian: Cégkapu”) on a form established for this purpose, to the government office in the jurisdiction of the place of business. The form is available on the website of the National Employment Service.

2. The Wage Subsidy can be claimed for a maximum of three calendar months. It the amount of which is 70% of the net absence fee for lost working time, based on the absence fee effective on the date of declaring the state of emergency but in any case not more than twice the net minimum wage (currently HUF 107,000), i.e. 214,000, As a result, the maximum amount of Wage Subsidy shall be HUF 74,900 / employee.

3. To be eligible to apply for the Wage Subsidy employers must have been operating for at least six months and have already exhausted their opportunities to reschedule work through working-time arrangements. The economic reasons for reducing working hours and retaining employees must be directly and closely related to the emergency. In addition  employers must carry out continuous economic operations that are classified as in the interest of the national economy. The definition and the requirements for this ‘national economic interest’, and the assessment criteria are undefined and unknown.

4. The employer must also present the measures it has taken or is expected to take to overcome the economic difficulties and to exhaust the working time available for rescheduling work. Exactly what is meant by this and when it is considered appropriate is also unclear at the moment. The support can be used after the ‘working time frame’ has expired or ended (the working time frame allows flexible scheduling of working hours over a working week, for example to allow staggered shifts, but over the duration of the working time frame hours worked cannot exceed normal full working time).  The optional two-year working timeframe newly introduced by Government Decree 104/2020 (IV.10.) cannot be interpreted in this context and it is unclear if using it is an eligibility criteria employers must meet.

5. In order to be eligible for the Wage Subsidy, the affected employees must be employed on reduced working hours compared to the working time in their employment contract in force on the day on which the emergency was declared. The reduced working time must be at least four hours per day and a maximum of 70% of the working time before the amendment. The Wage Subsidy can only be claimed for the period following submission of the application.

6. For the amount corresponding to 30% of the time lost through the reduction of working hours, the parties must agree on so-called ‘individual development time’ in order to develop the employee’s position or the employer’s operation. It is important to emphasise that the employer is obliged to pay wages for this period as well, meaning that 30% of the lost working time is compensated by the employer and 70% by the Wage Subsidy. In our interpretation, if the amount of the wage including the Wage Subsidy is less than the absentee pay of the employee prior to the emergency due to the limit on the Wage Subsidy, the deficit must be paid by the employer.

7. The employer must undertake:

  •  to maintain headcount for the duration of the Wage Subsidy  plus one month;
  • not to order extraordinary working hours (overtime) during the Wage Subsidy  period;
  • to pay wages for individual development time;
  • to ensure the amount of the salary increased by the Wage Subsidy reaches the employee’s absence fee prior to the amendment;
  • to notify the government office within two days of any change affecting the Wage Subsidy .

 

8. The employee must undertake:

  • to remain available to the employer during the individual development time;
  • not to take on additional employment rendering it impossible to return to employment in the original working hours.

 

9. The Wage Subsidy cannot requested or granted:

  • if the employee has a payment obligation due to the state employment authority reclaiming a benefit in its final decision;
  • if the employer is in the process of dissolution, liquidation, bankruptcy or other liquidation proceedings ordered by a final court decision;
  • if the employer does not comply with the conditions of the settled labour relations, i.e. within two years the authority has issued a fine or obliged the Employer to pay into the central budget due to the labour violations as provided in law;
  • if the employer qualified as an ‘undertaking in difficulty’ on 31 December 2019 as defined by law;
  • during an employee’s notice period;
  • if the employer or employee is already receiving job creation, retention, research and development or part-time subsidy in relation to the concerned employment;
  • for employment that started after the declaration of a state of emergency;
  • during unpaid leave;
  • where there is a derogation from employment contract (such as a home office); and
  • for temporary agency work.

 

10. At the same time the Government Decree described above was published, a further derogation from the Labour Code (‘Mt.’) was announced, according to which employers can unilaterally introduce a framework of working time up to 24 months or extend any already ordered framework for this period. The rules concerning daily and weekly working hours, daily rest periods and weekly rest days can be deviated from in this case only to the extent permitted by the Mt.