Employees in Hungary care most about life, accident, and medical insurance. Private medical costs are high and the public health service is not good. When asked for the top five employee benefits, employees in Hungary will say life, accident, disability, medical, and retirement. Employers should review compensation and benefits practices to ensure they remain tax-efficient and compliant in the light of Hungarian tax law amendments made in 2019. These changes reduced the preferential tax treatment for certain benefits and lowered the annual amount overall.
The average cost of employee sponsored benefits in Hungary is approximately 27% of gross monthly salary. For managers, this is between 250 – 500 Euros per month; for other employees, between 50 – 100 Euros per month.
Mandatory Employee Benefits in Hungary
Mandatory employee benefits in Hungary include pension, parental leaves, PTO and eye exams. Supplementary employee benefits include medical, life, and accident insurance. Perks as an employee benefit are not popular because they are taxed as salary.
The pension system was radically reformed in 1997 with the intention of placing its finances on a sustainable footing and mandatory private pillar II pensions were introduced with the aim of replacing at least 25% of the state pension for those retiring after 2013. This system was subsequently dismantled by a series of measures taken by the government in November 2010 and March 2012. The mandatory private pillar II provisions were transferred back to the state pillar I, and their associated assets were used to reduce the country’s fiscal deficit. The government wants to encourage additional voluntary private retirement savings and, as a first step, in 2014 introduced new tax-deductible pension insurance which has proved to be popular and continues to drive market growth, however, employer adoption is still below average. State retirement benefits are provided through pension insurance, administered by the Hungarian State Treasury (from 1 November 2017).
The basic pension is called the First Pillar and additional, mandatory, benefits, based upon differing contributions is the Second Pillar (only for the existing members). The Third Pillar relates to voluntary contributions for extra benefits. The Forth Pillar concerns contributions to specific accounts.
The normal retirement age for men and women is gradually increasing dependent upon year of birth, as follows:
|Birth Year||Retirement Age|
Women may retire at any age with at least 40 years of qualifying insurance, including at least 32 years (30 years where the woman has raised a disabled child) of insurance in respect of a gainful activity (reduced for those who have raised at least five children by one year for each additional child raised, subject to a maximum reduction of seven years of qualifying insurance).
Pensionable salary for contribution purposes is based on the employee’s salary. Effective from July 1, 2020 employees/insureds contribute 10%.
The minimum pensionable salary for employer contribution purposes is equal to the minimum wage; employer contributions are at least based on the minimum pensionable salary.
The monthly minimum wage is equal to HUF 200,000 (HUF 260,000 for positions that require at least a secondary education) in 2022.
Statutory paid annual leave is provided for 20 days (25 days for employees under age 18, employees permanently working underground, and other prescribed conditions and employees assessed as at least 50% disabled).
Statutory paid annual leave is increased, dependent upon the age of the employee, as follows:
|Age of the employee (years)||Additional statutory paid annual leave (days)|
|Over age 25||1|
|Over age 28||2|
|Over age 31||3|
|Over age 33||4|
|Over age 35||5|
|Over age 37||6|
|Over age 39||7|
|Over age 41||8|
|Over age 43||9|
|Over age 45||10|
In addition, statutory paid leave is provided in the following circumstances:
- 2 days where the employee has one child under the age of 16 (four days per disabled child)
- 4 days where the employee has two children under the age of 16 (six days per disabled child)
- A total of 7 days where the employee has more than two children under age 16 (nine days per disabled child)
- 2 days in case of the death of a relative.
Paid Time Off
Unpaid leave is provided in the following circumstances:
- Family care leave where the duration of care (subject to a maximum of two years) in case of caring for a relative for more than 30 days
- Military service leave – the duration of actual reserve military service.
- Whilst on unpaid leave the employee may receive short-term sickness benefits (see Short-Term Sickness
- Section for further detail) for:
- an unlimited number of days in case of caring for an ill child under age one
- Up to 84 days in case of caring for an ill child from age one up to age three
- Up to 42 days (84 days for a single parent) in case of caring for an ill child from age three up to age six
- Up to 14 days (28 days for a single parent) in case of caring for an ill child from age six up to age 12
Maternity benefits (known locally as pregnancy and confinement benefits) are provided through health insurance, administered by the Hungarian State Treasury (from 1 November 2017).
To qualify for the pregnancy and confinement benefit the employee must have at least 365 days of qualifying insurance within the two years preceding the expected childbirth
The pregnancy and confinement benefits are equal to 70% of the employee’s salary averaged over the year preceding maternity leave (provisions apply where the employee has less than 180 days of qualifying insurance within the year preceding maternity leave).
The pregnancy and confinement are payable for 24 weeks.
Paid paternity leave is equal to 100% of the employee’s salary and is provided for five days (seven days in case of twins) within two months following childbirth.
Family allowances are provided through health insurance, administered by the Hungarian State Treasury. Those eligible receive the following family allowances (from 2018):
- HUF 12,200 per month for one child (HUF 13,700 for a single parent),
- HUF 13,300 per month per child for two children (HUF 14,800 for a single parent
- HUF 16,000 per month per child for three or more children (HUF 17,000 for a single parent) and
- HUF 23,300 per month for a disabled child (HUF 25,900 for a single parent)
- childcare benefit – equal to 70% of the employee’s average salary (the maximum average salary is two times the minimum wage) and is payable from the end of maternity benefits until the child attains the age of two
- childcare allowance is payable until age three (age 10 if disabled) or until the end of the first year of school for twins
Eye exams are usually included as part of the Occupational Health Examination, which is compulsory, and the type of examinations depends on the company’s activity.
Vision benefits are separately defined and customarily includes eyeglasses and glass frames, but it is restricted in the internal company policy.
Cafeteria system 2022
Type of benefits
- Tax-free benefits Kindergarten, nursery, cultural service, sports ticket/pass (0% tax), virus tests, vaccination, using bicycles of Employers
- Fringe benefits “SZÉP” card up to a given amount (normally till 450K HUF/year)
= (15% Personal Income Tax + 13% social contribution tax) =28% tax
- Certain defined benefits “SZÉP” card over the given amount, cash deposit, gift of small value, group insurance
= (15% PIT + 13% social contribution 1.18 =34.04% tax
Supplementary Employee Benefits
- Pension Insurance
- Policyholder: Corporate or the individual (20% tax refund in case of individual policy)
- Voluntary Pension Fund
- Policyholder: Corporate or the individual (20% tax refund in case of individual policy)
Due to the taxation (in the case of company policies) Pension insurance is placed by the individuals. Companies continue their voluntary pension fund only if they had it in previous years. The corporate product is taxable.
Healthcare/ Medical Insurance
Companies are interested in this coverage; it is a popular employee benefit element.
- Prevention screening 1x annually
- Out-patient services / limited or without any limitation
- Overall laboratory & diagnostic tests (MR, CT, PET CT, X-ray, UH, etc.) – high-value diagnosis
Social security is available in Hungary, but Medical insurance is recommended due to the long waiting lists, long queuing, etc.
Medical insurance is taxable.
Group life, accident, and health insurance
Companies are interested in this coverage and it is a popular employee benefit element.
- Term life
- Accidental Death, Accidental Disability
- Short-term disability
- Critical illness
- Daily hospitalization resulting from accidents and illness
Group life, accident, and health insurance are taxable.
Stipends for massage are common as are ‘all you can move’ sports cards, and wellness programs. These perks are taxed as salary making them not very popular anymore.