Connecting a holiday in Tenerife with remote work? Sending an employee to China for three months? While ten years ago, these questions were considered unique, today, international mobility has become an everyday part of employment relationships.
In our three-part article series, we aim to explore what employers need to consider from a labor and tax law perspective regarding employee and employer mobility. The first part will discuss the legal considerations related to posting, the second part will cover the tax issues related to posting, and the third part will address the rules surrounding Employer of Record (EOR) services that assist employer mobility.
When is Posting?
One type of posting occurs when an employer temporarily transfers an employee for work purposes to a foreign employer within the same company group. This includes situations where a Hungarian employer decides to send one of its employees, for example, to work at a subsidiary in Germany for two months.
The Hungarian employer may freely decide on secondment for up to 44 working days per year, meaning the employee cannot refuse to work abroad. However, there are exceptions for certain employees in special situations, such as pregnant employees or women with children under three years old, for whom the employer does not have the unilateral right to transfer them abroad. If the employer intends to extend the secondment beyond this time limit, it is only possible with the employee's consent and mutual agreement between the parties.
In the case of posting, if the duration fits within the above-mentioned timeframe and no other claims arise, the content of the employment contract between the two parties does not change, and the employee remains an employee of the Hungarian company during posting. Therefore, there is no need for the employee and the host country company to sign a new employment contract.
Salary and Other Benefits
Just as the employee's employment contract does not change, the employee’s salary also does not automatically change during posting. However, there are exceptions. For instance, if the employee’s salary does not meet the minimum wage applicable in the host country, it must be adjusted. This can especially occur if the employer sends the employee to a West European member of the company group. For example, an employee posted to Germany is entitled to a minimum wage of €12.82 per hour during posting, which may be higher than their Hungarian salary. In this case, the employee will be entitled to posting allowance to cover the difference between their Hungarian salary and the German minimum wage.
By law, the employer is required to reimburse the employee for any additional costs incurred due to posting. These could include relocation costs, which cover expenses related to the employee’s travel to and from the host country. The employer must also ensure foreign housing arrangements for the employee. In such cases, the employer must either provide housing abroad at their own expense or reimburse the employee for housing costs. There is no mandatory guideline, or legal requirement regarding the level of housing the employer must provide, nor is the employer required to cover the costs of the employee’s trips to home during posting. However, a well-functioning posting that considers the employee's satisfaction can only work if the parties discuss and agree on these matters in advance.
Working Conditions
Fundamentally, the labor law provisions of the employee's home country (Hungary) continue to apply even during posting. However, for certain minimum issues (such as annual leave, maximum working hours, and minimum wage) if the host country’s laws are more favorable to the employee, those provisions will apply instead. This option can provide more benefits for the employee.
For example, in terms of working hours, the posted employee must adhere to the same rules as local workers. So, if an employee is sent to France, they do not have to work the 40 hours per week set out by Hungarian labor law; they only need to work the 35 hours per week required by French labor law. A similar situation exists regarding vacation time. If the host country’s system (e.g., Ireland) provides fewer vacation days, the employee will still be entitled to the number of vacation days calculated according to Hungarian labor law. However, if the host country’s regulations provide more vacation days (such as the German law, which provides a minimum of 24 days), these regulations will apply to the posted employee. Lastly, the employee’s working hours must be arranged to comply with the host country's working time rules.
Who Issues Instructions and Who Can Send Employees Abroad?
In the case of posting, the employer's rights will still be exercised by the sending Hungarian employer. This means that the Hungarian employer is the one who can give instructions to the posted employee, supervise their work, and ultimately, has the right to terminate their employment contract.
In practice, however, this process may not always be realistic. There may be a need for the host country’s group company to issue instructions to the employee. This is legally possible, provided that the sending employer informs the employee about this, and the sending and host employers agree to this arrangement in writing.
How Should This Be Done in Practice?
The Hungarian Labor Code and the relevant EU directives only provide the framework for posting. Depending on the situation, the planned duration of posting may require the employer and employee to agree in writing on the specific terms, compensation, or expense reimbursement related to posting. If posting is frequent in a company, it may be advisable to create an internal policy on posting.
Before posting, it is also important to familiarize oneself with the labor laws of the host country, any restrictions, rules, or opportunities offered by the legal system, and any foreign reporting obligations (including permit or visa requirements). It may also be helpful to consult with a foreign legal advisor.