Payroll in Hungary: Your efficient overview for business compliance in 2025

The effective management of payroll in Hungary is particularly important because it requires a good understanding of the complex the tax system, labour law requirements, frequent regulatory changes and accurate electronic reporting. Businesses must ensure compliance to avoid penalties, safeguard employee satisfaction and protect their reputation.

Therefore, Hungarian payroll is a complex task, and any mistake can be a sensitive issue for the employees. It’s very important that a competent payroll accountant takes care of the calculation of their monthly salary and taxes.

The Hungarian business environment significantly influences payroll practices, as legal, institutional, and ownership changes shape the laws governing payroll processes. While these laws are aligned with European Union strategies and directives, implementing new regulations can be complex, often presenting challenges for businesses managing payroll.

In this article, you will learn:

• The legal framework governing payroll in Hungary, including key regulations and upcoming legislative changes.
• The components of payroll, such as salary structure, mandatory deductions, and contributions.
• The payroll process in Hungary, including pay schedules, payslip requirements, and reporting obligations.
• The advantages of payroll outsourcing, how it ensures compliance, and tips for selecting the right provider.
• The challenges and compliance risks businesses face when handling payroll in Hungary.
• Why a deep understanding of Hungarian payroll is essential and how partnering with local experts can make a difference.

Legal framework governing payroll in Hungary

To decide which employment laws or other civil right laws to apply one has to determine the exact relationship between the two parties. Generally, the main regulation comes from the Hungarian Labour Code, but payroll accountants also need to be familiar with the below laws too:

• Act about the mandatory health insurance services
• Social security Act
• Government decree about the incapacity to work
• Personal Income Tax Act
• additional Government decrees and Ministerial Orders
• Act on the Rules of Taxation

These are only just a few examples of all the regulations, laws, decrees a competent payroll expert needs to be aware of – not to mention all the changes that are regularly released.

Hungary has seen various reforms in labour law and taxation periodically, which can affect payroll processes, such as changes in minimum wage, tax rates, applicable discounts or changes related to social security contribution.

Payroll components: Salary structure and deductions

Understanding the structure of payroll in Hungary is essential for businesses to manage employee salaries effectively and remain compliant with local regulations.

Salary components

Based on the Hungarian Labour Code these qualify as wage:

• base salary
• wage supplements
• bonus, premium
• cafeteria in cash

The Labour Code also lists the absence fee as „wage“. To calculate the absence fee, one shall take into consideration the effective base salary, fixed supplement, also the performance-based wage and wage supplement paid for the last six calendar months before the time when due.

Generally, in case of an employment relationship every payment that the employee receives for their work based on the employment contract or for absences that are listed in the Labour Code qualifies as wage.

Cafeteria items, private usage of company equipment’s (car, laptop, mobile phone), meal-tickets, cost reimbursements (for example commuting) are not part of the wage.

Mandatory deductions and contributions

One can determine the mandatory deductions and contributions after inspecting the legal relationship between the two parties and the legal status of the employee. For example, if an employee is already a pensioner, they will have different deductions and contributions than a „regular“ employee.

Generally, 15% personal income tax and 18,5% social security contribution are deducted from the employee and 13% social contribution tax paid by the employer.

Based on the headcount of the company other taxes can occur too.

The process of payroll in Hungary

Managing payroll in Hungary requires adherence to specific legal obligations, timelines, and reporting requirements to ensure compliance.

Pay schedules and payment obligations

With the exception of work performed abroad or unless otherwise prescribed by the relevant legislation, all wages shall be established and paid in forints. This means that the salary has to be given in forints in the employment contract too. Even if the salary is determined in foreign currency, it has to be viewed as a forint amount calculated with the exchange rate, communicated by the Hungarian National Bank at the time the contract was signed.

Salaries cannot be paid by means of vouchers or any other means of substitute payment.

