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Summary of the Effects of the Coronavirus Epidemic on Labour Matters

Summary of the Effects of the Coronavirus Epidemic on Labour Matters

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With respect to the declared state of danger and in order to alleviate the economic difficulties resulting from the Covid-19 epidemic, the government has taken several measures, the following document summarizes the most significant provisions of governmental decrees in the field of labour law effective as of and related to the operation of legal persons.

Provisions regarding the state aid for employment in reduced working time:

The Hungarian Government introduced state aid for supplementing the wages of employees with Governmental Decree No. 105/2020. (IV. 10.) („Governmental Decree”), due to the unfavourable economic circumstances resulting from the COVID-19 epidemic. Gov. Decree No. 141/2020. (IV. 21.) introduced several important amendments to the Governmental Decree, with effect from April 29, 2020, with the purpose of making the access to the state aid easier and bringing more persons concerned under the scope of the aid.

As a precondition for applying for the aid, the employer and the employees concerned must conclude an agreement at least for the duration of the aid, in which they shall agree on the following:

  • the employment in reduced working time (in line with the calculation rules that apply to the aid, the working time may be reduced to 25-85% of the pre-existing working time);
  • if the reduced working time exceeds 50% of the pre-existing working time, then the employee’s self-improvement time (the duration of the self-improvement time is by force of law 30 % of the volume of the reduction).

The pre-existing working time must be calculated in the average of 3 months.

if the reduced working time is equal to or less than 50% of the pre-existing working time, the agreement on ‘self-improvement time’ is only a possibility, not an obligation. Therefore, in this case, the application of ‘self-improvement time’ depends of the agreement of the parties.

In this case (i.e. in case of voluntary agreement on “self-improvement time”), the employer is not obliged (i) to pay the employee a salary for the duration of the aid – together with the amount of the aid – which would not be less than the employee’s pre-existing salary, and (ii) to pay salary to the employee for the self-improvement time.

In case of mandatory self-improvement time (i.e. if the reduced working time of the employee exceeds 50% of his/her pre-existing working time), these obligations are to be observed by the employer.

The aid may be granted upon the joint request of the employer and the employees concerned, and the aid application must be filed with the competent government office. The application must be filed by the employer during the state of danger or within a period of 1 month after the end of the state of danger, electronically, by using a form published on the website of the National Employment Service (in Hungarian: Nemzeti Foglalkoztatási Szolgálat). Subsequently, the government office has 8 business days to examine the application.

A number of preconditions must be demonstrated in the application:

  • the employer employs the employee concerned in reduced working time in order to prevent the reduction of the number of its employees;
  • the economic circumstances that substantiate the employment in reduced working time are in direct and close connection with the state of danger, and keeping the employees is in the interest of the national economy in connection with the continuous economic operations of the employer;
  • the employer has been operating for a period of at least 6 months;
  • at the time of filing the application, the employer does not receive – regarding any of its employees concerned with the application – either (a) ‘job creation aid’ (in Hungarian: munkahelyteremtő bérjellegű támogatás)  and/or ‘job protection aid’ (in Hungarian: munkahelymegőrző támogatás)  financed from EU sources, or (b) ‘R&D employee aid’ (in Hungarian: kutató-fejlesztő tevékenységet végző munkavállalók foglalkoztatásának támogatása);
  • the employees concerned do not receive [in connection with the same employment relationship as the one concerned by the aid] any other type of part-time employment related aid;
  • the employees have been employed by the employer since 15 March, 2020 (or earlier);
  • the employees are not under notice period.

No appeal shall lie against the rejection of the application. In case of rejection, the application (concerning the same employee[s]) may be re-submitted once.

The aid shall terminate:

  • if so requested jointly by the employer and the employee;
  • if the employment relationship terminates;
  • if either the employee or the employer fails to fulfil any of its aid related obligations;
  • if the employer receives “job creation aid” (in Hungarian: munkahelyteremtő támogatás), “job protection aid” (in Hungarian: munkahelymegőrzési támogatás) or “R&D employee aid” (in Hungarian: kutató-fejlesztő tevékenységet végző munkavállalók foglalkoztatásának támogatása);
  • if the reduced working time is amended during the aid period;
  • if it turns out that the aid could not have been granted (due to lack of fulfilment of preconditions).

