In Hungary, as is the case in other EU countries, recent economic growth has been accompanied by a labour shortage. This is largely due to Hungarian workers emigrating to other EU countries in search of higher wages and better living standards. According to statistics, approximately 5% of the country's working-age population has emigrated to other EU countries in recent years.
In parallel to this, several foreign investors have chosen to develop their production sites in Hungary, which has resulted in an increasing demand for workers. Under pressure to find a solution, the government introduced a new law to amend the working time rules, including by increasing the overtime limits and extending so-called 'work-time cycles'.
Since its adoption, the new law has come under close scrutiny from opposition parties and trade unions, and in December 2018 thousands of people took to the streets to protest what has become known as the 'slave act'. In addition to the protests, many commentators have analysed the new law's potential effects from several angles.
Changes to overtime limits
The amended overtime limits affect most employers and employees and have thus been the most heavily debated of the recent amendments.
Contrary to many reports, the limits for overtime which may be unilaterally ordered by an employer remain unchanged (250 hours per calendar year or 300 hours per calendar year based on a collective bargaining agreement). However, employers may now order an additional 150 hours (or 100 hours where the limit is increased to 300 hours by a collective agreement) of overtime based on an individual agreement concluded with the employee. Thus, the maximum overtime limit has been increased to 400 hours per calendar year.
This additional overtime (so-called 'voluntary overtime') has been heavily criticised – in some cases, rightly so – because employees are usually not in a position to freely agree to such overtime.
Conversely, employees in certain sectors are willing to perform additional work for extra pay, in which case such agreements could be beneficial to both parties (employers will have greater flexibility in scheduling and employees who wish to perform overtime will be allowed to do so). Further, due to the labour shortage, employers are sometimes reluctant to require employees to perform too much overtime, as they could risk losing their workforce to competitors.
The rules governing the maximum daily working times and rest periods remain unchanged.
Changes to work-time cycles
Another significant change is that employers and trade unions may agree via a collective bargaining agreement to apply a work-time cycle of 36 months where this is justified by objective technical reasons or reasons relating to work scheduling. This is a significant increase, as the previous limit was 12 months.
Where no collective bargaining agreement exists, work-time cycles may last for four months or 16 weeks (or six months or 26 weeks for certain employee groups). These rules remain unchanged.
The setting of a work-time cycle is relevant for employers which need flexibility in work-time scheduling and use a 'working time-type framework' (ie, the employer can schedule working hours unevenly during the cycle – keeping in mind the weekly maximum working time of 48 hours and the required rest times – so that the weekly maximum working time limits are fulfilled, on average, during the work-time cycle).
The recent amendments have introduced a rule which further fosters such flexibility, as it allows employers to meet the weekly maximum working limit of an average of 48 hours over a 12-month cycle if this is agreed in a collective bargaining agreement – even if the actual length of the cycle is shorter.
Any work performed outside the scheduled working hours, or in addition to the set framework, must be considered overtime. As overtime payments are normally due only once the scheduled work-time cycle has ended, the extension of the maximum length of a work-time cycle could allow employers to defer overtime payments to employees for up to three years.
The exact application of the new work-time cycle rules in practice remains to be seen. That said, trade unions will likely ask for certain guarantees regarding payment terms before agreeing to extend the maximum length of a work-time cycle.
The exact implications of the new rules cannot be predicted. Supporters of the new rules state that they will provide those seeking additional work and earnings with a means for attaining them. It is also believed that the more flexible rules on work scheduling will attract multinationals and foster further foreign investment in Hungary.
Only time will tell whether these expectations will be fulfilled or whether further changes will be required in order to better protect employees' rights.
By Daniel Gera, Counsel, Dorottya Gindl, Associate Schoenherr