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1 Employment Law Overview 2017 Hungary

2 Table of contents I. General 01 II. hiring practices 02 III. employment contracts 03 IV. working conditions 04 V. Anti-Discrimination Laws 06 VI. Social Media and Data Privacy 07 VII. Authorizations for Foreign Employees 08 VIII. Termination of Employment contracts 09 IX. Restrictive Covenants 11 X. RIGHTS OF EMPLOYEES IN CASE OF A TRANSFER OF UNDERTAKING 12 XI. TRADE UNIONS AND EMPLOYERS associations 13 XII. Other Types of Employee Representative Bodies 15 XIII. Social Security / Healthcare / Other Required Benefits 16

3 I. General 1. Introductory Paragraph Hungarian labour law has witnessed a few significant changes in the last decade and is now one of the most developed areas of law in the country. Since the end of the communist regime, labour law legislation has had to cope with the challenges of the new social and economic system. As a result, and due to the development of the labour market, labour law plays an increasingly significant role in legal relationships in Hungary. 4. New Developments Since Act CII of 2014 on the Prohibition of Work on Sundays in the Retail Sector has been repealed with the effect from 16 April 2016, Sundays and official holidays may be scheduled as working time for employees working in the retail business. Shops can operate on Sundays and official holidays again as before the Act CII of 2014 was introduced Key Points Employment contracts must be concluded in writing. Termination notice must be drawn up in writing. Termination notice must be clear, true and causal. In case of an unlawful termination of the employment the employee can claim damages, however, the damages claimed as lost income are limited by law; maximum 12-month absence fee of the employee. Severance payments are paid if a number of conditions are fulfilled. The minimum base salary is regulated by law. 3. Legal Framework Employment relations in Hungary are governed by the Labour Code and other labour law legislation, collective bargaining agreements and individual employment contracts. In the context of labour disputes, courts generally protect employees rights by interpreting the provisions of the Labour Code, collective bargaining agreements and employment contracts often in favour of the employees. Consequently, courts are usually considered very employee friendly in Hungary. Overall, litigation trends reflect a decrease in the number of lawsuits initiated by blue-collar employees, while more and more white-collar employees, particularly executives and key-employees, are initiating labour disputes against their employers before courts in Hungary.

4 II. Hiring Practices 02 Labour Code declares only one general rule in connection with the limitations on background checks. The employee may be requested to make a statement or to disclose certain information only if it does not violate his personal rights, and if deemed necessary for the conclusion and fulfillment of the employment relationship. The employee may be requested to take an aptitude test if one is prescribed by employment regulations, or if deemed necessary for exercising rights and fulfilling obligations in accordance with employment regulations. The interview questions need to be examined case by case as there is no explicit list about the suitable questions. In practice the employer is not allowed to ask about the employee s family life, religion, sexual orientation, private life, political beliefs. Questions shall be related to the position that the employee applies for. The employer has to observe the principle of the equal treatment in connection with the employment relationship.

