New legislation on fixed-term and part-time work in force
In July 2003, new legislation regulating fixed-term and part-time employment came into force in Hungary. The new provisions of the Labour Code seek to transpose the EU Directives on these issues. This article highlights the main new regulations and outlines the social partners' involvement in drawing them up.
From 1 July 2003, the Labour Code of the Republic of Hungary was amended by Act XX of 2003. The modifications include the transposition of five European Union Directives on: working time (2000/34/EC); fixed-term work (1999/70/EC); part-time work (1997/81/EC); transfers of undertakings (2001/23/EC); and the working time of seafarers (1999/63/EC).
This article focuses on the new and harmonised regulations on fixed-term and part-time work. Both phenomena have been well known in Hungarian employment practice for decades. According to the Central Statistical Office (Központi Statisztikai Hivatal, KSH) Labour Force Survey for the first quarter of 2003, 6.6% of employees had fixed-term contracts while 4.8% worked part time - levels which are lower than in the majority of the current EU Member States. Part-time work is especially popular among parents with young babies and among students, while fixed-term work is usually used for the replacement of employees on parental leave.
Main points of new regulations
The new Labour Code provisions prohibit discrimination against part-time or fixed-term workers. Part-time employees must receive monetary or non-monetary remuneration at least pro rata to that of full-timers if the basis for the remuneration is the amount of time spent at work.
To avoid misuses, the amended Labour Code states that any fixed-term contract shall be deemed as indefinite if the contract is repeatedly established or extended without the employer having a legitimate reason to do so and this violates the employee’s legitimate interests. While this has been the practice in Hungarian case law for a long time, there have been a number of cases even recently where an employer has employed the same workers consecutively on fixed-term contracts without any good reason.
Under Hungarian law, the maximum duration of a fixed-term contract is five years. This rule is also to be applied for extended fixed-term contracts. This means that even when the extension of a contract is legal according to the abovementioned rules, no fixed-term extension will be valid after the fifth year of employment. This rule is also to be applied if the employment is not continuous but there are no interruptions longer than six months in the continuity. These rules, however, are not applicable for employment involving an authorisation permit (for example, in the case of foreign employees).
In the event that an employee, after the end of the fixed term, works for at least one extra day with the knowledge of their immediate superior, the employment transforms into an indefinite term contract. An employment relationship established for a period of 30 days or shorter can be extended only by the amount of time for which it was originally established. These provisions do not apply to employment established by election (usually executives) and to those subject to authorisation permit.
According to the new rules, if the end of the fixed term is not defined by an exact date, the employer is obliged to inform the employee on the probable duration of the employment. This could be difficult if the employee replaces another employee, for example one on parental leave.
In accordance with the relevant EU Directives, employees may now request the modification of their employment contract with regard to the term of the employment or to the length of regular working time. This means that fixed-term workers may ask to be employed for an indefinite period, full-timers may ask to work only part time, and part-timers may ask to work full time. The employer is required to inform the employee on the acceptance or refusal of such request within 15 days. The employer must also inform employees about those jobs for which it is possible to amend the contract duration or the length of the working time.
Finally, it should be noted that, under Hungarian labour law, fixed-term employment cannot be terminated by either party giving ordinary notice. The employee may terminate such employment only by giving 'extraordinary' notice or during the probation period with immediate effect, while the employer, in addition to these two possibilities, may also terminate such employment by paying the employee one year’s average pay or, if the time left until the expiry date of the fixed term employment is less than one year, the average pay due until the expiry date. Termination by mutual consent is also possible.
Input of the social partners
The amendments to the Labour Code related to fixed-term and part-time work were supported by both trade unions and employers' organisations. During the negotiations in the National Interest Reconciliation Council (Országos Érdekegyeztető Tanács, OÉT) (HU0209101N), however, employers, trade unions and the government made proposals which were not agreed by the other parties. These included the following:
- the government proposed that severance pay should be paid to fixed-term workers;
- the trade unions proposed that a list of circumstances in which the conclusion of a fixed-term contract is lawful should be included in the Labour Code (there is already such a list in the Acts on Civil Servants and on Public Service Employees, whereby fixed-term employment may be used only to replace an absent worker or fulfil a given task);
- the unions proposed permitting ordinary termination of fixed-term contracts by the employee; and
- the employers proposed giving less information to employees with respect to the possible amendment of fixed-term and part-time employment contracts.
Since no agreement was reached on these issues, any new legislation on them may be expected only during the general review of the Labour Code which is due in the coming years.
With regard to fixed-term work contracts, Hungarian case law had elaborated practically the same rules as those in the relevant EU Directive, and therefore the formal transposition of the Directive has not brought too much novelty into the practice of Hungarian employment law.
With regard to part-time work, an interesting point of the new regulations is that, although the Labour Code does not say so expressly, from a practical point of view it is now illegal to abuse the possibility of part-time work. Allegedly, as a reaction to the substantially increased statutory minimum wage (HU0212105F), in recent years some employers have concluded sham part-time contracts in order to evade the minimum wage law or the tax laws by formally (but not in reality) shortening the worker's working time and paying proportionally lower wages. Therefore this interpretation of the new law is highly relevant in low-wage industries.
Finally, requests to alter employment contracts with regard to their term or the length of regular working time are mainly expected from part-time workers and fixed-term workers, because of their relatively low wages and the disadvantageous social security rules affecting part-time workers. If a part-time worker earns less than the minimum wage, only a proportionate period of employment is recognised for pension calculation purposes. For example, if a par- timer earns 50% of the minimum wage, two years of such employment is recognised only as a one-year period of employment from a social security point of view. (Gábor T Fodor and László Neumann, Institute of Political Science, Hungarian Academy of Science)