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Hungary: Is the era of black employment over?

As of 2020 more inspections and tougher penalties are expected.

An announcement by the Ministry of Finance in November revealed that from 2020 Hungarian companies can expect intensified tax inspection.

Increased control will affect companies which employ staff under self-employed status instead of an employment relationship, harming both the employee (less pension) and the central budget (unpaid tax and contributions). These false contracts of employment will be sanctioned with a mandatory fine as detailed below.

At the same time, changes are also expected in labour inspections. According to the draft act on the website of the parliament, the labour authority’s powers are to be extended. This means that inspectors would be allowed to watch and copy video tapes found in the workplace and data about people entering and leaving. The labour authority will impose a mandatory fine on every company where black employment can be identified.
The amount of the fine would be calculated by a band system –from the beginning of employment until a declaration of unreported employment:
• for undertakings larger than 20 people the amount of the fine is twice the wage paid, but at least four times the minimum wage
• for undertakings with up to 20 people, the amount of the fine is the amount of the wage paid, but at least twice the minimum wage
• if the employer is a natural person (including a primary producer) the fine is 50 per cent of the minimum wage.

To avoid a fine, companies are advised to check the form of employment before inspections, and properly arrange the legal relationships involved.

Very special thanks to our trainee Szabolcs László Farkas for his collaboration.

Source: No T/8013 draft act on amending certain acts related to the family protection action plan

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