As your Hungarian company grows, you may want to add more executives – either by promoting current employees or hiring new ones. Executive roles come with special rules, fewer protections, and in some cases, changes to work permits, so make sure to consult a specialist like Helpers before you proceed with hiring executives.
Who counts as an executive?
Executives are people who can make strategic decisions for your company, like budgets, key operations, or brand identity. This is also reflected in the FEOR code (the official job classification) of the position, so if you are promoting an existing employee, their FEOR code will change, which might affect their residency status if they are third-country nationals.
Executives can be:
- Managing Directors (MD): Especially if they can represent the company on their own. If the MD is an employee, the Labor Code applies to their relationship with your Hungarian business. If they are not, the Civil Code applies.
- Employees who directly report to the MD: For example, a CFO or CTO, especially if they can take over the MD’s role when needed.
- Other key employees: If their job is critical or highly confidential and they earn at least 7× the minimum wage.
Hiring executives
Executives can be either Hungarian citizens or foreign nationals. In either case, you will need to present them with an appropriate labor contract (since special rules apply to executives, see below). This means that if they are an internal hire, so you are promoting an existing employee, you will need to update their existing labor contract to match the new position. That will include updating their FEOR code.
This, in turn, might affect the residency status of your employee if they are a third-country national, since work permits are usually tied to the position a worker holds. As a result, before you proceed with the promotion of a third-country national employee, always consult an HR and work-permit specialist like Helpers.
Special rules for hiring executives under the labor code
The Hungarian Labor Code lists various protections regular employees enjoy. A labor contract may always be more lenient towards the employee than what is required by law while it cannot include rules that reduce the employee’s rights.
At the same time, while executives have more responsibilities than regular employees, they might also need more freedom than what the Labor Code allows for. As a result, the executive status is recognized by the Labor Code as special, allowing for reduced protections.
Rights that still apply (mostly related to children):
- Time off for medical appointments during pregnancy/reproduction treatments.
- Protection from dismissal during pregnancy or maternity leave (until the child is 3).
- Unpaid leave for childcare.
- No night shifts during pregnancy or until the child is 3.
- Extra paid leave for children under 16.
Protections that executives lose:
- Collective agreements don’t apply
- Executives aren’t covered by company-wide employee agreements.
- Working hours are flexible
- No fixed 40-hour week. Executives set their own schedules and don’t track hours.
- They often work more hours but don’t get overtime pay.
- Stricter conflict-of-interest rules
Executives cannot:- Take side jobs in the same field
- Run a business in the same field
- Own shares in a business in the same field (except public company shares)
- Hide family members’ involvement in competitors
- Greater liability
- Regular employees pay damages up to 4 months’ salary (unless intentional; then they pay in full).
- Executives may owe full compensation already for reckless mistakes (not just if the damage was intentional).
- Less protection from termination
- Employer doesn’t need to give a reason for regular dismissal.
- Executives can be dismissed even during childcare leave.
- No special protection before retirement.
- Executives may be dismissed while on sick leave.
- Employers have up to 3 years (instead of 15 days) to act on a reason for immediate dismissal.
On the other hand: - If the dismissal is unlawful, executives can claim 12 months’ severance, which is more than what regular employees usually get.
Key Takeaways
- Executives have more decision-making power but also more liability.
- They lose some employee protections (like overtime pay and collective agreements).
- If they are foreign employees, their work permit might need an update before they can start working in their new position
Before hiring executives or promoting employees into executive roles, review both labor law and immigration requirements – or rather, let a specialist do that for you while you are focusing on making your business a success in Hungary.
Helpers Hungary provides comprehensive assistance with business and immigration in Hungary. We offer not only company setup but also services related to accountancy, payroll administration, HR compliance, and work permit applications. Share your plans with us, and we will provide a solution tailored to your needs.
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