TERMINATION OF EMPLOYMENT - BASICS

Methods of termination of employment:

The employment relationship can be terminated under the Labour Code in the following ways:

a) by mutual agreement,

b) by termination with notice period,

c) by termination without notice period.

Mutual agreement: 

Under Hungarian law, employment can be terminated by mutual agreement (agreement of the parties). This solution offers flexibility, as the parties are free to agree on the terms of termination, including the date of termination, exemption from work, the compensation of vacation days and severance pay. A mutual agreement requires a written agreement in which the parties clearly state their intentions. A major advantage of a mutual agreement is that it can only be challenged afterwards to a limited extent (for example, in the case of misapprehension, deception or threats), so the risk of an employment dispute is minimised. It is typically used in cases where there is doubt as to whether a termination with or without notice period would be lawful in the specific case. It is worth offering the employee slightly better terms (for example, more money) to motivate him or her to sign the agreement.

Termination with notice period: 

Both the employee and the employer may terminate the employment relationship by giving notice. In this blog article, for reasons of space, we will only cover termination by the employer.

The employer is obliged to give reasons for termination (except for special cases, such as retired employees or employees in managerial positions).

The reason for termination can be one of the following three:

a) the employee's behaviour in connection with the employment relationship,

b) the employee's ability or

(c) operational reasons of the employer.

The reason for termination must be clear, real and reasonable. It is particularly important that the reasons for termination are well written, because the employer may later have to prove in an employment dispute that the termination was lawful.

The parties may exclude the possibility of termination by agreement (typically in the employment contract) for a maximum period of 1 year from the beginning of the employment relationship.

The notice period is 30 days (extended if the employment contract lasts several years). After at least 3 years, the employee is also entitled to severance pay.

In many cases, there is a so-called prohibition of termination, i.e. the employer cannot terminate the employment relationship by giving notice. Typical cases are pregnancy, maternity leave, paternity leave, parental leave or unpaid leave to care for a child.

In addition, there are also restrictions on termination, special rules, for example 5 years before retirement age, up to the age of 3 of the child for a mother or father raising a child alone, or for workers receiving rehabilitation benefits or rehabilitation allowances.

The above applies to the termination of an employment contract of indefinite duration (the vast majority of employment contracts are concluded for an indefinite period). The employer may terminate an employment contract of definite duration only in the following cases, which are much more limited:

a) during the period of liquidation or bankruptcy proceedings, or

(b) for a reason based on the employee's capacity, or

(c) if the employment relationship becomes impossible to continue for an external reason which cannot be avoided.

Termination without notice period:

Both the employer and the employee may terminate the employment relationship without a notice period (with immediate effect). However, this is only possible if the other party:

(a) intentionally or with serious negligence, seriously breaches an essential obligation arising from the employment relationship, or

b) otherwise behaves in a way which makes it impossible to continue the employment relationship.

The deadline for giving notice of termination with immediate effect is 15 days. Reasons must be given for the termination. In this case, there is no notice period, the employment relationship ends on the same day and there is no severance pay. However, the reasons for termination should be carefully drafted, as employment lawsuits are often brought by employees because of immediate terminations.

It is also important to know that either party can terminate the employment relationship during the probation period without giving any reason by termination without notice period.

The employer may also terminate a fixed-term employment contract without notice period and without giving a reason, but in this case the employee is entitled to 12 months' absence pay or, if the remaining period of the fixed-term contract is less than 1 year, to the absence pay for the remaining period (typically absence pay is an amount equal to the monthly salary).

Dr. Hizsák Tamás

lawyer

The above article is not intended to be complete, it was created for information purposes, so it does not constitute legal advice. If you have any questions or comments, please contact us using one of our contact details (e-mail: info@dunalegal.com, phone: +36 1 622 0436).