Hire Contractors in Hungary

Hungary is an amazing spot to expand your business globally. The main reason for this is the country’s simplified online bureaucratic processes. 

Unlike most other areas, setting up your company in Hungary only takes five business days. This means you don’t have to stress signing multiple documents or waiting in line for long hours when it can be done online.

Hungary has an extremely low corporate tax rate (9%)—the lowest in the European Union. This improves the quantity and quality of entrepreneurial activities in this region. 

Both these factors provide immense opportunities for companies that wish to hire contractors in Hungary. 

However, despite such huge benefits, this process has certain challenges. 

This article will discuss how to hire overseas contractors, commonly faced problems and how to solve them with Skuad’s AOR service.

How to Hire Independent Contractors in Hungary

Most businesses hire in Hungary directly. This means they set up a subsidiary, register their business with relevant authorities, source candidates, and onboard them. 

It includes various steps like,

• Verifying the applicable law for opening a subsidiary in Hungary.
• Selecting a legal entity (private company, public company, or limited liability company)
• Verifying the capital requirements.
• Contacting the relevant Hungarian institutions for business registration.
• Setting up a corporate bank account.

The problem with this approach is that it is not viable, especially if you are hiring for short-term projects. 

It is a waste of monetary resources and time. Additionally, there is a high risk of worker misclassification in Hungary and other non-compliance issues with direct hiring contractors. 

Hiring Contractors through Skuad AOR

A smart alternative would be to partner with an agent of record in Hungary, like Skuad. 

Skuad already has an established legal presence in this country. Therefore, you don’t have to stress about all the business registration paperwork. 

Apart from this, our united platform will help you with all the steps of the contractor onboarding process. These include,

• Digitally onboarding new hires within a short period.
• Processing accurate and timely payments.
• Drafting service agreements for your contractors that follow the labor rules of Hungary.
• Handling every minute requirements, such as invoicing, expense approvals, or reimbursements.
• Protecting your company’s IP with our built-in IP system and more. 

Moreover, for hiring employees you may use an employer of record Hungary.

How to Pay Contractors in Hungary

You can set up a payroll in Hungary to send payments to your contractors. This can be done through bank transfers, wire deposits, or checks. 

The advantage of this approach is complete transparency and control over the payment process. 

But the downside is that you must deal with massive amounts of paperwork. This includes understanding your contractors' taxation documents, making the right deductions, etc. 

You can avoid these responsibilities by processing payments using Skuad’s global payroll solutions. 

We will handle every aspect of the international contractor payment process. You can benefit a lot from some of our most exclusive features, such as,

• Automated invoicing and payments
• Regulatory compliance monitoring
• Real-time expense tracking and benefits administration
• Multiple payment options and
• Competitive FX rates, among others.

Hiring Contractors Directly vs. Hiring Contractors with Skuad

Are you still confused about how to hire independent contractors in Hungary? 

Here is a more detailed comparison to help you resolve your doubts.

Now, take a look at the section that answers how much does it cost to hire a contractor in Hungary.

Cost of Hiring Contractors in Hungary

If you are hiring international workers in Hungary directly, then the cost will automatically be higher. You must bear the set-up costs, registration fees, and onboarding expenses alone. 

However, the cost will be much lower with an agent of record in Hungary or contractor management software like Skuad. You pay the service charges, and all the administrative responsibilities will be handled on your behalf.

Additionally, remember to factor in the other variables when hiring contractors. These include the type of work you are hiring, the industry your company operates in, the location, and the contractor's experience level. 

Say you are hiring for a contractor with a proven track record of success in their respective fields. Their hourly charges will be much higher than those of someone who has just started freelancing in Hungary.

How to Convert a Contractor into an Employee in Hungary

Companies convert a contractor into an employee for various reasons. It can be to reduce the chances of worker misclassification, to protect the organization’s intellectual property, and sometimes even to reduce the overall cost of international hiring. 

Regardless, this conversion process is extremely simple as long as you know the essential steps :

• Learn and adhere to the employment laws in Hungary. For example, an employer must give every employee 15 days of sick leave.
• Discuss the working hours, benefits, and salary you can provide your contractor. 
• Once you and your employer have mutually agreed to a decision, draft a proper employment contract. Ensure it follows the guidelines in the Labor Code of Hungary.
• After the contract has been signed, a background check will begin. This is extremely important to avoid surprises and will help you reaffirm the qualifications of your contractor-turned-employee.
• Onboard the new employee, complete all the paperwork, and add them to your organization’s payroll system.

Challenges of Hiring Contractors in Hungary

Hiring contractors in Hungary may not always be as easy as it seems. You need to deal with various complexities when recruiting in a foreign land. Here are some examples of such challenges.

1) Contract for Personal Services: Civil Code

Hungary has different legislation regarding employees and independent contractors. For example, the Labor Code is the main law determining the terms and conditions of the relationship between an employer and an employee. 

However, in the case of a self-employed individual, it is the Civil Code.

If you want to hire contractors in Hungary, you need to draft a contract for personal services and not an employment agreement. 

The most important difference between these two is the relationship between a contract for personal services consisting of paralleled authorities. An employment contract is a hierarchical arrangement. 

Additionally, in a contract for service, the principal (contractor) is legally bound to complete the specified task. 

However, they are not responsible for the continuous performance of a specific scope of work.

When hiring international workers in Hungary, understanding and maintaining these differences is very important. However, it can be difficult without proper expertise or a professional. Contractor software can be a potential solution, but it can be very expensive and resource-intensive for companies with monetary constraints.

Tax Requirements for Contractors in Hungary

Generally, independent contractors in Hungary have to file and pay their taxes. This might sound like good news to you as an employer, but it's not. 

With an employee, you know the rules, how much you have to deduct, the contributions, etc. But when hiring contractors, it’s entirely different. 

You must ensure that each of your new hires submits the due document and the right tax percentage to the relevant authorities. 

Understanding all these requirements is not always easy unless you have an accountant/contractor management software. 

Even the tiniest of errors can lead to non-compliance and, ultimately, huge legal fines.

Hire Contractors in Hungary with Skuad

International hiring can be challenging. But it does not necessarily have to be that way. With Skuad as your partner, you can leave us all the administrative and compliance hassles. 

Our team of experts will ensure you are always up-to-date with the latest changes in Hungary's labor laws. We will draft contracts, pay your contractors, and handle all onboarding tasks. All you need to do is focus on your company's growth. 

Additionally, with Skuad, you don’t have to worry about data privacy issues. We have implemented bullet-proof data security measures to keep your sensitive business data and employee information intact and safe.

‍Connect with our experts today and experience a compliant and successful hiring journey only with Skuad!

FAQs

1: Can I hire a foreign contractor?

Yes, you can hire an international contractor. It is a well-proven strategy to expand your business globally without dealing with the expenses of hiring full-time employees.

2: Is there a 13th-month pay in Hungary?

Employers are not legally required to pay their employees a 13th-month salary, but it is a standard practice in most businesses.

3: What is the best place to find independent contractors?

Upwork, LinkedIn, and Fiverr are job-listing portals where you can source international contractors.

4: What is the employment contract in Hungary?

An employment contract is a written legal document highlighting the most important rules concerning the working relationship between an employer and an employee.

5: How do I pay a foreign contractor?

An effective way to pay an international contractor is with contractor software/AOR, like Skuad. Skuad’s amazing features make it easy for businesses to handle all the essentials of payroll processing, including automated invoicing, multi-currency payments, and guaranteed compliance.