The most important provisions of a legal employment contract
What is an employment contract?
An employment contract is an official document and agreement in which the employer and the employee set out the key terms of the employment relationship in writing. In line with the provisions of the Labour Code, the employment contract must be concluded in writing. Failure to do so renders the contract invalid only at the employee’s request, and only within 30 days following the start of work.
Who may be parties to an employment relationship?
- Employee: any natural person who has reached the age of 16, or a student who has reached the age of 15 and is enrolled in full‑time education, but only for work performed during school holidays.
Persons under 16 may only perform work in the context of cultural, artistic, sports or advertising activities as defined by law, and such employment requires the involvement of the guardianship authority.
Establishing an employment relationship with a minor also requires the written consent of the parent or legal guardian.
- Employer: any legal entity or person possessing legal capacity.
The content of the employment contract
In addition to the parties’ details, the mandatory elements of the employment contract are the base salary and the job title. The terms included in the contract may be amended later, but this requires mutual agreement (contract amendment).
If certain points are not specified in the contract, the statutory provisions apply by default:
- If the term of the employment relationship is not specified, the contract is deemed to be concluded for an indefinite period.
- If the place of work is not defined, the place customarily associated with the role shall be considered the place of work.
- If the parties do not agree on working hours different from full‑time, the employment relationship is regarded as full‑time.
- The employment relationship begins on the date specified in the contract. If no such date is provided, the day following the signing of the contract is considered the first day of employment.
A probationary period may be agreed, up to a maximum of three months, or up to six months if provided for in a collective agreement. If the parties agree on a shorter probationary period, it may be extended once, but the total duration may not exceed three months.
The employer must register the employee with the National Tax and Customs Administration preferably on the day before the employee starts work, but no later than the first working day and always prior to the commencement of work, using form 08E (formerly T1041). The employer must issue a certificate to the employee confirming the registration.
The employment contract, the mandatory information notice and all certificates must be prepared in two original copies, one signed copy retained by each party.
Obligations of the parties
Both parties owe obligations to one another.
The employer is required to:
- employ the employee in line with the terms set out in the employment contract and in accordance with applicable legislation;
- reimburse all necessary and justified costs incurred in relation to the performance of work;
- provide the conditions required for performing work;
- ensure compliance with the requirements of safe and healthy working conditions.
The employee is required to:
- appear at the designated place and time in a fit condition to work as prescribed by the employer;
- remain available to the employer for the purpose of performing work, in a fit condition, throughout working hours;
- perform work personally, with the level of expertise and diligence generally expected, and in accordance with the rules, regulations, instructions and customary practices applicable to the role;
- cooperate with colleagues.
Employer’s obligation to provide written information
The employer must provide written information to the employee within seven days from the start of the employment relationship, covering:
- the person exercising employer’s rights;
- the start date and key terms of the employment relationship;
- the place of work;
- the tasks associated with the position;
- the duration of daily working hours, the days of the week on which working time may be scheduled, possible start and end times of scheduled daily working hours, the potential extent of overtime, and any specific characteristics of the employer’s operations;
- the method for calculating wages, the frequency of wage payments, and the date of payment;
- any remuneration and benefits beyond base salary;
- the number of annual leave days, their calculation method and the rules applicable to granting leave;
- the rules related to the termination of employment, particularly those concerning the determination of notice periods;
- the employer’s training policy and the amount of time available to the employee for undertaking training;
- the authority to which the employer pays employment-related public charges;
- whether the employer is subject to a collective bargaining agreement.
If the employment relationship ends within seven days, the employer must provide this information no later than at the same time as issuing the mandatory termination‑related certificates.
Amendment of the employment contract
Amending the employment contract is possible; the parties may modify their previously concluded agreement at any time by mutual consent.
Fixed‑term employment
The duration of a fixed‑term employment contract may not exceed five years, including any extensions of the original term and cases where the parties enter into another fixed‑term contract within six months following the termination of the previous fixed‑term contract. A probationary period may also be agreed for fixed‑term employment; however, for contracts concluded for no more than 12 months, the probationary period must be set proportionately.
The end date of a fixed‑term employment relationship must be determined either by specifying a calendar date or by another appropriate method. Where specifying an exact date is not feasible—such as when the position is filled temporarily until an employee on maternity leave returns—the employer must inform the fixed‑term employee of the expected duration.
Employment under simplified or occasional employment arrangements
Simplified employment covers occasional work, agricultural seasonal work and tourism‑related seasonal work. It is important to note that an employer may not conclude a simplified employment contract with its own regular employee.
If, under simplified employment, the individual performs agricultural seasonal work, occasional work, or a combination of these on several occasions, the total number of days worked under simplified arrangements may not exceed 120 days per calendar year. This annual limit applies per employee, not per employer; therefore, the total number of simplified‑employment days across all employers must not exceed 120.
Agricultural seasonal work: Work performed in the sectors of crop production, forestry, animal husbandry, fishing and hunting, as well as handling and packaging of agricultural products produced by a producer, producer group, producer organisation or their association, excluding further processing.
Tourism‑related seasonal work: Seasonal work performed for an employer engaged in commercial‑type tourism service activities as defined by the Act on Trade.
