Penalty, or clean bill of health?

A labour inspection is never a “red-letter day” for any employer, but with careful administration and adhering to the basic rules of the Hungarian Labour Code it is possible to avoid being hit with fines.

The inspectors from the National Labour Office primarily select the companies to review based on their inspection plan. According to the plan published for 2013, in the first half of this year the Office will be focusing on activities supporting services, while in the following six months the emphasis will switch to the retail sector. In many cases the labour inspectors visit employers without prior notification, which is primarily designed to ensure the inspection can be conducted safely and successfully. Such inspections are most likely in the construction industry, shopping centres and hospitality industry, but it is not unknown for inspectors to appear at companies located in office buildings too.

One other common factor triggering official inspections is a notification or complaint from the public, which implies a complex and comprehensive labour inspection. This type of inspection generally starts with anonymous information that the Office always has to follow up on.

Two inspectors are generally in attendance, and they identify themselves with photographic ID before starting the inspection.
During the process, labour inspectors principally focus on examining compliance with the rules of the Hungarian Labour Code, and so they request registrations, employment contracts and attendance sheets; furthermore, they can interview employees as witnesses who have to respond to questions about their employment relationship. Experience shows that the inspectors focus on the following areas:

–    do employees believe they are registered at the company?
–    have the employees received an employment contract and a job description?
–    what are their gross salaries?
–    how many hours do they work each day?
–    how do they complete the attendance sheet?
–    does the employer tend to order overtime, if so, when and in what form?
–    is the overtime compensated?
–    can employees take their holiday entitlement?
–    do the employees receive a salary slip?

Employers can provide evidence for all these questions for both employees and the inspectors based on good administration.
According to the current regulations, employment relationships must be registered with the tax authority on form T1041 before the employment begins, but by the latest on the first day of the social security relationship. A copy of the data provided and of the confirmation of receipt must be given to the employees, naturally with the employees verifying receipt of these documents with their signature. This way the employer can easily prove that employees were informed about the registration.

Two copies must be prepared of employment contracts, the main purpose here being that both signatories to the contract each receive an original copy.

Attendance sheets must be kept on an hourly basis. Many companies do not indicate the number of hours worked on a given day with a number on the attendance sheets, but with an “X”. However, this does not reveal when the employee arrived at the workplace on the given day and when they left, so any overtime cannot be determined either. According to the new Labour Code the annual allowance for overtime is 250 hours, which in practice means that employees can be obliged to work 4 hours of overtime a day, 8 hours a week or 32 hours a month. This extra work must be instructed in writing if so requested by the employee; verbal agreement is also possible, but written instructions provide precise evidence for both parties in the event of an inspection. According to the rules of the Hungarian Labour Code, overtime must always be compensated.

Records of working hours also reveal whether employees can take their holiday entitlement. The general rule is that normal holiday leave must be used up in the given year, and this must be recorded on both the attendance sheet and the holiday consent form. If employees are unable to take out all of their annual holiday entitlement, then from 1 January 2013 and based on agreement between the parties the employer may allow the employee to use one third of the leave by the end of the following year based on Act I of 2012.

Salary slips must be handed over to all employees by the 10th working day of the month following the given month, with the employee signing to verify receipt. This proves that the employer followed the right rules.

If the employer adheres to the important requirements as outlined above during day-to-day operations, the inspectors of the National Labour Office will likely have nothing to object to during an inspection. Despite this, it is possible for employers to make mistakes during their everyday routines, and these may be discovered during an inspection. Nevertheless, for first infringements by small and medium-sized enterprises the Office only issues a warning or sets a deadline for the problem to be rectified.

If the labour inspectors reveal shortcomings or errors during the inspection that entail a fine or penalty – e.g. repeated breaches of the rules above, risk to life or health or the violation of rules regarding the protection of those under the age of 18 – such can range from thirty thousand forints to twenty million forints based on Section 6/A of the Act on Labour Inspections.

This means it is advisable for employers to inspect their labour documentation and review the circumstances of individual employment relationships to ensure that a possible labour inspection does indeed end with a clean bill of health.

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