The use of temporary staff agencies and agency workers has increased steadily in Hungary over the past two decades. The legal relationship in this context is usually referred to as 'workforce lending', as it is understood that the agency's assignment of workers to the undertaking that uses them constitutes lending.
Although the basic concept of workforce lending and detailed regulations on this tripartite legal relationship were officially adopted in 2001 as part of the harmonisation of Hungarian law with EU law, the concept had actually been in use much earlier.
The use of temporary agency workers is particularly popular among employers whose workforce needs fluctuate or which require employees for short-term or seasonal jobs. There are few restrictions or prohibitions on the employment of agency workers in Hungary. As a general rule, employers may employ an unlimited number of agency workers for any job position, for a period of up to five years. However, the law imposes certain restrictions and prohibitions on the use of temporary agency workers.
Term of employment with same company
The temporary nature of the assignment is a key characteristic of the legal relationship with agency workers. Therefore, in accordance with EU Directive 2008/104/EC, the Labour Code provides that the duration of the agency employee's assignment to the same user entity must not exceed five years. This timeframe includes periods of an individual's extended assignment and re-assignment within six months of termination of the individual's previous assignment, regardless of whether the assignment was made by the same or a different temporary staff agency. This restriction is similar to that for fixed-term employment contracts, which are also restricted to five years and are subject to the same time calculation method.
Employing agency workers in case of strike
In principle, temporary agency workers cannot be used to counteract strikes. This principle was incorporated by the previous regulations in a way that prohibited use of agency workers at a workplace that is affected by a strike. This prohibition was rather strict, as it did not even allow the use of agency workers in positions unaffected by the strike. The existing regulations have relaxed this prohibition, as it now applies only to those positions affected by the strike (ie, employment of agency workers with a view to replacing striking employees is not permitted).
Workforce lending between companies with same shareholders
The Labour Code prohibits workforce lending between companies which have the same shareholders (or partly the same). The aim of this prohibition is to block employers from founding a temporary staff agency which could then provide a workforce to group companies below the standard market price. By applying such a structure, employers could theoretically benefit from the flexible rules on workforce lending without actually exercising the role of employers. However, this is clearly against the concept and principle of agency work.
This restriction is regulated in such a way that an agreement concluded between the temporary staff agency and the user enterprise is invalid if:
- the two parties are affiliated by way of ownership (whole or partial);
- at least one of the two entities has some shareholding in the other; or
- the two entities are connected through their ownership of a third organisation.
Agency work under employment regulations
The Labour Code provides that the assignment of agency workers is not allowed in cases specified by the relevant employment regulations. The aim of this prohibition is twofold. First, it prohibits the employment of agency workers for jobs in which the employment of certain employee groups would otherwise be prohibited (eg, the employment of women or young employees in positions exposed to health hazards). Second, it empowers the parties to a collective agreement to establish further restrictions as to the employment of agency workers.
This latter aim has been the subject of criticism, as it is based on the somewhat outdated assumption that trade unions should seek to restrict the use of agency workers instead of regular employees. Nowadays, unions should also protect agency workers and ensure their equal treatment with regard to regular employees.
Penalties for non-compliance
The Labour Supervision Authority pays particular attention to the use of agency workers and closely scrutinises compliance with the legal provisions related to agency workers during its audits. Companies are therefore strongly recommended to become familiar with the restrictions on the use of agency workers. The Labour Supervision Authority may impose fines of up to HUF 10 million (approximately EUR 32,000) for violations of these provisions.
This article was edited by and first appeared on www.internationallawoffice.com
By Daniel Gera, Attorney at Law, Schoenherr
