Rising wage pressure, dwindling labor: VOSZ President Attila Gazsi on Hungary’s Top HR challenges

A Reality Check for Hungarian Business

At the end of May, you were elected president of VOSZ for a five-year term. What is your primary objective, and where will you focus your efforts?

Attila Gazsi: My goal is for teh National Association of Entrepreneurs and Employers (VOSZ) to represent the real-world problems of entrepreneurs more directly, rapidly, and accurately. We often discuss the Hungarian economy through the lens of macro indicators, budget targets, and abstract policy names. Meanwhile, an entrepreneur’s daily concerns are far more practical: Will there be enough people? Will there be orders? Are wage costs sustainable? Can I get financing? Will the regulatory environment remain predictable?

I am focusing the strategic direction of VOSZ on three key pillars:

• Operational viability: Addressing core business needs—labor supply, financing, administrative relief, and regulatory predictability.
• Productivity turnaround: A significant portion of Hungarian SMEs work incredibly hard but lack organization. They are insufficiently data-driven and fail to exploit the opportunities hidden in digitalization, artificial intelligence (AI), and workflow management.
• Organizational efficiency: Streamlining VOSZ itself. This means a stronger regional presence, faster feedback loops from business owners, and practice-oriented knowledge sharing.

One of our flagship initiatives for this initial period is the "100 Days – 100 Businesses" program. I want to personally listen to as many businesses as possible across various sizes, sectors, and regions. These won't be formal protocol visits; this is fieldwork. I want to see firsthand where the true bottlenecks lie—whether it's labor, capital, markets, technology, or regulation. This will culminate in an "Entrepreneurial Reality Report" to be leveraged in government consultations and professional tribunals.

Additionally, I want to reinforce VOSZ as a practical knowledge hub. We need to build platforms where SME leaders can learn directly from peer SME leaders about AI adoption, modern HR solutions, and succession planning. Entrepreneurs don't need theoretical academic studies; they need battle-tested blueprints.

The Twin Crises: Wage Pressures and Structural Labor Shortages

What is currently the single greatest HR challenge for Hungarian enterprises?

Attila Gazsi: Today, it is the simultaneous crisis of labor quantity and quality. The workforce is shrinking, wage pressure is mounting, and in many sectors, the available skill sets do not match the actual needs of businesses. This is no longer just a recruitment issue. Businesses must fundamentally rethink how to produce higher value-add with fewer people through superior organization.

The demographic reality is hitting businesses directly. Roughly 40,000 more people exit the labor market each year than enter it. This means the economy cannot rely on headcount expansion for sustained growth. Meanwhile, labor costs have surged rapidly, but productivity has failed to keep pace. If wages grow faster than efficiency, a business faces a grim trilemma: raise prices, defer capital investments, or swallow the loss in profit margins. None of these are sustainable long-term trajectories.

VOSZ is deploying several tools to counteract this. First, we are launching a "Work for Everyone" advisory program to introduce SMEs to atypical forms of employment in a highly digestible way—covering part-time work, employment of retirees, returning mothers, remote setups, simplified seasonal employment, labor leasing, and flexible scheduling. Many SMEs skip these options not because they don't need them, but because they are intimidated by the legal and administrative architecture.

Second, there is an urgent need for leadership and HR education. A vast majority of SMEs operate without professional HR departments. Retaining talent, managing multigenerational workforces, structuring compensation packages, performance evaluations, and workflow design are handled ad hoc. VOSZ will provide templates, calculators, training, and best practices.

Third, the productivity turnaround must be anchored by HR. Digitalization, AI, or automation will only yield returns if the workforce understands, accepts, and can operate the new systems. Therefore, upskilling, reskilling, middle-management training, and corporate culture are just as critical as the hardware or software investment itself.

Guest Workers: Targeted Tightening Over Blanket Bans

How do you view the role of foreign labor in the SME sector? What is your take on the government’s recent decision to halt a major recruitment channel for guest workers?

Attila Gazsi: Foreign labor must be treated as an economic and regulatory issue, not an ideological one. The primacy of Hungarian workers is a core principle—there is no debate there. We must absolutely crack down on wage suppression, grey-market employment, rogue labor agencies, opaque subcontracting chains, and unregulated labor influx. VOSZ is a fully committed partner in this clean-up.