In the absence of an agreement to the contrary, the wages of employees shall be retrospectively accounted at least once a month and shall be paid by the tenth day of the following month. If it is stated in the employment contract the parties can choose a shorter or longer accounting period. In case of performance-based wages when the performance wage can’t be determined within a month it can be paid later but even then, the employee has to receive at least half of their base salary as advance on a monthly basis.

Wages shall be paid in cash, or by way of transfer to the payment account the employee has indicated. It doesn’t have to be the employee’s bank account, but the employer shall ascertain that the employee shall has access to their wages on payday. Generally, the employee can only give one bank account, and their permission is needed in case the transfer is completed to more bank account.

Payment of wages may not invoke any cost on the employees’ part, except if the transfer is made to a payment account opened at a payment service provider that is established or has a branch in a state other than Hungary

If wages are paid in cash, it has to be done at the workplace of the employee or at the business premise of the employer during working time. If payday falls on a weekly rest day or a public holiday, the wages shall be paid at the latest on the last preceding working day.

Payslip requirements

The Labour Code stipulates that written information on the settlement of paid wages must be provided by the 10th day of the month following the month. But not required to do so in paper form. Payslips can be provided electronically as long as they meet the legal requirements and are accessible to the employee. The information shall be provided in such a way that the employee can follow the title of the deductions, the amounts deducted, gross elements (base salary, overtime, bonus, absence fee, SSPO payment, etc) and the correctness of the calculation. The payslip must include the employee’s data, the employer’s data, period of payment, total gross income, all deductions, the amount of net salary, additional benefits, paid leaves and unpaid leaves. The payslip shall be clear and understandable.

Key reporting obligations

In Hungary, companies have several key filing and reporting obligations related to payroll, to ensure compliance with labour and tax laws. These obligations cover the submission of social security contributions, tax filings, and documentation related to employee compensation. Below is an outline of the primary payroll-related filing and reporting responsibilities for employers in Hungary:

Data protection

GDPR rules must be applied throughout the complete process and agenda of payroll in Hungary. The employee can receive their payslip via encrypted and password protected e-mail or other GDPR-safe communication portal.

The employer is obliged to submit the necessary forms, tax return via secure portal.

Payroll outsourcing in Hungary

Outsourcing payroll in Hungary offers businesses a strategic solution to simplify operations, save costs and ensure compliance with complex local regulations.

Benefits of payroll outsourcing in Hungary

Outsourcing payroll in Hungary offers several advantages for companies. Payroll service providers continuously enhance their expertise by training employees and upgrading software and systems to ensure compliance and efficiency. With a team of experienced payroll professionals, they can handle complex situations effectively. In contrast, in-house payroll management can be costly, requiring salaries for payroll staff, ongoing training, and payroll software fees.

Additionally, companies with more than 100 employees must employ a specialized social security expert, a role requiring extensive knowledge and attention to detail. Outsourcing also minimizes the risk of penalties due to missed deposits, late filings, or calculation errors, as payroll providers ensure timely salary transfers, tax payments, and report submissions.

From the perspective of labour and tax law, payroll accountants must keep track of numerous legislative changes. If payroll is not outsourced, the company’s payroll accountant may not have the opportunity to discuss legislative or professional matters in-house. Errors caused by excessive workload or a lack of expertise can create significant tax and labour law risks.

Nowadays, finding a reliable in-house payroll specialist is increasingly difficult, which also drives up wages. By outsourcing payroll, companies can save on the salaries of both payroll accountants and Social Security Pay Office (SSPO) clerks.

With payroll outsourcing in Hungary, you pay for a continuous service while also having the option to request ad-hoc support. There’s no need to invest in costly payroll software, and the company is not responsible for the payroll accountant’s salary or training expenses.

Additionally, outsourcing eliminates the risk of disruptions caused by a payroll employee’s illness or resignation during payroll processing or declaration periods. Without outsourcing, companies must not only find a replacement but also invest in their training and ensure they are familiar with company-specific practices.

