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Termination of Employment Contracts in Hungary

1. 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

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 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

a. 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).

b. 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

c. Does the age of the employee make a difference?

Persons above 16 years can be employees.

d. Are there 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 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.

For more information, please contact L&E Global.
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