What you should know about employment from a third country in Hungary?

"There are many misconceptions about the employment of guest workers in Hungary" - began Attila Gazsi, Vice President of the National Association of Entrepreneurs and Employers (VOSZ). One of them is the one linking foreign employment with temporary work. The reality is that a maximum of 15-20,000 foreign workers are temporary agency workers out of a total of 80,000 foreign workers. It is also a falsehood that it is cheaper to employ a foreign worker than a Hungarian, the rule of thumb being that it is 30% more expensive.

Sándor Czomba: hiring third-country nationals is inevitable

Hungary has a labour reserve of 300,000 workers, who should first be used to fill the gap in the labour market, only then Hungarian-speaking workers can be employed from abroad, and then third-country workers within a regulated framework. This has already been stated by Sándor Czomba, State Secretary for Employment Policy at the Ministry of Economic Development.

The State Secretary recalled that while in 2010 employment in the 20-64 age group was 60%, below the EU average, it is now above 80%. The same is true of unemployment, with Hungary now among the seven best-performing countries, along with Germany and the Scandinavian countries.

He drew attention to the fact that planned major investments will once again increase labour shortages, which he said will be as much of a challenge as creating a million jobs in 10 years.

The private sector will be the engine of growth of demand in the labour market. There is a shortage of around 60-80 thousand workers on the market today, although figures show that 300 thousand people are available in the labour pool, in terms of their status, the largest share is unemployed, inactive or part-time, i.e. underemployed.

Many inactive people have entered the labour market in recent years, typically women returning to work. So there is a potential labour force, but many are not working because of family circumstances and need to be helped in coordination with the social sector. The Secretary of State said that reaching 85% employment by 2030 was a realistic target and noted that there was still room for improvement in the under-25s and the over-64 age group.

Sándor Czomba sees the use of labour from a 3rd country as inevitable, "when we call them in, and within a regulated framework". It is important "to know where they come from, to know what kind of work culture they have, to look at their movements, so they do not use the Hungarian labour market as a springboard", he stressed.

He also said that there are currently around 80,000 third-country workers in Hungary, 40,000 of them in Budapest and 20,000 in Pest County. Of the 80,000, 50,000 are Ukrainians and more than 5,000 are Serbs. The rest come from distant countries. "Their number is likely to increase, the aim is to ensure that they arrive in a regulated framework, not to knock on our doors," Sándor Czomba confirmed.

1500 new Kyrgyz workers expected shortly

Asanbaev Almazbek Zholchuevich, Kyrgyz Consul in Budapest, outlined the Hungarian-Kyrgyz labour market cooperation. So far, about 1000 workers have arrived from the Asian country and another 1500 are expected to arrive shortly. In the 20th century - back in Soviet times - many Hungarian professionals helped the country, and now it is time for Kyrgyzstan to pay off its debt.

Taxation of third-country residents

Zsuzsanna Asztalos, Deputy Head of the Department of the National Tax and Customs Administration, said in her presentation on tax issues related to the employment of third-country nationals that a third country is a non-member of the European Economic Area and with which Hungary has not concluded a bilateral social security agreement. These countries include the Philippines, Vietnam and Brazil. In addition, Hungary's double taxation convention with the state of residence of the worker should be examined:

• if there is income from employment, it is taxable in the state of residence of the employee under the conventions,
• if there isn’t: only the income of a non-resident individual from a limited tax liability in Hungary is taxable.

Zsuzsanna Asztalos also answered two questions that occasionally arise:

"Can Filipinos get back the personal income tax deducted from them?" The answer is no. Whether Hungary has a double taxation treaty or not.

"Can third country nationals claim tax base relief - e.g. family, under 25, etc.?" They are not excluded from such benefits, but two conditions must be met:

- at least 75 per cent of the total income earned in the tax year must be taxable in Hungary

- and you do not claim the same or similar benefit in another country.

The deputy head of the department added that guest workers can claim the benefit for school-age children even if the child does not live in Hungary. Even if they do not live at the same address, the parent transfers money to them and takes care of them.

Zsuzsanna Asztalos added that a third-country worker can also be granted Szép-kártya benefit. It is with even better conditions than giving it to a Hungarian employee, as the payer is only liable to pay VAT and not social contribution tax.

Practical experience

What does employment look like in practice? At the conference, two representatives of automotive suppliers and the manager of a temporary employment agency spoke about their experiences. Csaba Hortobágyi, Managing Director of Fehrer Hungária said that out of their 700 employees, 210 were foreigners, 130 of whom came from Mongolia and the rest from the Philippines. Márk Mécs, HR director of Alpine, added that they employ Ukrainians and Kyrgyz. Csaba Ottó, managing director of the temporary employment agency Man at Work, said that they mainly bring in workers from Kyrgyzstan and the Philippines.

What is the recruitment period? Csaba Ottó said that for a completely new project, it takes about 3 months for new recruits to arrive. However, he cannot give an exact timeframe because it depends mainly on the speed of the administration of the authorities, which varies. Automotive suppliers added that it takes one and a half to two months after arrival for foreigners to work at full capacity in production.

On the screening of candidates, Mark Mécs noted that detailed video material was sent to the recruitment partner onsite about the factory, accommodation, work tasks and conditions. The candidates were selected through video interviews, which proved to be reliable. According to the HR specialist, the key to success is to provide realistic information to foreigners. If they arrive and perceive the working conditions as disappointing, they will leave quickly.

It is worth paying attention to the specific needs of expatriates. For example, the Kyrgyz who came to Alpine do not eat pork, so the catering in the factory kitchen had to be adapted. A strong wifi connection in the accommodation is crucial, as it is the only way for workers to stay in touch with their families.

The Hungarian team only had to be trained before the first workers arrived, after which they got used to their presence, and there was no tension between them – they explained.

Csaba Hortobágyi said that although hiring workers from abroad are 30 per cent more expensive, there is significantly less turnover, they bring stability to production and after a while their production volume increases. Foreigners are very motivated and would work overtime almost any time, which is not the case with the two suppliers.