Collective Redundancies in Hungary
Source of picture: menzieslaw
In Hungary employers must follow a rather strict procedure set forth by the applicable collective agreement and the Labour Code of Hungary.
The provisions only apply to dismissals and terminations by mutual consent relating to the employer’s operations. Dismissals connected to the employee’s performance or skills do not count. The number of terminations by mutual consent, those by ordinary dismissal and terminations without notice during fixed term employment should be added together for the purposes of calculation.
What are the requirements?
Prior to making collective redundancies, an employer must:
The notice period is 30 days but may not exceed 6 months. Employees may also be entitled to receive enhanced redundancy payments under the terms of their contract or any collective agreement.
When do the provisions apply?
The provisions apply where an employer is proposing to dismiss the number of employees specified below within a 30 day period.
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No. of the employees to be dismissed
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Size of the organization
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at least 10
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between 21 and 99 employees
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10%
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between 100 and 299 employees
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at least 30
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300 or more employees
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The provisions only apply to dismissals and terminations by mutual consent relating to the employer’s operations. Dismissals connected to the employee’s performance or skills do not count. The number of terminations by mutual consent, those by ordinary dismissal and terminations without notice during fixed term employment should be added together for the purposes of calculation.
What are the requirements?
Prior to making collective redundancies, an employer must:
· inform the appropriate representatives and the Government Agency on its intention of collective redundancies;
· consult with the appropriate representatives;
· inform the appropriate representatives, the employees and the Government Agency on its decision on collective redundancies.
At least seven days before the consultation, the employer must provide oral and written information to the appropriate representatives about its proposed intention on collective redundancies. The written information shall include at least the reasons for the proposed redundancies, the number of employees to be made redundant divided into categories, the number of employees employed during the last six months, the period over which the redundancies will take place, the criteria to be used to select the employees to be made redundant and the conditions for eligibility for any redundancy payments other than statutory ones and their calculations.
Who are “appropriate representatives”?
Before the announcement of the collective redundancies, the employer must consult with the employee representatives of the works council. The Labour Code provides that a works council must be elected at all companies or at all of the employer’s independent sites where the number of employees exceeds 50. If there is no works council, the employer must consult with ad hoc representatives of the employees.
How shall the employer consult?
The employer shall consult with the representatives at lease fifteen days before taking the decision on collective redundancies. During such consultation the parties shall discuss possible ways to prevent redundancies, lessen their impact and consequences and reduce the number of employees involved. If an agreement is reached it must be put down into writing and one copy shall be sent by the employer to the Government Authority. The employer must notify each employee involved in the collective redundancies in writing 30 days before sending out the notices for dismissal. Collective redundancies will not take effect within 30 day from these employee notifications.
What sanctions apply if the process is not followed?
Failure to comply with the Labour Code regulations can lead to unlawful employment termination. The consequences of unlawful termination apply only in case of ordinary dismissals, terminations by mutual consent or terminations without notice are excluded. If the employment is terminated unlawfully, the employer must pay lost wages (no more than 12 months’ average earnings) and compensate any harm suffered.
If the employer fails to notify the representatives of the works council, they can turn to court for remedy.
If the employer fails to notify the Government Authority or the notification is defective or the employer provides incorrect data, the Government Authority has the right to levy fines which amounts to EUR 1700 maximum.
Are certain employees protected from dismissal?
The employer cannot dismiss an employee who is within five years of the minimum statutory retirement only if a proper justification is given. There are employees who enjoy special protection against ordinary dismissal as listed by the Labour Code (e.g. employees unable to work due to illness, pregnant women, etc.).
How do I choose which employees to dismiss?
At least seven days before the above mentioned consultation the employer must provide oral and written information to the appropriate representatives on the criteria to be used to select the employees to be made redundant. The employer must provide clear reasons for the selection of the employees and the criteria must be submitted to the Government Agency. The employer and the employee representatives may agree on the selection criteria in the above mentioned separate consultation agreement. Unfortunately the Hungarian Labour Code does not contain any regulations on such selection criteria but it does happen many times that within a family husband and wife are also affected. Therefore in the consultation agreement the employer and employee representatives can agree that only one person shall be dismissed within a family.
Unfair dismissal
If the employer breaches the relatively strict procedural rules of collective redundancies, this may render the whole procedure unlawful. If the employment is terminated unlawfully, the employer must pay lost wages (no more than 12 months’ average earnings) and compensate any harm suffered.
What will it cost?
Aside from statutory redundancy payments, there are no direct costs for making redundancies, although the minimum consultation and notice periods can result in significant costs. An employee is entitled to a statutory redundancy payment if his or her employment is terminated by an ordinary dismissal:
1 month\'s pay for at least 3 years of employment
2 month\'s pay for at least 5 years of employment
3 month\'s pay for at least 10 years of employment
4 month\'s pay for at least 15 years of employment
5 month\'s pay for at least 20 years of employment
6 month\'s pay for at least 25 years of employment.
The notice period is 30 days but may not exceed 6 months. Employees may also be entitled to receive enhanced redundancy payments under the terms of their contract or any collective agreement.
Is staff required to work during the consultation process?
The employer must release employees from work at least for half of the notice period. Such release can be allocated in two parts at the employee’s discretion.
Can I ask employees to sign a waiver agreement?
Employers often enter into settlement agreements with individual employees to compromise potential or actual claims. There isn’t a requirement that the employee must be independently advised through his or her own solicitor. Claims for failure to inform and consult can be later compromised through the courts e.g. in cases when the employee was denied the possibility to consult with his or her own solicitor or in cases where the employer’s manner influenced the employee to act in accordance with his or her free will when entering into such a settlement agreement.
Do I need consent from a public authority?
No. While the employer needs to notify the Government Agency, it does not need to obtain consent for the collective redundancies.
Can disgruntled employees bring claims?
Yes. Employees can bring claims for unfair dismissal before the court. Such claims generally need to be brought within 30 days of the employer’s dismissal
