International Tax, Accounting and Law Firm in Hungary
The new Whistleblowers Act imposes new obligations on medium-sized businesses in Hungary. We report on the opportunities and challenges of whistleblower systems, discussing also international scenarios and the experience of multinational companies.
The new whistleblower legislation in Hungary requires businesses with over 50 employees to establish a reporting system until the 17th of December 2023. The rules were introduced in accordance with the Whistleblower Directive of the European Union (Directive 2019/1937). A whistleblower system allows companies to uncover harmful practices within the company. This can take many forms, such as damage by fraud, corruption, malpractice or negligence. If not addressed, these harmful practices can result in serious damage to the company and to fines when harming public interest.
While in most European countries filing complaints is only possible for employees, Hungarian legislation requires the company to handle complaints not only by its own employees but also by other individuals authorized by the law. Employers must allow whistleblowers to file reports both in writing and verbally.
It is a further special feature of the Hungarian whistleblowing legislation that companies must also accept anonymous reports, however they are not obliged to examine them. Nevertheless, it may be in the interest of the company to investigate anonymous reports, as they may contain useful information. Also, if the company implements the Standards ISO 37301 and ISO 37001 it is bound to respond to anonymous complaints as well.
International studies have found that most whistlerblowers wish to remain anonymous and about 90 percent of all whistleblowers file their reports outside of working hours. Most companies therefore work with external providers to operate their whistleblowing systems. In practice, online reporting platforms are commonly used in Europe, however they may not provide full compliance under Hungarian law because of the broader scope of responsibilities of employers in Hungary. The whistleblower system service of Gyarmathy&Partners allows full Hungarian compliance, making it possible for companies to efficiently respond to whistleblowing complaints.
Most multinational companies view whistleblowing systems not just as a compliance obligation but also as valuable asset. Economic research has found that 80% of companies with a whistleblower system successfully uncovered the unlawful activity and damage stated in whistleblowing reports. Finally, implementing an efficient whistleblower system not only provides financial benefits for the company but also improves the company's compliance culture, integrity, and the personal responsibility of its employees.
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