End of Employment in Hungary

End of Employment Procedures & Guidelines in Hungary

Termination procedure

According to the Labour Code, an employment contract concluded for an indefinite term may be terminated in the following ways:

• by mutual agreement

• by dismissal notice

• by termination with immediate effect

Any documents related to the termination of an employment contract by either party must be made in writing.

Employees thinking that they have been dismissed unfairly or unlawfully can file an appeal with the competent court and request to be reinstated at work while being compensated for the period of unemployment caused by the dismissal. Employers shall inform employees of their rights in this matter while notifying of the termination.

Employees may request compensation for their damages if the termination is declared unlawful. In case of the unlawful termination, employees may choose between the following:

• Employees may request compensation for their damages resulting from the unlawful termination of the employment. In such case, employees must prove the amount of damages and the damages resulting from the unlawful termination of their employment. Employees may request compensation for their lost salary, for up to 12 months.
• Employees may request the payment of the absence fee that would be due for the notice period if a dismissal notice terminated their employment. In this case, the burden of proof is more favourable for employees, as they do not have to prove that they suffered damages in relation to the unlawful termination of the employment.

If the employee claims that certain rights of the employee as a person have been violated because of the unlawful termination of the employment, the employee may file for compensation for non-material damages. In claiming non-material damages, no harm beyond infringement has to be proved (with no amount of damage being proved). The court determines the amount of compensation in one sum by considering the gravity of the infringement.

Termination by mutual agreement

The employment relationship may, at any time, be terminated by mutual agreement between the employee and the employer. This is the most amicable solution to terminate the employee’s employment and can be initiated by either party. The Labour Code does not contain explicit provisions regarding termination by mutual agreement. The parties are free to set out the relevant terms of the termination, such as the date of the termination, the amount and form of compensation payable to the employee, etc.

Such mutual agreement is less likely to bring legal disputes or to be challenged at a court of law. However, it requires the employee’s consent. The employer may also have to provide additional compensation to convince the employee to sign a mutual termination agreement.

Termination by dismissal notice

An employment contract can be terminated by the employer’s or the employee’s dismissal notice at the end of the notice period.

If the employer terminates an indefinite employment contract by the dismissal notice, the employer must provide written reasoning (except for retired employees). The employment relationship can be terminated by the employer, based on only the following reasons:

• the employee’s behaviour at work (e.g., not fulfilling obligations, being unable to cooperate with colleagues, causing a breach of trust, etc.)
• the employee’s skills mismatch (e.g., lack of the right abilities, capabilities, knowledge, etc.), with no right to terminate an employee due to temporary incapacity for work
• company operations (e.g., reorganisation within the company, “quality replacement” with a better qualified employee)

The reason for termination must be factual, reasonable, and clear.

An employment contract concluded for a definite period can be terminated by the employer for the following reasons:

• insolvency and involuntary winding up proceedings of the company
• the employee’s skills
• unavoidable external reason, which makes it impossible to maintain the employment relationship

The employee can terminate an indefinite employment contract without providing a reason. However, the employee can terminate a definite employment contract only if the reason makes the employment relationship impossible or disproportionately prejudicial.

In a legal dispute, the employer (or the employee if needed) must be able to prove the validity and reality of the reasons for termination.

Termination with immediate effect

The employer and the employee may terminate the employment contract with immediate effect, provided that the other party

• significantly breaches any substantial obligations deriving from the employment contract, wilfully or with gross negligence, or
• behaves in a way that makes the continuance of the employment impossible.

The breach of an obligation from the employment relationship must be significant to enable the employer/employee to terminate the employment relationship immediately. However, the significance of the breach correlates not to the amount of the damages occurred but to the degree of the gravity of the breach.

According to the Labour Code, the right of termination with immediate effect can be exercised within 15 days of finding out the information that requires the termination or in the event of a criminal offence up to the statute of limitation for criminal liability. If the employer/employee fails to respect the above specified deadline, the employment termination will be considered unlawful.

The parties can immediately terminate the employment contract during the probation period.

Disciplinary procedure

The parties can determine legal consequences (in the employment contract or collective agreement) for the event of any infringement of obligations arising from the employment relationship. These disciplinary sanctions must be consistent with the gravity of the infringement.

Detrimental legal consequences can involve a sanction related to the employment relationship, altering its terms and conditions for only a fixed period. These consequences cannot not violate the employee’s dignity and rights as a person.

Disciplinary sanctions can also involve an oral or written warning (which can be applied under the labour code).

Before imposing a disciplinary sanction, the employer should allow the employee to provide oral explanations or accept written explanations and gather and assess the specific evidence.

Disciplinary sanctions are imposed within two months of detecting a breach and not later than one year after. The employee can challenge the imposing of written disciplinary sanctions.

Redundancy

Mass redundancy

Mass redundancy is a form of dismissal by the employer for an operations-related reason:

• At least 10 employees are made redundant in companies employing between 20 and 100 employees.
• At least 10% of employees are made redundant in companies employing between 100 and 300 employees.
• At least 30 employees are made redundant in companies employing 300+ employees.

Dismissals should be handed over within 30 days.

Employers must notify workers’ councils that they are planning to do mass redundancies. At least 7 days before they begin negotiations, they should outline the reason, the number of employees affected, the reason to choose the affected employees, and the amount of severance. If an agreement isn’t reached within 15 days from the start of negotiations, the employer must negotiate ways to avoid such an event, to ease the consequences of the mass redundancy, and to reduce the number of terminated employees.

Notice period

In case of an indefinite employment contract, the notice period is 30 days. In case of termination by dismissal notice by the employer, the notice is extended based on the length of the employee’s employment (e.g., extended by 5 days in case of 3-year employment and up to 60 days in case of 20-year employment). The parties can agree on a longer notice period for a maximum of six months.

If the employer terminates the employment by dismissal notice, the notice period begins at the earliest on the day following the expiry of

• incapacity for work due to sickness, but not more than one year after the expiry of the sick leave;
• incapacity for work due to taking care of a sick child;
• unpaid leave due to taking care of a relative at home.

In the case of a fixed-term employment contract, the notice period ends as the fixed term expires.

If the employer terminates the employment by dismissal notice, the employee must be exempted from work obligations for at least half the notice period. The employee is entitled to the absence fee during the exemption period.

In case of termination of the employment by dismissal notice, employees are also entitled to the monetary compensation for the proportionate part of their untaken annual holidays.

Severance

Employees of more than three years are entitled to severance payments in the following cases:

• dismissal by the employer’s notice
• liquidation of the employer without legal successor
• the employer’s ceasing to fall into the scope of the Labour Code

The amount of severance payment is based on the length of the employment relationship (e.g., one month’s pay after 3 years of employment; six months’ pay after 25 years of employment).

No severance is to be paid if the employee is considered to be retired upon termination, or if the employee is terminated due to behaviour or lack of capabilities (unrelated to health).

Employee termination protection

Certain employees have protection from termination during the following periods:

• pregnancy
• maternity leave
• child care unpaid leave (If the employee does not take it, the employee is entitled to the same protection upon returning to work until the child turns 3.)
• voluntary military service
• in vitro fertilization process for six months

Unemployment funds

Former employees searching for work could be entitled to unemployment benefits. They should have been employed for at least 360 days within the last three years and should be able to prove that both their job search and the National Employment Agency’s have been in vain. The maximum daily unemployment benefit is HUF 6,667 (around EUR 16.4).