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State aid: 3-month allowance to protect jobs with reduced working hours in Hungary

April 24, 2020

Last updated on 11 May 2020

As part of the economic relief measures in Hungary related to the COVID-19 pandemic, the government will provide an allowance for 3 months for income lost due to reduced working hours.

Reduced working hours in Hungary

Because of social distancing measures aimed at hindering the spread of the coronavirus, many businesses are forced to reduce working hours – either by getting employees to work part-time instead of full-time, or by cancelling positions altogether. Neither solution is perfect: while getting payment for reduced working hours might have employees struggling to make ends meet, discharging may cause an even greater distress, while it will also make it more difficult for the company to restart operation in full once the state of emergency is over.

In order to help protect jobs during the coronavirus pandemic, the Hungarian government is providing an allowance for 3 months to employees working in reduced working hours, covering up to 70% of income lost. This will also help employers to retain invaluable workforce without jeopardizing the feasibility of their business.

How to apply for the allowance

The employer and the employee can apply together through the e-government portal for companies (the Cégkapu or “Company Gate”). Since both of them will sign the application forms, there will be no need to modify the labor contract. The following conditions apply.

The company has to be operational for at least 6 months, and the employer must pledge not to terminate the employment relationship while the employee is receiving the allowance and over the following month. (Of course, the employee is allowed to hand in their notice.)

An employee is eligible if they were already working for the company at the start of the state of emergency (11 March 2020), there have been no interruptions to the employment since then, and they are not on notice. If their working hours are reduced between 15-75%, they may receive an allowance for 3 months that will cover up to 70% of their lost income.

The employee cannot be expected to work overtime while receiving the allowance, but they must agree to return to their previous full working hours after the end of the financed period. They might also be required to provide data to the authorities at least twice.

Calculating the allowance for reduced working hours

The basis of the allowance is the regular net salary of the employee, but it is maximized in the double of the current net minimum wage, HUF 214,130 (ca. EUR 600). The allowance may cover for 70% of the loss of income because of reduced working hours, however, because of the cap on the basis for calculation, it may be at most net HUF 22,484 – HUF 112,418 (ca. EUR 60 – 315) / month, depending the number of working hours lost.

The allowance is exempt from taxes, which means the employer will achieve savings not only on the net salary of the employee, but also on taxes and contributions (amounting to about the double of the allowance).

Individual development time

There is another important, obligatory element to receiving the allowance in cases where the reduced daily working hours are still above 50% of regular working hours: individual development time. (In cases where working time is reduced by 50% or more, choosing this element is optional.)

Employees should remain available in 30% of the working time lost, in which time they might be required by the employer to participate in training related to their positions or the operation of the company. For this, the employer pays their proportionate salary. This way, together with the allowance from the government, they might receive their full salary while still working reduced hours.

The catch for the employer is that if the regular salary of the employee is above the basis of calculation, they will have to pay not simply 30% extra to their employee, but an amount that would complement the reduced salary (and the allowance) to the regular salary of the employee.

How to proceed?

If you think you and your employees might benefit from this allowance, get in touch, and we will assist you figure out the details, hand in your applications, and remain compliant. You will help your employees maintain their standard of living and support their families, while you also let your company get back to gear more easily once restrictions are lifted.

Some alleviations are also available to those who are still working their full time: read about payroll tax reductions related to the coronavirus pandemic.

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