COVID-19 and Employment contracts in Hungary

In Hungary, the Government has introduced multiple measures – besides the ongoing curfew restrictions – aimed at helping companies navigate through these hard times.

General employment law related measures

• The employer has more flexibility in modifying the work schedule even after it has been communicated to the employees;
• The employer can unilaterally order the employee to work from home;
• The maximum length of the working time frame has been extended to 24 months for all employers, which allows the employer to schedule less (or no) work for the employees during the state of emergency, and more work than usual during the remainder of the working time frame. Although this means that the employer must pay the whole base salaries of the employees even during the times when the employees work less, it also means that the employer will not have to pay overtime wages for the remainder of the working time frame; and
• The employer may carry out reasonable and necessary measures in order to safeguard the health of employees.

Even if collective bargaining agreements regulated the above issues differently, such collective bargaining agreement provisions shall not be applied during the term of the government regulation.

In addition to the above, during the term of the government regulation employers and employees can agree to deviate from the rules of the Labour Code in a separate agreement.

Short-time work (Kurzarbeit) subsidy

• The wage subsidy is to be provided by the state for the employee upon a joint request made by the employer and the employee;
• The subsidy is payable for a duration of three months;
• The rate of the subsidy is 70% of the wage for periods of absence proportionate to the lost working time. The working time may be reduced by at least 15% and 75% at the most. This means that when the employee only works 4 hours instead of the original 8 hours, 70% of his wages applicable to the lost 4 hours will be paid by the state. However, the wage to be considered is maximized at double the minimum wage in effect at the time of the application (i.e. the maximum amount of the subsidy that a worker could receive is around EUR 320 per month in case of the decrease of the working time by 75%); and
• If the working time is reduced by less than 50%, the employer is also required to allocate 30% of the lost working time to the ‘personal development’ of the employee, during which period the employer is required to pay the basic salary of the employee.

During the subsidized period and for another month, the employer must maintain the employment relationship of the subsidized employee. When this obligation is not met, the subsidy must be repaid.

Research and Development (R+D) subsidy

• Employers can receive government support after researcher-developers (engineers, researchers, IT specialists) for a maximum of 3 months.
• The support covers all non-state-budgetary employers where research and development is carried out.
• The employee must qualify as a researcher-developer as per Act LXXVI. of 2014 on Innovation: a natural person who is engaged in the creation or development of new knowledge, intellectual property, a product, service, procedure, method or system, or who is engaged in the management of the implementation of projects aimed at those things.
• The support is for a period of three months and its amount may not exceed approx. EUR 900 per month per person. Below a certain amount of gross salary, the support decreases proportionally. The amount is paid to the employer, who must guarantee – in return for the aid – that the subsidised employee will remain employed for at least 3 additional months on a salary not lower than that which they received on the day the emergency situation was declared (March 11, 2020).

According to the general rules, if the employer is not able to give the employee work due to the epidemic, the so-called “Downtime” rules come into force. During downtime, the employee is entitled to a basic salary, and downtime counts as work done.

If, however, the employer is unable to give work to the employee for some “unavoidable external reason”, the employer does not have to pay wages. The law does not specify what is meant by an “unavoidable external reason,” and in the current coronavirus situation, it is still questionable what constitutes such a cause. In our view, the coronavirus situation alone does not create an unavoidable external cause, but the consequences of the certain government measures, on the other hand, can in certain circumstances fall into the category of unavoidable external cause.

During the period between the day on which the employment contract is concluded and the date of commencement of the employment relationship the parties may not engage in any conduct that may harm the employment relationship.

However, during the period referred to above, either party shall be entitled to withdraw from the employment contract in the event of material changes to their circumstances following the date of conclusion of the employment contract whereby carrying out the employment relationship is no longer possible or it would result in unreasonable hardship.

