With the hiring of third-country nationals becoming ever more prevalent on the Hungarian job market in recent years, the number of problematic employment cases is on the rise.
Employers invest several months in the recruitment and immigration process, in addition to incurring significant costs. They usually hope that after such investment, they cover a position for a while, and they can terminate third-country national employee contracts in the “usual” way. In reality, employers are often unfamiliar with the rules of employment of third-country nationals and the potential consequences, thus they often encounter unpleasant surprises. The most common are: (i) being unable to terminate employment despite employee underperformance; (ii) redundancies necessary due to relocating business activities from Hungary to other countries, especially in the SSC sector; or (iii) employees leaving before the end of the fixed term. This article seeks to shed light on issues surrounding these termination cases.
Termination by the Employer
Third-country nationals may only be employed for a fixed period of maximum 2 years. Work permits may be extended by further 2-year periods. Compared to indefinite term employment contracts, employers are limited in the termination options available to them for employees under fixed-term contracts. Redundancy is not a valid reason for termination, whilst underperformance and behavioral problems may only lead to termination if they are so serious as to justify extraordinary termination.
During probation an employer may terminate the employment with immediate effect, however, in many cases probation is often not long enough to assess professional skills and suitability for the position. A psychological factor likely also comes into play – after significant investment in recruitment, employers may be reluctant to terminate employment during probation even if the performance or personality match is not perfect.
After probation an employer may only terminate fixed term employment with ordinary notice in the following circumstances: (a) during winding-up or bankruptcy proceedings; (b) for a reason related to the employee’s capabilities; and (c) if the employment relationship becomes impossible to continue for an unavoidable external reason. Termination based on capability is usually viable only within the first 6 months of employment. It is important to note here that capability does not mean ordinary performance issues, rather the lack of necessary professional or personal capabilities (e.g., people management skills). The third circumstance may rarely be used (e.g., a complete business shutdown).
There is a final, but costly possibility. Fixed term employment may be terminated with immediate effect and without reason if the employer pays the employee the value of their salary to the end of the fixed term (maximum 12 months).
Otherwise, an employer may only terminate the employment with immediate effect.
What if the Employee terminates the Employment?
It is simply a fact that employees may receive better job offers. In Hungary employees may only terminate fixed term employment for reasons according to which it would be impossible for them to continue the employment or would cause disproportionate harm. A better job offer is not such a reason. We experienced a significant rise in such cases recently. Even if employers know or suspect that reasons referred to in an employee termination are untrue (e.g., family or health issues), they rarely take these cases to court as damages employers may claim from the employee are capped at 3 months’ salary. If the employee leaves Hungary, the enforcement procedure would simply be too burdensome and expensive.
What can Employers do?
To mitigate the issues discussed above, employers may wish to closely monitor the performance of third-country national employees during probation and document all performance or capability issues. Even if employers do not terminate the employment during probation, such documentation may assist, if the employer wishes to pursue capability-based termination after probation. Furthermore, in documenting all problems and issuing written warnings employers may find that ongoing breaches of employee obligations may add up to grounds for extraordinary termination.
Implementing policies on repayment obligations for relocation support and immigration costs should an employee seek early termination may work as a deterrent as well. Lastly, it may be advisable to take selected cases of wrongful terminations by employees to court, to act as a deterrent once again against potential future cases.
By Greta Baksa, Attorney at Law, OPL gunnercooke