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Foreign Employees in Hungary: a Solution to Workforce Shortage?

Nowadays, lots of businesses struggle to fill vacant positions due to a general workforce shortage. Could importing foreign workers be a solution? Below we look at some of the administrative and legal aspects of employing foreigners.

Dániel Gera, Counsel, Schoenherr Hetényi Attorneys at Law.

The Hungarian economy has been suffering from a labor shortage for several years now, posing challenges to employers across various sectors. According to a recent report by the Hungarian Central Statistical Office, there were more than 80,000 vacant positions between October and December 2018.

According to some experts, the workforce shortage already impacts the economy’s growth potential. As a skilled workforce greatly contributes to the competitiveness of not only individual enterprises but the economy as a whole, both the government and enterprises are trying to mitigate its impact.

Employing workers from “third-countries” (countries outside the EU/EEA) has long been considered a solution for filling vacant positions. An increasing number of enterprises consider hiring third-country nationals or even foreign agency workers. Is it really a viable option? Below we briefly summarize how third-country nationals may be employed in Hungary.

Dorottya Gindl, Associate, Schoenherr Hetényi Attorneys at Law

Basic concepts and permits

Third-country nationals may be employed in Hungary on the basis of appropriate permits which allow them to stay (residence permits) and work (work permits).

Employment contracts with third-country nationals may only be concluded for the period for which the worker has a permit, so these are mostly fixed-term contracts.

There are generally two types of permits: the single permit which combines work and residency permits, and the work permit. There is a specific permit for seasonal workers.

A single permit allows third-country nationals to reside in Hungary and enter into employment. Before applying for a single permit, the third-country national and the employer must conclude a preliminary agreement with the contents prescribed by law. Upon receipt of the permit, the parties must establish employment based on the preliminary agreement. The duration of such employment may generally not exceed two years.

In the case of third-country nationals who are entitled to reside in Hungary, based on a valid visa or on some other legal basis, their employer must normally obtain a work permit for them from the competent government office before entering into employment.

The law distinguishes between different types of work permits, e.g. a work permit issued with or without labor market examination, work permit for seasonal workers, etc.

In the case of a work permit with labor market examination, the authority examines the labor market to foster the employment of registered job-seekers. This means that third-country nationals may only be employed if the authority (i) has not found a suitable registered job-seeker for the advertised position and (ii) the third-country national meets the conditions required by the employer. There are some exceptional cases where the work permit may be issued without this examination.

Seasonal workers employed in the agricultural sector may request a seasonal work permit. The duration of their employment must not exceed 180 days within a period of 12 months.

Exemptions

The law determines several exemptions, when third-country nationals may be employed without a permit.

This is the case, for example, with citizens of neighboring third-countries (Ukraine and Serbia) if they have a residence in their home country. They may be employed in professions determined yearly by a ministerial decree. The current list includes: software developers, architects, nurses, shop salespersons, carpenters, etc.

Though, as mentioned above, Ukrainian and Serbian workers may under certain circumstances be employed without a permit, they still need to have permits for their residence in Hungary and their employers have a notification obligation towards the competent labor authority. This notification only serves statistical and information purposes, and is not a condition of establishing employment.

Conclusion

In summary, the employment of third-country nationals could potentially be a solution to alleviate the workforce shortage; though it is linked with several administrative tasks both for the employer and employee, the relevant procedures can be completed relatively smoothly and in certain cases there are exemptions from permitting requirement. With this in mind, the employment of foreigners may spread increasingly in the following years.