5 III. Employment Contracts Minimum Requirements In Hungary, the conclusion of an employment contract is a pre-requisite to enter into an employment relationship. Simply put, in order to engage in an employment relationship an employment contract must be signed between the employer and the employee at all times and under any circumstances. It is definitely the employer s obligation to set forth any employment contract in writing. The employer s failure to comply will render the employment contract invalid upon the employee s claim, made within 30 days from his entering work. Substance-related requirements and guidelines: The parties of the employment contract must agree by all means on both the personal base wage and the position of the employee these terms are essential under Hungarian labour law. It is not essential for the parties to set the place of work and the duration of the employment contract as well as the starting date of the employment relationship (lack of agreement on these issues will not affect the validity of the employment contract and relationship). If the parties fail to provide for the place of work, the place where the employee regularly performs his work shall qualify as the place of work. Besides the essential and mandatory elements discussed above, the parties may set any other term they wish to provide for in the employment contract. The only thing the parties need to be aware of: such term may not be in violation of statutory labour law. 2. Fixed-term/Open-ended Contracts As long as the parties do not provide for the term of the employment contract, it is deemed to have decided to last for an indefinite period of time. Should the parties wish to establish an employment relationship for a definite time period, this must be specifically set in the employment contract. The terms of fixed-term employment relationships may not exceed 5 years; any extension thereto is inclusive in that 5-year time limit. Provided that the employment contract contains no indication of the employment s starting date, it is the next day following the conclusion of the employment contract. 3. Trial Period The Parties may set forth in the contract a trial period of a maximum of three months commencing as from the beginning of the employment. If the parties agreed on a shorter trial period, they are entitled to agree (only once) to extend the trial period to a maximum of three months. 4. Notice Period The notice period is 30 days. In case of termination by the employer, the notice period is extended with 5 days of additional notice period after 3 years of employment, with 15 days after 5 years of employment, with 20 days after 8 years of employment, etc. The parties may agree to a longer notice period, which can be a maximum of six months (which includes any additional notice period as well). It is worth noting that the competent Hungarian labour supervisory authority is authorised to carry out inspections as to whether the mandatory formalities and the major substance-related requirements have been complied with in course of concluding an employment contract.

6 IV. Working Conditions Minimum Working Conditions The employer is obliged to provide the conditions necessary for the fulfilment of the working obligations, except if they agree otherwise. The duration of the work, from its start to end, and any related preliminary or concluding activity (e.g. opening or closing of a store) all qualify as working hours. However, the duration of break-time, as well as the time spent commuting, are, typically, not inclusive. In general, full-time daily working hours total 8 hours per day. The employee and the employer are allowed to agree on part-time employment in the employment contract, setting shorter daily working hours than usually applicable to the given position in full-time work. Remuneration for part-time work is pro-rated. 2. Salary All employees shall be treated equally when it comes to any sort of remuneration for work. In this regard a particular emphasis is placed on considering the following individual circumstances of the employee: The nature, quality and the amount of work performed; The required professional qualification and prior professional experience of the employee; Physical or intellectual efforts made by the employee; The responsibility incumbent on the employee in relation to the given position. Under Hungarian labour law, the base salary may be specified either on a time (month/week/hour) or performance basis or may be the combination of the two. When the base salary is exclusively based on performance, a guaranteed salary equivalent to half of the base salary must be established as a minimum. Currently in Hungary, the minimum base salary is HUF 111,000 per month in case of full-time work. If a minimum secondary education requirement is set as a prerequisite to being employed in a certain position, the minimum base salary is raised to HUF 129,000 monthly. Certain wage supplements elaborated above (e.g. night/ shift/sunday allowance, etc.) are payable to employees beyond their base salary due for their normal work hours. The calculation base of any wage supplement is subject to the parties agreement. In the absence of such an express agreement, it is the base salary of the employee that serves as a basis when calculating any wage supplement payable to the employee. It is open for the parties to agree on a pre-determined amount of base salary, which already covers the amount of certain wage supplement(s) that may arise (i.e. Sunday allowance, official holiday allowance, shift allowance and night allowance). Alternatively, the parties are allowed to set a monthly fix rate pertinent to each anticipated wage allowance covering the wage allowance part only, remuneration for normal work is exclusive of such fixed rate. 3. Maximum Working Time Employees shall be entitled to two rest days in a given week. In case of an irregular work schedule the weekly rest days may be scheduled irregularly as well. Instead of weekly rest days, employee shall be given at least forty-eight hours uninterrupted weekly rest period. 4. Overtime In case of full time employment, two hundred and fifty hours of overtime work is permitted in a calendar year. Working overtime shall be in writing, if requested by the employee. 5. Holidays Employees are entitled to vacation time. Vacation time in Hungary is divided into basic and extra vacation time, due in each calendar year and subject to the time spent in work by the employee in the given year. The basic vacation time is currently 20 working days in Hungary. Eligibility to extra vacation is subject to the employee s