It is important to note that on the one hand, if it turns out that the aid could not have been granted due to lack of fulfilment of preconditions and this is attributable to the employee, then s/he must repay the aid received and, on the other hand, if this is attributable to the employer, then the employer shall make payment to the National Employment Fund equal to the aid received by the employee.

By force of law, as a result of using the aid, the employee undertakes

  • that should s/he establish another employment relationship (in addition to the one concerned by the aid), then such additional employment relationship will not be an obstacle for him/her to return working in the pre-existing working time after the duration of the aid;
  • to carry out work during the reduced working time;
  • to remain available for the employer during the self-improvement time (without being required to actually carry out work).

By force of law, as a result of using the aid, the employer undertakes that

  • for the duration of the aid and for a further period of 1 month, the employment of the employee(s) concerned will not be terminated;
  • for the duration of the aid, it will not request the employees concerned with the aid to work in extraordinary working time;
  • it will notify the competent government office – within 2 business days – if there is any change that may affect the conditions of the aid and/or the length of the reduced working time;
  • for the duration of the aid, the employee’s base wage – together with the amount of the aid – will not be less than the employee’s pre-existing salary (except if the parties voluntarily agree on ‘self-improvement time’, as described above);
  • it will pay salary for the self-improvement time (except, if the parties voluntarily agree on self-improvement time, as described above).

The aid may only be granted for the future (i.e. for a period of time following the filing of the application). The duration of the aid shall be calculated in months, and the maximum duration of the aid is 3 months. No aid may be granted for the duration of unpaid leave (if any) of the employee concerned.

It is important to note that the amount of the aid is capped: the maximum basis for the calculation of the aid is the net amount of the double of the statutory minimum wage (In Hungarian: kötelező legkisebb munkabér) applicable at the time of filing of the aid application (as of today, this amount is net HUF 214,130 pursuant to Section 2 (1) of Governmental Decree no. 367/2019 [the statutory minimum wage for a month is gross HUF 161,000 Ft). The amount of the aid is 70 % of such proportion of the salary that corresponds to the working time reduction agreed by the parties.

The above rule of calculation is illustrated by the following example.

  • the net amount of the employee’s salary is HUF 214,130, and the parties agreed to reduce the working time by 75 % (i.e. by the maximum volume of reduction under the Gov. Decree);
  • we shall accordingly calculate the 75 % of HUF 214,130 (= HUF 160,598);
  • the amount of the aid is 70 % of the so calculated amount: HUF 160,598 x 0,7 = HUF 112,418.25 (practically, HUF 112,418).

The above-mentioned amount of HUF 112,418 is nevertheless the maximum monthly amount of aid under the Governmental Decree. It is important to highlight that if the net salary of an employee exceeds HUF 214,130, we shall still use the amount of HUF 214,130 as the basis for the calculation given that this is the statutory threshold, thus the amount of the monthly aid cannot exceed HUF 112,418.

The aid is paid to the employee on a monthly basis, following the subject month, however, the Governmental Decree does not specify an exact date as a deadline for payment.

Please note that the Gov. Decree contains a number of specific restrictions which are not described herein (due mainly to their rather exceptional nature). For example, among others, the employer may not be under liquidation, winding up procedure, bankruptcy or other proceedings specified by law regarding the termination of the employer (Governmental Decree Section 5 (1) b) bb)).

Provisions affecting the rules of work time frame:

Pursuant to Section 1 (1) of Governmental Decree no. 104/2020. (IV. 10.), the provisions of Act I of 2012 on the Labour Code (“Labour Code”) shall be applied with the exception that the employer may order a maximum work time frame (in Hungarian: munkaidőkeret) of 24 months. The work time frame ordered prior to the entry into force of the decree may be extended by the employer for a maximum period of 24 months. It is important to highlight that the work under the work time frame ordered by the employer as described above or agreed upon by the employer and the employee (by deviating from the provisions of the Labour Code) is not affected by the termination of the state of danger.

Provisions on the aid for research and development employees:

Governmental Decree no. 103/2020. (IV. 10.) establishes special rules for the economic support of research and development employees. The Decree refers to Act LXXVI of 2014 on scientific research, development and innovation in connection with the definition of research and development employees: a natural person who is engaged in the creation, development of a new knowledge, intellectual work, product, service, procedure, method, system or in the management of the implementation of projects for the purpose of the abovementioned.

