The new Hungarian Labour Code is expected to make the life of employers easier and the Hungarian labour market more competitive.

The move towards a more employer-friendly labour law started with amendments to the current Labour Code (Act XXII of 1992 on the Labour Code), which were adopted by the Hungarian Parliament in the fi rst half of July 2011. Most of these amendments entered into force on 1 August 2011.

One change is that if the employee works beyond his or her agreed working hours (overtime), the employer may decide whether to provide time off from work or to pay the salary supplement for the overtime. On a regular business day, the supplement is 50% of the salary (ie, a total of 150% salary is payable). The time off may not be less than the duration of the extra work performed. Before this amendment, this option used to be available to the employer only if the parties had agreed so in advance or if a collective bargaining agreement had so provided.

A new Hungarian Labour Code

On 22 July 2011 (about two weeks after the adoption of the above modifi cations), the Ministry of National Economy published the fi rst draft of a new Hungarian Labour Code. This draft is currently subject to discussions between Ministry offi cials, university professors, trade unions, and the employers’ representatives. The new draft Code is expected to be adopted by Parliament at the end of 2011 and come into force beginning 2012.

The first draft of the new Code was much less employee friendly than the current Labour Code and triggered protests by various trade unions. The government announced that, to a certain extent, they would back off their original plan and cut back fewer employee rights and benefi ts. The new Code is, however, still expected to be more modern than the current legislation and also regulate certain new types of employment, one of which would be on-call work.

Call on work

If the employee works maximum six hours a day in part-time employment, the employer and the employee may agree in the employment contract that the employee works when the task is due. The employer must notify the employee of the work at least three days in advance.

Increased liability for employee negligence

The new provisions, which are less employee-friendly than the current provisions, contain, for example, an increase of the employee’s liability for damage caused to the employer through negligence. Under the current Labour Code, if the employee causes damage through negligence, the employee is liable only up to one-half month average earnings (or a maximum of 1.5 months average earnings if the employer and the employee in the employment contract so agree or a maximum 6 months average earnings if the collective agreement so provides). Under the new Code, the main rule will be that the employee will be fully liable if he or she causes damage through negligence. However the extent of the liability is still subject to discussions.

Collective bargaining agreements

The new Code will also increase the regulatory role of collective bargaining agreements. The main rule will be that the provisions of the collective bargaining agreement may derogate from the provisions of the Labour Code not only if they are favourable for the employee but also if they are detrimental.

Unlawful termination

Pursuant to the draft of the new Code, the rules for unlawful termination will also change. One change is that if the employee claims that the termination was unlawful, the main rule will be that the employer will have to pay damages. Under the current Hungarian Labour Code the main rule is that the employer must reinstate the employee in his/her original position.

Non-compete undertaking

The new Hungarian Labour Code will also contain the minimum amount of compensation for a post-termination non-compete undertaking by the employee. This is not regulated in the current Hungarian Labour Code. The compensation will have to be at least one-third of the employee’s salary. The compensation must be paid for the same period as that of the non-compete undertaking. The maximum duration of the non-compete obligation will be two years instead of the current three years.

Conclusion

The new Hungarian Labour Code, which will enter into force in 2012, is expected to follow modern trends, be less employee friendly, and decrease employers’ costs. The goal is to increase employment in Hungary.

The new Code will also increase the regulatory role of collective bargaining agreements. The main rule will be that the provisions of the collective bargaining agreement may derogate from the provisions of the Labour Code not only if they are favourable for the employee but also if they are detrimental.