7 05 age and the number of his/her children under 16 years of age. Vacation time (inclusive of extra vacation as well) shall be allocated in the year in which it is due, however the parties have the opportunity to agree that the extra vacation time can be allocated until the end of the year subsequently following the due year of the extra vacation time, at the latest. 6. Employer s Obligation to Provide a Healthy and Safe Workplace The responsibility for the implementation of occupational safety and occupational health requirements lies with the employer. The employee s fitness for the job for which he / she is being considered shall be examined free of charge before taking up work and on a regular basis during the employment relationship.

8 V. Anti-Discrimination Laws Brief Description of Anti- Discrimination Laws The main Anti-Discrimination Laws in Hungary are the Constitution of Hungary and Act CXXV of 2003 on Equal Treatment and the Promotion of Equal Opportunities (the Equal Protection Act ). In addition the regulations of the European Union have major influence on the Hungarian Anti-Discrimination Laws. The Constitution of Hungary declares the prohibition of discrimination on the basis of age, race, sex, skin color or religion. The Equal Protection Act declares the types of discrimination and describes the available remedies. 2. Extent of Protection The Equal Protection Act prohibits the following forms of discrimination: direct negative discrimination, indirect negative discrimination, harassment, unlawful segregation, retribution, and any orders on committing such acts of discrimination. The principle of equal treatment may not be breached by behavior, measure, condition, omission, instruction or practice based on a characteristic related to any of the grounds, such as age, social origin, sexual identity, mother tongue, state of health, disability and so on. The Hungarian Labour Code sets forth the principle of equal treatment regarding the employment relationship, especially in connection with the remuneration of work. 4. Employer s Obligation to Provide Reasonable Accommodations According to the Hungarian Labour Code in the case of employment of persons with disabilities appropriate steps shall be taken to ensure that reasonable accommodation is provided. The employer shall change the conditions, equipment, and the environment to enable the employee to effectively perform the job. 5. Remedies In case of infringements of anti-discrimination laws the employee has a wide range of remedies. He may turn to the court or the Equal Treatment Authority. The Authority is entitled to initiate procedure if one year from the date of becoming aware of the breach of the law and three years from the occurrence of the breach of the law has not expired yet. The Authority s decision cannot be appealed, but the aggrieved party can file a claim with the court. The employee is entitled to receive indemnity and non-pecuniary damages in case of infringement of anti-discrimination laws. 3. Protections Against Harassment If the employee becomes a victim of harassment he may turn to his employer to take measures against the offender. If the employer does not take the proper measures, he will be responsible for the harassment, too. In addition the employee may turn to the Equal Treatment Authority or directly to the court.

9 VI. Social Media and Data Privacy Can the employer restrict the employee s use of Internet and social media during working hours? Yes, the employer may restrict the employee s use of Internet and social media during working hours if the restriction is deemed strictly necessary for reasons directly related to the intended purpose of the employment and if proportionate for achieving its objective. In practice, the employer may restrict only a few web pages taking into account the aim of the restriction. 2. Employee s use of social media to disparage the employer or divulge confidential information The employee may not share any information that may result in detrimental consequences for the employer or other persons. Employee may not exercise the right to free speech in a way, which leads to the damage of the employer s reputation or legitimate economic and organizational interests. During the employment relationship the employee shall not engage in any conduct, which jeopardizes the employer s legitimate economic interests.

