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Far from Impossible... Legal Challenges of Teleworking

Far from Impossible... Legal Challenges of Teleworking

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While the number of people employed in teleworking or home office is growing rapidly across the world, many firms are not aware of what this entails in legal terms. Yet, those employing workers outside of the office are often faced with unexpected risks.

Chronic labour shortage. Increasing demand for flexible employment. Geographical mismatches between labour market participants. Saving on office rents. These are just a few of the reasons for the rapid expansion of teleworking. Recently, the number of employees who work outside of the company’s office has multiplied. So much so that, according to statistics from the International Labour Organisation, they already accounted for 17% of all employees in the European Union at the end of 2017. While this process is slower in Hungary, there is no doubt that teleworking is spreading rapidly here as well. But what does an employer risk when employing a worker outside of the office?

Home accident = work accident

At the workplace, it is the employer's responsibility to ensure and monitor health and safety at work. But how does this work in the case of “home office”? 

Legal rules on teleworking do not contain any specific requirements for workplace safety. Therefore, even in the case of working from home, the employer must make sure that the conditions for safe working are in place. Yet, with teleworking, this can lead to extremely unrealistic and bizarre situations. It is questionable, for example, how an employer can ascertain whether an employee's home is suitable for work. Or whether his or her laptop is adequate. And how can they check this continuously, at regular intervals?

Yet, if the place of work is the employee's place of residence, even a household accident at home can be classified as a work accident. So if, for example, the employee slips on the floor in his or her study, injures himself or herself and becomes incapacitated for months, the employer can be held liable for the accident or loss of income. Thus, an employer who does not check whether the flooring of the employee's apartment is made of adequate material may face serious consequences in terms of damages.

The traps of working abroad

Finding suitable workers outside the country is often easier than finding them within it. However, having the work done abroad can further complicate certain legal aspects of employment.

Obviously, a Hungarian employer would like to apply Hungarian law to a foreign employee’s teleworking, as that is what the employer is familiar with. There is no obstacle to this, since the governing rules allow the parties to freely agree on the law governing the work. However, one rule must be taken into account here: the application of Hungarian law must not deprive the worker of the benefits that the law of the place of employment affords him. 

That is to say, even though the parties agreed to apply Hungarian law, it may come as a surprise to the employer when the employee wishes to take more leave than would be granted under the Hungarian Labour Code. Or the employer may be in trouble if it is significantly more difficult to terminate the employment than it is in Hungary. It’s important to keep these matters in mind from the start, when employment contract is concluded.

Social security and tax complications

In the case of a foreign worker employed in teleworking, it is also necessary to be prepared for unusual social security and tax consequences. Thus, if a foreign worker performs its job from home, it will still be covered by its own social security system. This may also mean that the social security contribution due will not be deducted from the salary by the employer, but the payment will be the responsibility of the employee – including the appropriate official administration. 

In general, income tax on wages will also be payable in the country where the work is performed. Questions may arise, however, if the teleworker occasionally comes to Hungary and performs his or her job, even to a minimal extent, in the employer's office. Should the tax base be divided in such a case and should the personal income tax on the Hungarian part of the employment be paid in Hungary? In principle, the answer is yes, but it wouldn't be surprising if few people actually thought of this. 

Should we employ people at home or not?

The many complications and strict occupational safety responsibilities obviously raises the question of whether it is worth employing a worker in a "home office”. The surge in the popularity of teleworking suggests that it is. However, until the legislators adequately adapt certain labour-law regulations to teleworking, the parties should consider using another form of employment (eg. agency or business contract, etc.) instead of an employment contract

By Ágnes Bejó, Senior Attorney, Jalsovszky

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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