An employer at any company may decide to employ someone temporarily in a manner deviating from employment contracts, in another position (reallocation), at another workplace (secondment) or at another employer (temporary assignment). This option is provided for in Section 53 of the Act on the Labour Code (Hungarian Labour Code). However, there are specific cases when the employee’s approval is essential for employment in another location. The Hungarian Labour Code provides an itemised list of these cases.
Position or workplace deviating from employment contracts
The maximum duration of employment deviating from employment contracts is 44 working days per calendar year for the position. In certain cases, for example, when the employment starts during the year, this rule must be applied proportionally. For employment deviating from employment contracts that exceeds the duration set forth by law, the given employment contract must be amended. The employee must always be informed about the expected duration of the employment deviating from employment contracts.
When employing someone in a position deviating from employment contracts, the employer instructs the employee to perform tasks related to a different position, but if the work is performed in a different workplace, the tasks remain the same, just the place of work changes. In both cases the work is performed under the direction of the employer, there are no changes in payroll or accounting.
Temporary assignment: employment at a different employer
However, employment at a different employer means that the employee is temporarily subject to the direction of another employer. It is advisable to specify the details of this legal relationship in an agreement between the two employers, in which issues related to sharing the exercise of employer’s rights, the duration of the secondment and settlements between the two parties should be included. The seconding employer still prepares the payroll, pays the salary of the employee, as well as declaring and paying the taxes. Wage costs, related taxes and contributions are recorded in the books and accounting records as usual.
An employee cannot be seconded for some form of consideration, but this implies a possible tax risk. This is why it is important to examine the issue in advance from a corporate tax and VAT perspective too. Of course, one of the employers may also ask the other to reimburse the costs incurred. Such compensation must be booked as other revenue, while the other employer should classify it as other expense.
Employment at more than one employer at the same time
A distinction should be drawn between employment deviating from employment contracts and atypical employment, where one of the forms involves the employee being employed by more than one employer. It is very common for several companies in the same group to employ the same person in certain positions, like accountants or receptionists, etc., within the framework of the same employment relationship. Section 195 of the Hungarian Labour Code enables several employers and the employee to enter into an employment contract for the performance of tasks pertaining to the same position. The Hungarian Labour Code not does restrict this form of employment to related parties only, completely independent employers can also apply this legal tool.
For employment relationships established by more than one employer, aside from the general rules the employment contract has to state which employer pays the salary. Upon entering into the employment relationship, both employers must record in writing which employer is responsible for the tax liabilities, and inform the employee of the designated employer. Based on this rule we can say that the provision of information by the employers is particularly important in such cases of atypical employment. Employers are liable for wage costs and related public dues proportionally, as agreed, so both companies record the appropriate proportion as a wage cost or wage contribution in their books. (Information about the tax on employment by several employers is summarised by the Hungarian Tax Authority in tax guideline 2013/28.)
Agency work
Another case of atypical employment is agency work, where the agent releases one of its contracted employees to a client on a temporary basis for work purposes and in return for a fee. According to Section 142 of the Act on VAT, reverse charge applies to such activities and they are subject to authorisation.
If a company wishes to choose one of the employment options above, or any other atypical employment alternative, it is advisable to consult with a labour lawyer and a tax advisor. The professionals at WTS Klient Hungary are here to help.
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