The employment offer may therefore be taken back even after the employment contract has been signed, but before the date of the employee actually beginning to work, by referring to the circumstances caused by COVID-19. This clause has rarely been used in the Hungarian court practice; therefore, we are unsure of the relevant practice of the courts. It should be noted that the unreasonable hardship caused by the pandemic may only be relied on if the parties concluded the employment agreement before the escalation of the virus.

Should the employer decide that the employee is redundant after the commencement of work, it may terminate the employment relationship unilaterally and without justification within the maximum 3-month long probation period, if such a period was agreed in the employment agreement.

According to the Hungarian labour code, vacation time is scheduled by the employer. Therefore, the employer may compel the employees to take their remaining paid leave days.

However – with the exception of the first three months of the employment relationship – employers shall allocate seven working days of the paid leave in a given year – in no more than two parts – at the time requested by the employee. During the scheduling of the paid leave, the employer shall also take into account that, unless otherwise agreed, vacation should be allocated to contain at least fourteen consecutive days once in a calendar year.

Employees must be notified of the scheduled date of their vacation time no later than fifteen days before the first day of the vacation.

Although all nurseries, kindergartens and schools are closed indefinitely, these institutions are required (at least in theory…) to organize day care for children in small groups based on parental needs. Based on this, workers with small children are not exempted from working, as schools – in principle – take care of children.

The Hungarian Labour Code contains no specific obligations in this respect. Therefore, according to the letter of the law, the employer is not required to exempt parents from working solely on the basis that they have kids at home. A parent refusing to work due to this reason would breach the employment agreement. However, the employer may (and in certain cases may be required to) exercise its general duty of reasonableness and fairness in the employment relationship by making exceptions and allowing parents to work from home or to be exempt from work altogether.

The parties may conclude an agreement on voluntary unpaid leave, but during such period the insurance policies are suspended and the duration of the unpaid leave is not counted as a working period, therefore this period is not eligible for workdays required for pensions and severance pay.

In addition, there is a rule that an employee may stay away from work because of a personal, family, or unavoidable reason that deserves special consideration. It is the employer who shall consider whether the reason deserves special consideration. This rule was not invented with the coronavirus situation in sight. In any event, an employee is not entitled to wages when he or she does not perform work in such a case.

Best practise would be to consult and determine the reasonable options with employees. This means the duties are potentially different for single parents, parents whose partner works in a crucial job (health care), has many children, is vulnerable, etc.

If the employer agrees to home office, the employer shall be obliged to continue the payment of all applicable salaries.

Currently, home office is not a mandatory requirement for employers, merely a suggestion. Therefore, if there is something that may not be carried out from home, employees are free (and can be required by the employer) to go into the workplace. Going to the workplace is deemed to be a valid reason for disobeying the curfew restrictions.

We anticipate that the first 2-4 weeks of the restart should be a period when working at the workplace will remain an option for the employees, i.e. it will not be mandatory and home office will be allowed for those who still wish to work from home. Also, the number of employees working in the workplace should be limited to a certain percentage (50% may sound reasonable) of the employees, in order to ensure the effective implementation of social distancing.

Also, the employer may wish to consider which scope(s) of work may actually warrant physical office work, whereas those employees who can easily do their work from home could keep working from home for an indefinite period of time.

Following the 2-4 weeks’ period, the best practise would be to split the employees into e.g. two groups where the employees in the first group would be working during week 1, whereas those belonging to the second group would be working in the office during week 2. Employees who are taking care of children below a certain age (children who have no physical school education) and those who are in a special situation (e.g. are pregnant or have had Covid-19 symptoms or has had contact with a person who has been or may have been infected with coronavirus) will need to be offered the option to keep working from home for an indefinite period. The situation of those working from home could and should be evaluated every two weeks.

Yes. A company has the same possibilities for termination as before and the economic downturn caused by the pandemic situation may be relied upon as a justification for termination as well.

We note, however, that the state subsidy programs mentioned above are breached if the employer terminates the employment relationship of a subsidized employee during the term of the subsidy.