Occasional work: A fixed‑term employment relationship between the employer and the employee that:
a) lasts for no more than five consecutive calendar days, and
b) does not exceed a total of fifteen calendar days within a calendar month.
In the case of simplified employment, the employer must register the employee with the National Tax and Customs Administration prior to the commencement of work using form T1042E. The employer must provide its tax number, the employee’s full name, tax identification number and social security number, and indicate the number of days and the category of simplified employment.
Under an employment relationship established for the purpose of simplified employment, the minimum remuneration payable as base salary or performance‑based pay must correspond to at least 85% of the statutory minimum wage for positions not requiring qualifications, and to 87% of the guaranteed wage minimum for positions requiring qualifications.
The net daily income earned by a film industry extra performing occasional work may not exceed 12% of the statutory minimum wage applicable on the first day of the relevant month, with the resulting amount rounded to the nearest one hundred forints.
A person performing work under a simplified employment relationship is not considered insured under the Social Security Act, but based on this legal relationship becomes entitled to old‑age pension, accident‑related health services and unemployment benefits.
What are the mandatory elements of an employment contract?
The employer’s company details and the employee’s personal details:
- The employer’s name, address, tax number, etc.
- The employee's name, address, date of birth, etc.
The base salary and other elements of remuneration:
- The base salary and additional elements of remuneration for work, detailing the conditions under which the employee receives his/her pay.
The Employee’s position:
- It describes exactly what tasks the employee is responsible for and what position he/she holds at the company.
The duration of the probationary period:
- It specifies the period of time during which both the employer and the employee can decide if the employee and a position are a good match.
The term of the employment:
- It specifies the length of the employment relationship. If not specified, the employment is for an indefinite term.
The place of work:
- If the place of work is not clearly specified, it is considered to be the place where the employee usually works.
Whether the employment is full-time or part-time:
- Unless otherwise specified, it is assumed that the employee works in full-time employment.
If the employment contract contains at least this information, the rights and obligations of the parties will be clear in most cases.
What information elements should be included in an employment contract?
Employers are obliged to inform employees in writing within 15 days of the following important information relating to their employment contract:
- The daily working time: How much time the employee is expected to be at work daily.
- Remunerations and other benefits above the base salary: What other remunerations and benefits the employee is entitled to in addition to the base salary.
- Payroll accounting: How the salary is calculated, when and how often it is paid, as well as the exact date of payment.
- Leave days and how they are issued: How many days of leave the employee is entitled to, how it is calculated, and the rules for issuing leave days.
- Rules applicable to the notice period: What conditions apply to dismissal and resignation, and how long the notice period should be before the employment is terminated.
- The scope of the collective agreement: Whether the employer has a collective agreement in place and what specific provisions apply to them.
- The person exercising employer’s rights: Who is entitled to exercise the employer’s rights?
Important note: The employer is not obliged to provide such information if the duration of the employment relationship is one month or less, or the working time is eight hours per week or less, i.e. in the case of short-term or part-time employment, detailed information may not be provided. Nevertheless, these elements can be included in the employment contract, and it is worth asking for such information even if the employer is not legally obliged to provide it.
Why is it a problem to work without an employment contract?
In some cases, in order to avoid taxes and obligations, the employee and the employer choose to work without a written employment contract (and rely instead on a verbal agreement) to establish the employment relationship. However, as a consequence, it is not possible to prove the existence of an employment relationship. With a view to this situation, the Labour Code has introduced a rule to protect workers.
This rule states that an employment contract that is not in writing is invalid, but the employee can still rely on such an agreement within 30 days on starting work. This means that even if the employment is based on an oral agreement, the law protects workers by this rule so that they can assert their rights and to ensure that their employment is officially recorded for the purpose of calculating service time.
It is recommended that employees avoid jobs without a written employment contract, even if they seem more financially attractive in the short term.
Amending the employment contract- Is it possible? Is it legal?
Both the employer and the employee can take the initiative to change provisions of the employment contract. Changes in various aspects of life, for example, having children or a change in family situation, can also lead to such a situation. For example, a mother on maternity leave may return to work in part-time employment. It is important to note that the employment contract can only be amended in accordance with the provisions of the Labour Code and both parties must comply with these provisions.
5+1 things to pay attention to before signing an employment contract
1. Remuneration and benefits:
- Check the elements of remuneration and other benefits offered (e.g. cafeteria, bonuses, etc.).
2. Position and responsibilities:
- Make sure that the positions and its responsibilities match your expectations and skills.
3. Working hours and flexibility:
- Understand expectations regarding working hours, including overtime.
- If flexibility is important to you (e.g. home office), it is worth discussing these options.
4. Place of work:
- Be clear about where you will be working. This may be particularly important if remote working or travel is an option.
5. Conditions of termination:
- Review the terms and conditions applicable to the termination of the employment contract by either of the parties.
- Understand with what notice period and under what conditions the employer or you may terminate the employment.
+ 1 Other terms and conditions:
- Look at other conditions, such as holidays, sick leave, training opportunities, etc.
- Look out for any confidentiality and non-compete clauses.
What should a company pay attention to in order to draw up a legal employment contract?
When drafting a legal employment contract, it is important that it is adapted to the labour laws and regulations of the country in question. Forvis Mazars’ experts have over 30 years of experience in drafting employment contracts, so our clients can be certain that these documents are legally compliant!