Collective bargaining in Hungary

The Labour Code (Act I of 2012) provides the legal basis for the collective bargaining system, especially Part 3, Chapter XXII (Articles 276–284). These provisions mainly regulate collective bargaining in the private sector, but also at state-owned enterprises (typically public utility companies).

Under former legislation, the works council’s election functioned also as the measurement of representativeness of trade unions, and the acquired collective bargaining rights remained valid until the next works council’s election. Based on the new Labour Code, a trade union loses its right to collective bargaining (and thus its legally unspoken representativeness) when its number of members decreases below the 10% threshold.

Another modification of the Labour Code has empowered works councils to conclude a plant agreement with similar content to a collective agreement under specific conditions (see the section ‘Workplace-level employee representation’).

In 2004, Hungary introduced sectoral social dialogue committees to promote sectoral dialogue in general, including collective bargaining at that level, in the private sector. This institutional development has been successful in some sectors but has not resulted in a growing number of sectoral-level collective agreements. Most committees use the institutional framework for discussing economic, labour and social issues of mutual concern without entering into binding negotiations.

Collective bargaining is not possible for civil servants (employees of the state administration at various levels and public officials) according to Act CXCIX of 2011 on civil servants. For public employees (who are employed by the various budgetary institutions in areas such as education, healthcare and social services) collective bargaining is possible. Any derogation from the relevant acts and the implementation decrees by a collective agreement is, however, possible only if it is allowed by Act XXXIII of 1992 on public employees.

Collective agreements are legally binding.

Databases that allow the calculation of coverage ratios do not exist in Hungary. Experts consider the coverage ratio to be low in Hungary, based on the assumed number of collective agreements and the organisation level of trade unions.

According to the European Company Survey 2019, wage bargaining coverage stands at about 16% of employees. At sectoral level, wage bargaining coverage is relatively poor, with only three sectors having collective agreements, namely electricity, construction and tourism/hospitality. There is no national cross-sectoral level.

Collective wage bargaining coverage of employees from different sources, all levels

Note: * Percentage of employees working in local units where more than 50% of the employees are covered under a collective pay agreement against the total number of employees who participated in the survey.

Sources: Eurofound, European Company Survey 2013 and 2019 (including private sector companies with establishments with >10 employees (NACE codes B–S); the question in the survey was a multiple choice question and multiple responses were possible); Eurostat [earn_ses10_01], [earn_ses14_01], [earn_ses18_01], Structure of Earnings Survey 2010, 2014 and 2018 (including companies with >10 employees (NACE codes B–S, excluding O), with a single answer for each local unit).

The predominant level of collective bargaining in Hungary is company level.

Although the Labour Code (Act I of 2012) does not distinguish between bargaining levels, the Hungarian system can be considered as a two-tier bargaining structure, with single or multi-employer (enterprise-level) agreements and agreements that are signed by an employer organisation. The latter is loosely (and not consistently) determined as an ‘agreement with wider scope’. It refers in practice to sectoral-level bargaining, which could cover a part of the sector only.

At national level, social partner confederations are not involved in collective bargaining in the traditional understanding of the term, that is, in a bipartite manner, as indicated earlier. They are involved in tripartite and multipartite consultation and discussion on the minimum wage (within the framework of the VKF and the NGTT). They are also parties to the tripartite recommendation on the average wage increase agreed within the framework of the VKF. There is no obligation to follow this recommendation and there are no data available on the degree to which the recommendation is used by bargaining parties in practice.

In the case of public employees only, ‘institutional-level’ collective bargaining (that is, single-employer bargaining) is stipulated by Act XXXIII of 1992. Special agreements with a wider scope can be concluded by the government and sectoral trade unions, but neither their content nor the negotiation procedure follows the overall collective bargaining pattern.

Levels of collective bargaining, 2022

Articulation

The various levels of collective bargaining in the private sector are not systematically linked, primarily because sectoral collective agreements are rare. At national level, the only relevant output is a tripartite recommendation on wage increases and its role in the bipartite collective bargaining machinery is limited.

In the public sector, single-employer collective agreements are fairly distinct outcomes of local bargaining and only the relevant legal framework provides an overall framework.

In the private sector, bargaining rounds usually occur at the end of the year. In some years, bargaining has been postponed due to the late agreement of the VKF to the recommended average wage increase or delayed due to difficulties in the bargaining process.

In the public sector, collective bargaining has to be scheduled according to the availability of reliable information on the state budget for the subsequent year (if not according to the approved law).

Coordination of single-employer collective bargaining is weak in both the private and the public sector. Coordination is considered to be an internal affair of those sectoral trade unions and employer organisations to which the bargaining parties are affiliated. There is no pace or trendsetting tradition in Hungary.

Collective agreements concluded at sectoral level can be extended by the resolution of the minister responsible for employment policy. The extension is regulated by Act LXXIV of 2009 on the sectoral dialogue committees and by its implementation decree (SZMM Decree 22/2009 (IX. 30.)). According to Article 17 of the act, the two sides of the sectoral dialogue committees, as the signing sectoral social partners, can jointly initiate the binding extension. An extension is an administrative procedure that takes place after due consultation with national social partner confederations and the relevant line minister, and the minister’s resolution can be challenged in the labour and administrative courts.

Since the amendment of 1 January 2023 concerning Act LXXIV of 2009, extensions can be requested only if the members of the signatory employer organisation employ, jointly, the majority of workers in the sector for which the extension is requested and if at least one of the signatory trade unions is representative of the sector according to the legal requirements.

In the Hungarian context, derogation mechanisms should be discussed in two senses, namely in:

• collective agreements at different levels

• the relationship between collective agreements and legislation

The lower-level collective agreements may derogate from the higher-level collective agreements, but only in favour of workers. The few higher-level collective agreements have opt-out options – mainly regarding the organisation of working time.

The Labour Code has a unique regulation on the derogation of the collective agreements vis-a-vis legislation. In principle, the collective agreements can derogate from the rules of the Labour Code not only in favour of workers but also to their detriment. The closing part of each chapter of the Labour Code precisely defines those provisions from which no derogation is allowed by a collective agreement or from which derogation is allowed only in favour of workers. Regarding all other provisions, derogation is possible in a way that could be unfavourable or harmful for workers. Opening the derogation in both directions, according to the legislator, is intended to provide more room for bargaining. There is no doubt, however, that the influence of employers has been strengthened by this new regulation.

Collective agreements can be concluded for an indefinite or definite period. If the most recent one has expired, it loses its force immediately and is repealed.

A new Labour Code regulation states that if the membership of the contracting trade union has dropped below the 10% threshold, the collective agreement negotiated by it is repealed. When one employer takes over from another, the successor is required to apply the rules of the existing collective agreement for one year (if it is still valid for a year or more: Articles 281 and 282 of the Labour Code).

Collective agreements do not usually include peace clauses.

According to experts, collective agreements have continued to focus on traditional bargaining issues, including interpretations of the Labour Code. Contemporary challenges (such as gender equality, lifelong learning and flexibility) are often missing, as they are mainly dealt with by employers only and have not yet become the subject of comprehensive bargaining packages.

The main issues regulated by collective agreements are:

• wages and fringe benefits (contributions to the meals of workers, contributions to their transport needs, contributions to voluntary pensions and health and recreation services)

• working time schedules, taking into consideration in particular the situation of workers with children

• the rights of workers’ representatives.