Government Supplements Reduced Hours Salaries

State measures in response to the threat posed by the coronavirus allow employers to apply for state aid to finance reduced hours employment.

Many employers react to the economic downturn by reducing the working hours of their employees. The government introduced a new state aid in April 2020 to help employers to cover the costs.

According to the new regulations, working time can be reduced by 30-50% and employers can apply for state support at seventy percent of the lost net base salary. The amount of the subsidy is capped at HUF 75,000 per month per employee.

Conditions of the application

Several conditions apply to the submission of the application, for example, an obligation for the employer to have been operating for at least 6 months and to undertake to maintain the statistical headcount of the day of submission of the application. Furthermore, the employer's working time-frame needs to have expired or been closed down, and the employee may not be under termination of employment.

The employer must demonstrate in the application that the economic rationale for the reduced time employment is directly and closely related to the emergency and provide credible evidence that the retention of employees is in national economic interest. If the employer uses a working time-frame, it can only apply for state aid if the working time-frame has expired or has been closed down.

It is to be noted that the latter circumstance will probably prevent many businesses from applying, as it is common for companies to try to reduce losses by introducing variable daily working hours for several months, the so called working time-frame referred to above. Also, it is at the discretion of the authorities to decide for which businesses they consider the retention of employees to be of national economic interest.

The application for state support must be submitted jointly by the employer and the employee, in an electronical manner and on a form that can be downloaded from the website of the National Employment Service.

The authority will examine the application within eight working days and decide whether to grant or reject the application. Appeal against the decision is not allowed and it cannot be challenged in court either. In the event of a rejection the employer and the same employee may re-apply only once.

International comparison

In an international comparison it can be stated that the reduced hours state aid newly introduced in Hungary unfortunately does not reach the same level of support as in other states, e.g. in Germany, where it functions as an entitlement.  State aid in Hungary can be claimed under stringent conditions, it is capped at a rather low amount and it will be disbursed for a shorter period of time than in other developed states.

New possibility for employers to extend working time-frame

Part of the government’s coronavirus support measures is an amendment to the labor code that allows employers to increase the duration of the working time frame to twenty-four months at a maximum. This is a significant increase, as according to the rules currently in force, the maximum duration of the working time frame is sixteen weeks. A period of 36 months can be established in a collective agreement.

These rules are aimed at allowing employers to set shorter working days during the economic downturn caused by the emergency and to make up for the working hours missed when the economy gets stronger again.