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New Legislation to Reduce the Competitive Disadvantage of Compliant Businesses

New Legislation to Reduce the Competitive Disadvantage of Compliant Businesses

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In February 2021 the State Secretary of Labour of the Ministry for Innovation and Technology announced a new measure to fight black employment. The amendment of the Act on the Service and Support to Subserve the Employment, and on the Supervisory of Employment (Act) is already in effect since 1 March 2021.

According to the amendment, employers who failed to report employees will be obliged to retroactively report those employees to the National Tax and Customs Administration of Hungary. The Employment Supervisory Authority is also entitled to oblige the defaulter employer to register the employment for at least one month.

The new rules prescribe the payment of social security contributions for employees, who were previously unreported, e.g. they will be eligible for social security services and for pension service time, accordingly. This measure should whiten further the Hungarian economy and ensure additional income for the state budget.

On the other hand, the amendment could reduce the vulnerability of the employees (in labour law, the workers usually are in a disadvantageous position compared to the employers) and should also support compliant employers that duly pay their taxes and contributions with regards their workers, since the retrospective reporting and payment obligations should eliminate the competitive advantage of the defaulting companies.

By Rita Parkanyi, Partner, KCG Partners Law Firm

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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