Act I of 2012 of the Hungarian  Labour Code ("Labour Code") came into force on 1 July 2012, introducing a new concept into Hungarian law. A more flexible labour law based on a contractual system.

The Labour Code strengthens the role of works councils in widening the scope of matters, on which, if they affect a substantial number of employees, the employer must see the work's council's opinion at least 15 days before making any decision.

The new Labour Code also strengthened the role of works councils by providing that agreements between employers and work councils may now regulate all issues that can be regulated in a collective bargaining agreement (except for those relating to remuneration).  This new rule elevates the works council agreement to same level of significance as collective (bargaining) agreements. The aim of this measure is to encourage flexibility of employment and the protection of employees' interests.

However, a works council agreement may not  be concluded with the works council if the employer is subject to a collective bargaining agreement or if there is a trade union at the employer entitled to enter into a collective bargaining agreement.

Hungary has a relatively low level of union density; thus, trade unionism is still fragmented in Hungary.  The new Labour Code amended the rules on trade unions by removing a trade union’s right of objection, eligibility for extraordinary paid vacation for trade union officials, and the option to request payment as compensation for untaken working-time allowances.

Notwithstanding that, the role of the trade union is still significant because a collective (bargaining) agreement may be concluded only between an employer (or multiple employers) or an organisation that represents the interest of the employer(s), on the one hand, and the trade union or an association of trade unions, on the other hand.

Trade unions remain entitled to request from employers information on issues concerning the employees’ employment-related economic and social welfare interests, and may inform their members of their rights and obligations concerning their material, social, cultural, living, and working conditions. The trade union may provide the employer with the union’s position concerning the employer’s actions or decisions and, further, initiate consultation in connection with those actions or decisions.