10 VII. Authorizations for Foreign Employees EEA Citizens Since 1 January 2009, the employment of EEA citizens and their family members are not subject to any permits. However, the employer is obliged to notify the competent labour centre on the employment of EEA citizens. It is worth noting that the fulfilment of the notification obligation is not a pre-requisite of the establishment of employment relationships or the commencement of the activity performed on the basis thereof. The fulfilment of the notification obligation has actual significance in terms of labour inspection. 2. Non-EEA Citizens By comparison with the citizens of the EEA, non-eea citizens, namely the citizens of third countries except for statutory exceptions can only be employed in Hungary on the basis of a work permit or an EU Blue Card. 3. Statutory exceptions As statutory exceptions, no work permit is necessary on the one hand to the employment of refugees, protected or resorted persons and persons having immigrant or resident status, and on the other hand to the employment of persons having the right of freedom of movement and residence. Besides, No. 445 of 2013 Government Decree on the Authorization of Employment of non-eea citizens in Hungary ( Decree ) lists the employment forms in the framework of which the citizens of third countries can perform work without a work permit. These licence-free cases cover among others, the personnel of diplomatic representation of foreign countries, the personnel of international intergovernmental organisations operating on the basis of international agreements, the sport activity of professional athletes, etc. 4. Work permit According to the Decree the following work permits may be issued: General work permit; Permit issued without the analysis of the labour market situation; Seasonal agricultural permit. The general administrative deadline for the decision is 30 days as from the submission of the application. The most common type of work permit is the general work permit. It may be issued for a maximum of 2 years. The competent authority will issue the general work permit only if the below conditions are fulfilled: The employer has a valid manpower request in respect of the position to be filled by the potential foreign employee; No Hungarian citizen or other person having the same rights and obligations as Hungarian citizens in line with Act IV of 1991 on Job Assistance and Unemployment Benefits (i.e. refugees, protected persons, resorted persons, persons having immigrant or resident status and persons having the right of freedom of movement and residence) who is registered as a jobseeker and have the necessary qualifications for the respective position, has been directed by the labour authorities to the employer; The potential foreign employee has the necessary qualifications for the respective position. 5. EU Blue Card EU Blue Card is also sufficient for the lawful employment of citizens of a third country. The EU Blue Card has a double function: it is an EU- wide work permit for the purpose of employment of highly educated citizens of third countries and a residence permit. The EU Blue Card is valid for a maximum of 4 years and can be extended occasionally for the maximum of 4 years.

11 VIII. Termination of Employment contracts Grounds for Termination It is impossible to make an exact list of grounds for termination as such grounds are serious breaches of obligations and in case of a dispute the court decides on a case by case basis on the lawfulness of the termination taking into account the type of the breach, the provisions of the employment contract and the employee s job position. 2. Collective Dismissals Definition If the employer, based on the average statistical number of its workforce in the half-year period preceding its decision, intends to terminate the employment relationship within a 30-day period of at least 10 employees if it employs more than 20 and less than 100 employees; or of at least 10 % of its employees if it employs at least 100 but less than 300 employees; or of at least 30 employees if it employs at least 300 employees due to a reason in connection with its operation, the workforce reduction shall qualify as mass dismissal. The mass dismissal procedure has 3 well-separable phases: (i) consultation (7+15 days); (ii) announcement (30 days); and (iii) termination (at least 30 days). Consultation (7+15 days) The employer planning to carry out a mass dismissal shall initiate consultations with the works council and at least 7 days prior to the consultation procedure, the employer shall notify the works council in writing on the details of its planned decision. The employer shall notify the labour authority of its intention to carry out mass dismissal. At least 7 days after the notification has been sent, the employer shall initiate consultations with the works council and continue it: until an agreement has been concluded; or (in absence of such agreement) for at least 15 days. (i) For the purpose of concluding an agreement, the consultations between the employer and the works council shall cover the possible way to avoid mass dismissal; (ii) the principles of mass dismissal; (iii) the measures to be taken in order to mitigate its negative consequences; and (iv) a way to decrease the number of affected employees. If the parties reach an agreement it shall be in writing and shall be sent to the labour authority. If the parties cannot reach an agreement during the consultation, the employer is entitled to decide in its own discretion regarding the mass dismissal. Announcement (30 days) If the employer, following the consultation, decides on the mass dismissal, it shall determine (i) the number of affected employees; and (ii) the commencement and end date of the mass dismissal. Having made its decision, the employer is obliged to notify the labour authority in writing of its decision at least 30 days prior to the delivery of the termination notices to the employees. The employer is also obliged to notify, in writing, the employees affected by the mass dismissal of its decision and of the fact that the given employee is affected by the mass dismissal, at least 30 days prior to the delivery of the termination notice. If the employer does not comply with this obligation, the terminations shall be deemed unlawful. Termination (at least 30 days) The termination notice (of at least 30 days) can be delivered to the employees 30 days following the notification of the affected employees on the employer s decision of mass dismissal.