Last but not least, outsourced payroll professionals regularly participate in specialized training and gain extensive experience by handling a wide range of complex cases.

Ensuring compliance for foreign companies

For foreign companies, navigating Hungarian regulations can be challenging, as many laws and government decrees are not available in English. Having a native-speaking expert is essential to ensure compliance and provide guidance through the complexities of local regulations. Additionally, payroll is a constantly evolving field, and payroll professionals stay up to date with legislative changes, allowing foreign businesses to focus on their operations without the burden of tracking legal updates.

A local expert is well-versed in Hungarian rules and legislation, providing clients with clear explanations and acting on their behalf during audits and revisions. They can also prepare mandatory tax returns and claim documents in the local language, ensuring compliance with all regulatory requirements.

Outsourcing payroll helps avoid errors and penalties, as service providers implement multi-level controls and have liability insurance. This ensures that clients are protected from financial losses and are not responsible for any costs resulting from mistakes.

Choosing the right payroll provider in Hungary

When choosing a payroll provider in Hungary, businesses should consider:

• if they have any industry-specific requirements and see which payroll provider has expertise in that
• what services are needed: do they need cafeteria management, time and attendance tracking, social security office task? Is that particular service provided by the outsourcing company?
• flexibility of the payroll provider and how they accommodate business growth, integrations with client software, etc.
• the reputation and reviews of the payroll company – checking the provider’s website for references, clients they work with and how satisfied they are with the service

Challenges and compliance risks in payroll in Hungary

Handling payroll in Hungary presents several challenges for foreign companies, including navigating a complex legal and regulatory framework, complying with labour laws, understanding the intricate tax system, and managing bureaucratic processes. Market conditions, economic factors, and potential corruption further complicate payroll management. Ensuring compliance is critical to avoid penalties and legal issues.

Common compliance risks include payroll fraud, such as employee compensation manipulation, misclassification, and timesheet fraud. Other risks involve ghost employees, errors in salary calculations, tax misreporting, data security breaches, and increased scrutiny from tax authorities, which could lead to reputational damage or loss of key employees.

Non-compliance with payroll regulations in Hungary can result in significant penalties. Employers face fines of up to 2 million HUF for hiring unregistered employees, although the National Tax Office (NTO) applies a principle of gradation when assessing penalties. Businesses have the opportunity to review and correct errors through self-revision, but additional costs may include tax penalties, late fees, and self-revision charges.

Why a deep understanding of Hungarian payroll matters

Payroll laws are crucial for companies to ensure fair and consistent treatment of employees. Understanding these laws helps companies avoid legal issues, maintain trust with stakeholders, and protect their reputation. Additionally, focusing on social responsibility and sustainability is essential for business success.

One of the key roles of payroll is ensuring legal compliance. In Hungary, as in other countries, businesses must adhere to financial and tax regulations. Payroll errors or improper bookkeeping can lead to serious legal consequences, including fines and financial audits. Maintaining accurate payroll and accounting records ensures financial transparency and supports effective financial planning.

To ensure a smooth and compliant operation of payroll in Hungary, companies are advised to:

• use the right payroll software
• understand the Hungarian payroll process
• involve a local payroll specialist with vast experience
• stay updated on changing laws and regulations
• schedule regular internal audits
• train employees or rely on payroll outsourcing that covers all these points.

Companies who provide payroll outsourcing in Hungary offer personalized services and quick responses, ensuring any payroll issues or questions are promptly addressed through a dedicated support hotline. Additionally, working with a local payroll expert can be an effective solution for managing payroll processes. 

Modern payroll solutions enhance efficiency through paperless systems, automated payroll processing, employee self-service portals, and seamless integration with other software. Features such as payroll reporting, time tracking, and attendance management further streamline operations. By implementing these solutions, businesses can improve efficiency while also increasing employee satisfaction.