Checklist for terminating employment in Hungary

Terminating employment contracts of indefinite duration

In Hungary, employees are usually employed with a contract of indefinite duration. This means there is no end date set in the contract, the employment relationship goes on and on, until you change it or it is terminated. In this case, the following might apply.

1. Termination during trial period

While the probation period lasts, both you and your employee can terminate the employment, with immediate effect and without any justification necessary. If that happens, you have to pay salary until the day the employment is terminated.

2. Ordinary termination by Employer (with notice period)

To terminate employment after the trial period, you as an employer are obliged to give clear justification. Reasons may include:

• the Employee’s abilities
• the Employee’s behavior regarding the employment
• the Employer’s operation.

In case of ordinary termination, there is always a notice period, which should last at least 30 days – in accordance with the Hungarian Labor Code. The employment terminates automatically once the notice period is up, and your accountant exits your employee from the company (which means your accountant must be notified about this decision as soon as possible).

During the notice period, both your and your employee’s rights and obligations arising from the employment relationship continue to exist. However, your employee will be exempt from work for at least half of the notice period.

The remaining holidays of your employee must be calculated and paid with the last salary. If the employment lasted more than 3 years, you must also pay severance.

3. Ordinary termination by Employee

The same rules apply as to ordinary termination by the employer. Your employee has to provide their reasons in writing, but the scope of reasons is wider for them.

Also, as termination was initiated by the Employee, they will have to work until the end of the notice period.

4. Termination by mutual consent

You and your employee may also agree to terminate employment by mutual consent. This can be done at any time, but has to be set in writing. Remaining holidays must be paid, but apart from that, you are free to set any terms and conditions. These should include the following:

• 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

Terminating employment via an agreement of mutual consent is more advantageous than simply following regulations because it is

• more transparent
• simpler
• more flexible

5. Immediate termination (extraordinary termination)

Both you and your employee have the chance to terminate employment with immediate effect under certain circumstances.

• If either of you significantly violates a substantial employment obligation, either willfully or through gross negligence;
• If 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 employment within 15 days.

Please always consult a labor law specialist when considering extraordinary termination – whether you are an Employer or an Employee. Most employment related lawsuits are connected to not observing all relevant laws when terminating employment immediately.

Need help? Just ask!

In any case, your accountant and/or payroll specialist must be notified about terminating employments, as there are certain administrative duties they have to perform. Also, they will probably be able to tell you which option is the best for your current situation – or can direct you to an employment law specialist if they think it is necessary.

Just call us on +36.1.317.8570 or write an email to finance@helpers.hu.