12 10 3. Individual Dismissals a. Is severance pay required? The employee is entitled to severance payment if the employment is terminated by the employer and the employee is employed by the employer for at least 3 years. The minimum amount of severance payment is a one-month absentee fee; the maximum amount (in case of 25 years of employment) is six months absentee fee. The employee is not entitled to a severance payment if the reason for termination is the employee s behaviour or ability to work (except health issues). 4. Separation Agreements (i) Is a Separation Agreement required or considered best practice? A separation agreement is not required by the Hungarian labour law but it is a good choice to avoid further disputes, as after its conclusion the parties can challenge its validity only in few cases (e.g. in case of duress or deception). (ii) What are the standard provisions of a Separation Agreement? The standard provisions of a separation agreement are the following: date of the termination of employment relationship; provisions on payment by the employer; non-compete provisions (if any) waiver. (iii) Does the age of the employee make a difference Persons above 16 years can be employees. employee can claim damages related to the unlawful termination of the employment relationship, however, the damages claimed as lost income are limited by law; they cannot exceed the sum of a 12-month absence fee of the employee. In addition to these 12-month capped damages, the employee can claim the unpaid severance pay if he did not receive severance pay at the time of the termination, however, he would have been entitled to it. In lieu of damages, he can claim the absence fee for the notice period. Furthermore, in certain cases (see the chapter on void dismissal), the employee can request the restoration of his employment relationship. In light of the adverse consequences, the employer may face in the case of an unlawful termination of employment relationship, it is highly recommended to consult with an attorney on both the possibility of the termination by notice and the reasoning thereof, as well as whether the conduct of the employee or the violation of his obligation can serve as a lawful basis for the termination by notice with immediate effect. The employee is entitled to apply for the restoration of employment by the court if: the termination of the employment breached the requirement of equal treatment, or the employee was under termination protection (e.g. pregnant), or the employee was a trade union official, or the employee was a works council member, or the employee was an employees representative in the employer s supervisory board or the employee successfully challenged the mutual agreement on employment termination before the court. (iv) Are there any additional provisions to consider? It depends on the circumstances of the given case. 5. Remedies for employee seeking to challenge wrongful termination Generally speaking, the employer terminates the employment relationship unlawfully if he does not meet the respective substantive or procedural rules. The

13 IX. Restrictive Covenants Definition of Restrictive Covenants The employer and the employee can agree that after the termination of the employment (for a compensation) the employee shall not engage in any conduct, which may infringe upon or jeopardize the rightful economic interests of the employer. Such non-compete period can be determined up to two years following the termination of the employment relationship. 2. Types of Restrictive Covenants (i) Non-Compete Clauses The employee may undertake that he shall not pursue any business, which competes with the employer s business. (ii) Non-solicitation of customers The employee may undertake not to solicit the employer s clients and customers for his own benefit or the benefit of a competitor. In case of non-solicitation provisions the employee is entitled to compensation. The amount of compensation depends on the period of the agreement and the scope of restrictions. 3. Enforcement of Restrictive Covenants process and remedies The employer and the employee have the right to stipulate penalty payments apart from the right to damages in case of breaching a restrictive covenant. They are entitled to file an action with the court in such case. 4. Use and Limitations of Garden Leave In Hungary there are no limitations of garden leave. The employer can decide that the employee is obliged to stay away from work during the notice period (or at any other time), while still remaining on the payroll of the employer. (iii) Non-solicitation of employees Employee may undertake not to solicit the employer s other employees to leave the employer for his own benefit or the benefit of a competitor. In case of nonsolicitation provisions the employee is entitled to compensation. The amount of compensation depends on the period of the agreement and the scope of restrictions. In determining the amount of such compensation, the degree of impediment the agreement has on the employee s ability to find employment elsewhere in the light of his education and experience shall be taken into consideration. The amount of compensation for the term of the agreement may not be less than one-third of the base wage due for the same period.