The aid is granted by the competent government office upon the request of the employer,

  • if the employee
    1. does not receive other aid with regard to the same employment relationship,
    2. is in employment relationship with the employer at least on the day of declaration of the state of danger as a research and development worker,
  • is not under the notice period,
  • if the employer
    1. demonstrates the economic circumstances that substantiate the application of the employer, its connection with the state of danger, and the measures already applied and expected to be applied,
    2. does not receive state aid for reduced working time in connection with its employee named in the application concerning the same employment relationship,
  • does not receive – regarding any of its employees concerned with the application – job creation aid, or job protection aid at the time of filing the application, and
  1. has been operating for a period of at least 6 months,
  • if the application is filed according to the form published on the website of the National Employment Service.

The amount of the aid and the conditions for its payment are as follows. The duration of the aid shall be calculated in months, and the maximum duration of the aid is 3 months. The monthly amount of the aid may not exceed HUF 318,920 per employee. This maximum amount shall be paid if the employee's gross salary is HUF 670,000 or more on the day of declaring the state of danger. If the salary is less than HUF 670,000, the proportionate amount of HUF 318,920 is due to the employee calculated on the basis of the ratio of the employee's gross salary and of HUF 670,000. The aid is paid to the employer on a monthly basis, following the subject month.

When applying for the aid, the employer must undertake the following:

  • the employee is further employed for at least the same duration as the duration of the aid (the further employment is checked after the end of the said duration),
  • it does not reduce the existing salary of the employee on the day of the declaration of the state of danger during the duration of the aid and further employment,
  • it will notify the competent government office – within 2 business days – if there is any change that may affect the conditions of the aid.

In addition to the commitments, the employer must also comply with certain legal requirements:

  • it fulfils the conditions of organized employment relationships laid down in separate legislation and provides proof of this,
  • it is not under liquidation, winding up procedure, bankruptcy or other proceedings regarding the termination of the employer,
  • it did not specify as an undertaking in difficulty as defined in separate legislation on 31 December 2019.

The aid cannot be granted for certain types of employment according to the Labour Code (employment other than an employment contract, downtime, exemption from work with the consent of the employer, temporary work).

The application shall be filed with the competent government office regarding the registered seat or site of the employer during the state of danger or within a period of 1 month after the end of the state of danger. A decision to grant aid may be made by 31 December 2020 at the latest. The Decree restricts the possibility to apply for the same site and employees. As a general rule, this application may be filed once, and the application can only be filed at the same time for employees of the same site. If the application is rejected, the employer may refile the application, once more at the most. The government office has 8 business days to examine the application. If the application complies with the legal conditions, the government office will conclude an official contract with the employer, on the basis of which it provides the aid to the employer.

The aid constitutes as State aid under EU law, and can be granted in the form of a non-repayable aid. The monthly amount of the aid, together with other aids according to the amended version of the European Commission Communication C (2020) 1863 final of 19 March 2020, may not exceed 80 % of the monthly salary of the employee, including contributions. This shall be taken into account when calculating the maximum amount of the aid. The Governmental Decree defines certain cases where it is possible to use multiple aids for partially or completely identical identifiable eligible costs, however this cannot lead to the overcompensating of the salary of employees with regard to the employer. All documents relating to the aid must be kept for 10 years.

The aid shall terminate:

  • if the employer requests it so,
  • if the employment relationship of the employee terminates,
  • if the employee receives state aid for employment in reduced working time concerning the same legal relationship,
  • if the employee does not qualify as research and development worker,
  • if the employer
    1. fails to fulfil any of its aid related obligations,
    2. reduces the existing salary on the day of the declaration of the state of danger of its employee concerned with the aid,
  • receives job creation aid or job protection aid regarding any of its employees concerned with the aid,
  • if it turns out that the aid could not have been granted due to lack of fulfilment of the preconditions.

The employer is obliged to pay back the aid in certain cases. It shall pay back the entire aid if it could not have been granted due to lack of fulfilment of the preconditions. In proportion to the breach, it is required to pay back the entire or part of the aid if it has not fulfilled his obligation to further employing the employees. The employer may be released from the obligation to pay back the aid if it proves that the employment was terminated with immediate effect during the probationary period; as a result of the employer's immediate termination, the employer's termination without successor, or the employee's termination.

By Artúr Számel and Dániel Almási, Associates, Nagy és Trócsányi

Nagy es Trocsanyi at a Glance

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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