Tax News Hungary – Details to „short-time work”

The Hungarian Government has published the detailed rules of its government aid program for short-time work in the government decree number 105 of 2020 (IV. 10.), which was designed after the German and Austrian ’Kurzarbeit’ (this is why the reference “Kurzarbeit” is also used in Hungarian sources). In many aspects the Hungarian aid system is different from its German and Austrian counterparts, and some details still remain unexplained by the current legislation.

In the following we present the information which has been released by the Government until now about the Hungarian ’Kurzarbeit’ in summary topics for easier overview and understanding (some parts have been shortened), however, this summary cannot substitute reading the actual legislative requirements themselves. Thus we strongly recommend that our Clients contact us about the details, as we are at your disposal.

Who is eligible for the Government aid?

employer may request the aid who

• is operating for at least 6 months,
• undertakes to continue employing the employees in question in short-time work,
• will not decrease its statistical staff in any of its Hungarian establishments at least until one month following the aided period.

Further requirements of aid with respect to employers:

• It has no outstanding payment obligation connected to employment support towards the State Employment Authority (these are the local government agencies),
• It complies with the requirements of ‘organized labour connections’ and can validate this,
• it is not under liquidation, voluntary liquidation, or bankruptcy procedure,
• it is not considered as ‘a company in difficult situation’ based on the rules of government decree number 37 of 2011 (III. 22.).

For which employees can the aid be requested?

The government aid can only be requested for employees for whom the following conditions are met:

• he has been employed by the employer requesting the aid at least since the day when the State of Emergency has been declared in Hungary (11 March 2020),
• he is not spending his notice period,
• he has not received any other form of support connected to part time working,
• the employer does not receive any job creating or job maintaining support with respect to the employee in question.

For what period can the aid be requested?

The legislation will become effective on 16 April, and government aid can be requested from this date, until 1 month after the State of Emergency is over at the latest. The aid can be provided for the period following the submission of the request, and will be determined on a monthly basis, up to a maximum of 3 months.

What is the amount of aid that can be requested?

The amount of aid is the 70 percent of the amount of stoppage payment calculated by the due date as the announcement of the State of Emergency (reduced with personal income tax advance and social security contributions) which would be payable for the proportionate part of the lost work time in case of 30, 40 or 50 percent reduction of work time. The amount of stoppage payment that can be considered for the calculation of the government aid cannot exceed the stoppage payment reduced with taxes and contributions equal to double of the minimum wage applicable on the day of the submission of the request (which is currently net HUF 214,000).

As a reminder, stoppage payment is a type of remuneration to be paid in lack of work based on the Hungarian labour code, which can be determined based on the base salary, the average allowances, piecework payment and benefits.

It is important to note that since the net amount which can be considered for the calculation of the aid is maximized, thus the amount of aid cannot exceed HUF 75,000 (approx. EUR 214) per month per employee. Thus, if the employee’s net salary exceeds HUF 214,000 net per month, then he will not receive his original monthly salary even with the government aid.

Example: suppose that an employee’s monthly net salary is HUF 214,000. His employer will have him work 50 percent part time, for which he will receive 50 percent of his original wage (HUF 107,000). The government will provide aid in the amount of 70 percent of the lost 50 percent of his original wage, thus compensation the employee and providing relief to the employer. The amount of government aid is 70 percent of half the original HUF 214,000, which is HUF 75,000. Based on the government decree the part of the lost work time which is not covered by the government aid (which is 30 percent of the lost 50 percent) the employer is obliged to develop the employees skills, and it also has to provide salary for this part. In this example the employee will receive the same amount of HUF 214,000 net salary in the end, from which a total of 50 percent plus 15 percent shall be covered by the employer.

What is the required work time during the aided period?

In three months’ average aid can be provided to a part time work scheme which is at least half the amount of work time stipulated in the original employment contract, but does not exceed 70 percent of it (meaning a reduction of work hours by 30 to 50 percent), and the part time work has to be at least 4 hours per day (thus 20 hours per week). No aid can be provided for leave without payment. The employee also has to declare that in case he takes a second job to cover for the lost work time’s income, this second job will not prevent him from returning to full time working in his first job.

What are the conditions to receive the aid?

The employer and the employee have to make a joint declaration, in which they have to agree about the conditions of short-time work, which can be done in practice by amending the employment contract. Their agreement has to be attached to the aid request. During the aided period the employer cannot order overtime. 30 percent of the lost work time has to be utilized as ’individual development time’, meaning some sort of training or other form of personal development connected to the employee’s job role or the employer’s activity, for which the employer has to pay salary to the employee. The legislation does not provide more details on what exactly can be accepted as such form of development. The employee has to undertake to be at the employer’s disposal during the development time.

When and how can the aid be requested?

The employer and the employee can submit a joint application electronically to the relevant local government agency at the place of work via the "Cégkapu" online system. The request can be submitted during the State of Emergency, or 1 month after it at the latest.

In the request it has to be presented that there is a strong and immediate connection between the economic reasons of the short-time work and the State of Emergency, and it has to be duly supported that keeping the employee is a ’national interest’ in connection with the continued economic activity of the employer. It also has to be provided in the request what measures have been taken and what more is planned to be taken by the employer to overcome the economic difficulties.

The agreement between the employer and employee about the conditions of short-time work has to be attached to the request for aid.

How are the applications evaluated and how is the aid paid?

The government agency will make its decision about the applications within 8 working days following submission.  No legal remedy is available against denied requests, and the decision cannot be attacked in front of a court of justice either; however, requests can be submitted one more time following denial. The aid is paid to the employee subsequently in each month, and no aid is payable for holidays. The aid is free of all tax and contributions.