14 X. RIGHTS OF EMPLOYEES IN CASE OF A TRANSFER OF UNDERTAKING Employees Rights The new employer is not allowed to terminate the employee s employment relationship by notice by relying on the fact of the transfer of the undertaking. Change in the employer s person could be injurious to the employee in certain cases. Work conditions pertinent to the employee may change substantially due to the change in the employer s person causing him/her an unreasonable and disproportionate harm. Embracing the idea of allowing for the parties intent to a higher extent, the Labour Code expressly affords the employee the opportunity to terminate his/her employment relationship by notice in such event, thereby the employee will be entitled to the same emoluments due in case of the employer s termination of the employment relationship by notice (e.g. severance payment). The employee is obliged to justify his/her decision by supporting the legal grounds enumerated above. The burden of proof in respect of the authenticity and substantiality of the cause for termination by notice lies with the employee. The employee is entitled to terminate the employment relationship with notice within a 30-day forfeit deadline reckoned from the date of the transfer of an undertaking. both employers must engage in negotiations with the worker s council concerning all the measures pertinent to the employees. If no works council operates at the employer, the employees themselves must be notified in writing accordingly. Within 15 days following the effective date of the undertaking s transfer, the new employer must notify all respective employees about the change in the employer s person and as to whether there has been any change to certain working conditions (e.g. daily working hours). The employers failure to meet its notification and consultation obligations will allow the works council to go to court within 5 days claiming that their interests have been violated. The court is entitled to establish as to whether such infringement has, in fact, occurred. The works council actually has a preliminary consultancy right, meaning that the works council s views on the transfer must be requested prior to the employer s resolutions therein. A trade union is nevertheless entitled to express its ideas and judgments about the intended transfer of the undertaking and have the employer involved in a consultation procedure, if necessary. In regards to employee s outstanding claims against the employer having fallen due prior to the transfer of an undertaking, the employee may enforce such a claim against either of the employers within one year from the date of the transfer of an undertaking. 2. Requirements for Predecessor and Successor Parties Prior to the effective date of the transfer of an undertaking the previous employer must inform the new employer about the rights and obligations attached to the employment relationships affected by the undertaking s transfer. Both the old and the new employer must inform the works council 15 days prior to the transfer s date at the latest about the intended transfer. Simultaneously,

