Changes in the regulation of simplified employment

The new Act on Simplified Employment approved by Parliament has just been promulgated. The new act contains a number of simplifications for the companies choosing to apply this form of employment as of 1 August 2010.. In this newsletter we report briefly on the modified rules of simplified employment. Edina Pentz, our payroll expert points out that the new regulations not only bring several positive changes to the employers but they also appear to support the decrease of black employment. On the other hand, employers of low staff numbers will undoubtedly continue to struggle when contracting seasonal work due to the administration requirements of registering and de-registering employees and the strict limitation of seasonal staff numbers.

Applicability of simplified employment

Simplified employment may be applied in the case of:

• agricultural work,
• seasonal work in tourism and
• temporary work.

According to the new act, the rules of simplified employment may not be applied in the future to household work and to employment by a prominently public benefit organization.

Seasonal plant cultivation work, which was previously regulated separately, is now integrated in the definition of seasonal agricultural work. In the case of seasonal agricultural work the rules of simplified employment are applicable if the period of employment established between the same parties for a definite term does not exceed one hundred and twenty days within a calendar year. (Previously this was ninety days and as a further requirement for seasonal agricultural work, the uninterrupted period of employment could not exceed thirty-one days.)

New rules of establishing legal relationships

Under the new rules of simplified employment, the headcount of the employees employed for temporary work may not exceed for one calendar day

• 1 person in the case of 1 employee,
• 2 persons in the case of a headcount of 1-5 employees,
• 4 persons in the case of a headcount of 6-20 employees and
• 20% of the headcount of employees in the case of a headcount over 20 persons employed in full time employment as defined in the Hungarian Labour Code. For this purpose, the headcount is to be calculated on the basis of the average statistical headcount of the six months preceding the given month.

A new regulation provides that the employer which has accumulated tax debt in an amount reaching HUF 300,000 in the current month may not establish further simplified employment relationships as long as his tax debt is not settled.

A further new rule says that in the case of simplified employment the employment relationship is not established by the conclusion of the employment contract but by the fulfilment of the employer’s registration obligation. Conclusion of an employment contract is only compulsory if it is requested by the employee or if it is chosen by an employer not having electronic tax return filing obligation.

The employers may fulfil the registration and change reporting obligation

• through the electronic government portal “ügyfélkapu”,
• by phone or
• from December 1, 2010 by text message (SMS). Whichever of these three forms the employer chooses, registration with the “ügyfélkapu” portal at one of the Offices of Government Issued Documents is a must. Changes may be reported in forms other than the form of registration. Fewer data must be registered under the new rules.

Unlike under the previous regulation, not even a small group of employers may opt for annual tax return filing. All employers must file their tax returns monthly. However, the employers not having electronic filing obligation may still choose to file tax returns on paper.

Tax liabilities

The rate of the public dues payable on the income paid in simplified employment also changes. So far, the rate of public dues payable by employers was 30% of the net income. According to the modification, irrespective of the amount of the net income paid, the amount of public dues payable by employers is

• HUF 500 for each calendar day in the case of seasonal agricultural and touristic work and
• HUF 1,000 for each calendar day in the case of temporary work.

The basis of the calculation of pension service for the employee is HUF 1,370/day if HUF 500 of public dues is paid daily and HUF 2,740/day if HUF 1,000 of public dues is paid daily.

A new rule provides that the part of one day’s payment to the worker in simplified employment in excess of twice the daily minimum wage is regarded as non-acknowledged cost.

Should you have any questions regarding the above, do not hesitate to contact our colleagues (phone: +36 1 886 3700, e-mail: edina.pentz@rsmdtm.hu).

The Newsletter contains general information. Therefore, the content of the Newsletter may not be regarded as professional advice or comprehensive information for decision-making. This information – due to its nature – may not address all details, especially all circumstances of a certain transaction. Although we used every effort for our Newsletter to be comprehensive, we cannot assume liability for the outlining and interpretation of the relevant regulations.

The Newsletter contains general information. Therefore, the content of the Newsletter may not be regarded as professional advice or comprehensive information for decision-making. This information – due to its nature – may not address all details, especially all circumstances of a certain transaction. Although we used every effort for our Newsletter to be comprehensive, we cannot assume liability for the outlining and interpretation of the relevant regulations.