However, the problem begins when regulation fails to differentiate between unregulated, illicit labor influxes and lawful, certified, heavily audited employment channels. The sweeping guest worker freeze implemented recently—especially without transitional rules, sectoral impact assessments, or prior consultation with business and labor representatives—poses severe operational risks. In sectors where it is mathematically proven that there is insufficient domestic labor, a sudden ban will not magically conjure Hungarian workers. Instead, it triggers production disruptions, capacity losses, investor anxiety, and ultimately risks the stability of Hungarian jobs that depend on those supply chains.

"The blanket restrictions on third-country nationals introduced without a transition period are a policy failure. I understand the political objective—to protect the domestic labor market and clean up third-country employment—but the solution lies in targeted tightening, not a total shutdown."

We need certified employment channels, stricter entry criteria, background checks on agency owners, financial guarantees, digital registries, regular audits, and swift penalties. That is how you make third-country employment transparent.

You mentioned domestic labor reserves, a frequent talking point in the industry. How can we make tangible progress on this front?

Attila Gazsi: Mobilizing internal reserves is absolutely indispensable, but we must realize these groups require entirely different strategies. Our reserves include:

• Inactives and the unemployed: Require targeted training, mentorship, debt-management support, and job-placement subsidies.
• Retirees: The current favorable tax conditions for working pensioners must be fiercely maintained.
• Mothers returning to work: Require flexible reintegration models, part-time options, remote work, and predictable scheduling.
• Hungarians living abroad: We need competitive, concrete "repatriation offers."

The Hungarian labor market is at a historical turning point. The internal reserve exists, but it cannot be switched on at the push of a button. While we must safeguard the operational capacity of our businesses, the ultimate long-term antidote to this shortage is a rapid leap in productivity.

Digitalization and AI: A Matter of SME Survival

Digitalization and AI are fundamentally redefining job descriptions. How can VOSZ help domestic firms prepare their workforces for this massive tech shift?

Attila Gazsi: For SMEs, AI and digitalization are not tech trends or buzzwords—they are matters of baseline survival and competitiveness. Right now, a significant portion of Hungarian SMEs fail to utilize even elementary digital tools. Far too many companies run entirely on Excel spreadsheets, phone calls, and personal routines. That might suffice up to a certain organizational size, but beyond that, it becomes a hard ceiling on growth.

Our role at VOSZ is to act as a translator. We shouldn't just tell entrepreneurs to "use AI"; we must show them exactly what for. We are talking about concrete use cases:

• Automating sales proposals and customer service responses.
• Managing sales leads and inventory optimization.
• Streamlining administration and internal knowledge bases.
• Optimizing shift scheduling and financial forecasting.

These are not futuristic, sci-fi solutions; they are off-the-shelf tools available today.

Tech alone never solves an underlying efficiency problem. If a process is broken, digitizing it simply means you will execute a bad process faster. To address this, VOSZ is looking into launching short, practical AI bootcamps for SME executives, an online portal showcasing proven case studies, and right-sized digitalization blueprints tailored to specific company sizes.

Upskilling and reskilling are fundamentally cultural issues. Employees will embrace new technology if they understand how it augments their role, rather than viewing it purely as an existential threat. The responsibility resting on leaders here is immense.

The Leadership Transition: Breaking the Founder’s Trap

What blueprints and best practices do you intend to provide for successful generational succession and for attracting younger talent?

Attila Gazsi: Generational transition is one of the most agonizing bottlenecks in the SME sector. Many Hungarian companies grew out of the sheer willpower and entrepreneurial energy of their original founders. But reaching the next level of scale requires moving past the founder’s personal, centralized control.

The younger generation expects an entirely different operational blueprint: transparent workflows, clear accountability, modern digital ecosystems, rapid feedback loops, and flexible work structures. Generational transition is not merely a transfer of shares or equity; it is a fundamental shift in the leadership model.