15 XI. TRADE UNIONS AND EMPLOYERS ASSOCIATIONS Brief Description of Employees and Employers Organizations The Constitution of Hungary and the Hungarian Labour Code implements the freedom of association, which in principle was declared in numerous international treaties. The freedom of association guaranteed by the Constitution of Hungary and the Hungarian Labour Code entitles both the employees and the employers to organise representative organisations for the promotion and protection of their economic and social interests and to join or refrain from joining such organisations. Such representative organisations may establish or join federations (including international federations). The Hungarian Labour Code expressly declares that employees shall be entitled to establish trade unions at their place of employment. 2. Rights and Importance of Trade Unions The trade unions are special civil organisations with legal personality. Trade unions are authorized to establish their internal organisation, establish the rules of their operation and elect their representatives. Trade unions are registered by the county courts. It shall be noted, that only those trade unions may exercise their rights regarding an employer, which according to its statutes operates an organization authorized for representation of the given trade union at the employer or has an officer at the employer. The employers organisations consist of companies and groups of companies instead of individuals. Employers organisations are typically organised on a territorial and/ or professional basis and/or on the basis of company size. The employers organisations are authorized to conclude collective bargaining agreements with trade unions. The most significant employers organisations in Hungary have been formed by (i) small companies, (ii) medium and large sized companies and (iii) employers in the agriculture industry. 3. Types of Representations There are two types of representation of trade unions: trade union which operates an organization authorized for its representation at the employer; trade union, which has an officer at the employer. 4. Number of Representatives If the average statistical number of employees employed during the previous calendar year at the employer is: not more than five hundred, the number of the representatives shall be one; more than five hundred but not more than one thousand, the number of the representatives shall be two; more than one thousand but not more than two thousand, the number of the representatives shall be tree; more than two thousand but not more than four thousand, the number of the representatives shall be four; more than four thousand, the number of the representatives shall be five. 5. Appointment of Representatives The trade union is entitled to appoint the representatives. 6. Tasks and Obligations of Representatives The trade union representatives have the following tasks: (i) to promote and protect the employees interests related to their employment, in particular to conclude a collective agreement with the employer and (ii) to participate in the decision making process of the employer regarding the working conditions.

16 14 7. Employees Representation in Management For the purpose of exercising the employees right of participation in the employers decisions and influencing the working conditions, the employees may establish: works councils if the average number of employees employed by the employer (or at its branch office) exceeds 50, shop steward, if the average number of employees employed by the employer (or at its branch office) is between 16 and 50. If more than one works council has been established at the same employer, the works councils may establish a central works council. Depending on the number of employees and the type of works council, the number of the works council members shall be at least three but maximum fifteen. The detailed procedure of the election and the operation of the works council are outlined in the Hungarian Labour Code.

17 XII. Other Types of Employee Representative Bodies 15 A shop steward or a works council shall be elected in order to represent the employee before the employer. Their role is to help the cooperation between the employer and the employees. The works councils are elected for a five-year term. The justified expenses incurred in connection with the election and operation of the works council shall be borne by the employer.

18 XIIi. Social Security / Healthcare / Other Required Benefits Legal Framework The social security system in Hungary provides a wide range of benefits including maternity, unemployment and disability benefits, as well as sick pay and pensions. 2. Required Contributions The social security contribution to be paid by the employees consists of the following items: Pension contribution 10 % Health insurance contribution 7 % Labour market contribution 1,5 % The employer shall pay social security tax in respect of its employees. Social security tax is a newly introduced concept (adopted at the end of 2011). It does not grant social rights of allowances or subsidies (social rights are covered by individual social contributions). In general, the employer shall calculate the amount thereof and withhold it from the payable salary for social security tax purpose. The tax base is identical to the tax base of personal income. The tax rate is 27%. 4. Required Maternity/Sickness/ Disability/Annual Leaves Maternity leave is a continuous, uninterrupted 24- week period in Hungary, from which maximum 4 weeks shall be used prior to the expected date of the child s delivery, unless the parties agree otherwise. A maternity allowance is paid to employees on maternity leave. Employees shall be entitled to fifteen working days of sick leave per calendar year for the period during which the employee is incapacitated to work. 5. Mandatory and Typically Provided Pensions Persons who have reached the statutory retirement age and have at least 20 years of employment are eligible for old-age pension. The statutory retirement age differs based on the employee s year of birth, i.e. it increases gradually with every coming generation, e.g. employees born before 1952 may retire at the age of 62, while employees born in or after 1957 may retire at the age of Insurances Besides the required contributions employees can pay fee for private insurance companies. Employees can choose from two different types of private health insurances. One of them is voluntary mutual insurance fund and the other option is commercial sickness insurance. Voluntary Mutual Insurance Funds are non-profit, self-governing organizations, while commercial sickness insurances are offered by multi-national insurance companies that profit from their activity.

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