The key to a successful handoff lies in building a capable middle-management layer, formalizing workflows, ensuring financial transparency, and gradually delegating decision-making authority. VOSZ wants to pioneer a succession program that looks far beyond legal and tax architectures. Of course, valuation, inheritance structures, and financing matter. But the true friction points are psychological and interpersonal. How does a founder let go? How does a successor establish legitimacy? How do you retain legacy staff while onboarding youth?

To attract younger workers, we must think in the spirit of a "Hungarian Career Program." The brightest young minds shouldn't feel that a corporate track or moving abroad are their only options for upward mobility. Hungarian SMEs must learn to pitch an attractive career path—one that offers end-to-end business visibility, fast-tracked mentorship, and international exposure. SMEs have to accept that for Gen Z, corporate culture, purposeful work, and leadership quality matter just as much as traditional expectations of blind loyalty.

Aligning Classrooms with the Boardroom

Employers frequently complain that fresh graduates lack market-ready skills. What steps are needed to fix the dialogue between academia and the private sector?

Attila Gazsi: Businesses are entirely justified in their complaints. However, we cannot simply dump all the blame on schools. The modern economy mutates at a speed that traditional educational frameworks cannot match. What we need is a permanent, institutionalized dialogue between corporations, vocational training centers, universities, and business advocacy groups.

I see three non-negotiable focal points:

• Solidifying core skills: Without strong foundational skills, rapid on-the-job training is impossible.
• Expanding dual education: Ramping up corporate exposure through robust apprenticeship and internship frameworks.
• Instilling workplace culture: Accountability, punctuality, teamwork, and client management cannot be mastered from a textbook.

VOSZ’s role will be to structurally aggregate the exact needs of business owners and deliver them to educational stakeholders not as vague complaints, but as concrete curricular requirements. SMEs employ the lion's share of the domestic workforce, yet their voices are often the quietest in these high-level discussions. We are going to change that.

Furthermore, we must start talking about the labor market integration of international students studying in Hungary. If a foreign student graduates from a Hungarian university, understands our culture, and possesses market-ready skills, we should explore streamlined pathways to integrate them into the Hungarian economy.

Redefining Flexibility and Well-being for SMEs

For modern workers—especially Gen Z—flexibility and mental well-being are baseline expectations. How do you incentivize rigid domestic SMEs to adopt modern HR solutions like hybrid work or well-being initiatives?

Attila Gazsi: Flexibility is frequently misunderstood by SMEs. It does not mean everyone works wherever and whenever they please. Real flexibility requires a well-regulated framework, crystal-clear performance metrics, predictable scheduling, and honest communication.

Granted, you cannot introduce hybrid remote work across every sector. A manufacturing assembly line, a restaurant kitchen, a logistics hub, or a retail floor operates on a different reality than a digital agency. Yet, you can still execute modern HR within these rigid environments via smarter shift optimization, structured part-time roles, predictable scheduling, and transparent internal communication.

Similarly, mental well-being should not be treated as corporate jargon. In an overworked, poorly managed, and unpredictable corporate culture, performance tanks, turnover skyrockets, and loyalty evaporates. For an SME, well-being doesn’t require six-figure corporate wellness budgets. Often, the first step is simply better leadership communication, realistic expectations, sensible overtime management, employee involvement, and basic training for middle managers.

We must avoid oversimplifying Gen Z. It’s a myth that young people don’t want to work. They simply have a different relationship to employment: they expect faster feedback loops, have a zero-tolerance policy for toxic leadership, and will exit a company the moment they realize their growth has stalled. While this shocks traditional management cultures, it should be treated as a vital diagnostic signal. Companies must offer clearer career progression, sharper onboarding, robust mentorship, and modern digital workspaces.

VOSZ will bridge this gap by translating high-end corporate HR strategies into lean, actionable SME toolkits. We aren't asking small businesses to copy the HR architecture of multinational giants. Instead, we will equip them with simple, high-impact modules: structured exit interviews, probationary feedback templates, leadership conversation scripts, turnover metrics, and foundational mental health toolkits.

My ultimate message to business owners is clear: HR is no longer an administrative back-office task. In a talent-starved economy, HR is a core strategic lever for market competitiveness. The businesses that thrive will not be those merely hunting for heads, but those actively building superior organizations.