Government subsidy related to employment under shortened working hours during state of emergency

On 10 April 2020 Government Decree 105/2020 (IV.10) on subsidising employment with shortened working hours during the state of emergency under the Economy Protection Action Plan (hereinafter referred to as Government Decree) was promulgated in Hungary. Below we summarise the cornerstones of the Government Decree.

Agreement facilitating claims for the government subsidy related to employment under shortened working hours during the state of emergency (hereinafter: Subsidy) 

The Subsidy may be claimed if the employee and the employer agree on

  • shortened working hours (part-time working hours based on an employment contract modified after the declaration of the state of emergency in which working hours reach at least half of the working hours from the employment contract before the modification in a three-month average, but no more than 70% of the previous working hours – at least 4 hours per day), and
  • individual development time (employee is exempted from work obligations for 30% of the time lost due to shortened working hours in order to conduct development activities connected to the employee’s position or the employer’s activities)
Conditions for claiming the Subsidy and exclusion criteria

The Government Decree outlines a complex system of conditions for claiming the Subsidy, according to which the Subsidy may be granted if the conditions below are met:

1. the employee:

  • has been employed by the employer since at least 11 March 2020;
  • does not receive any other subsidies related to part-time work in connection with the same position;
  • is not serving their notice period;

2. the employer:

  • has been in operation for at least 6 months;
  • is employing the employee – with whom it is jointly submitting the claim – under shortened hours in order to avoid reducing the headcount;
  • presents the business conditions justifying the employment under shortened working hours, their direct and close connection to the state of emergency, as well as the measures already taken and planned by the employer to alleviate the economic hardship;
  • has used all available options to reschedule work before submitting the claim;
  • is not receiving aid for creating or retaining jobs or for employing research and development staff at the time of the submission in respect of the employee with whom the claim is jointly submitted, and
  • the cumulative working time has expired or been completed.

The Government Decree prescribes a number of obligations both for the employee and the employer:

1. the employee agrees

  • to work under the shortened working hours entailing a loss of income;
  • to be available for the employer during the time of individual development;
  • that establishing any new employment besides the employment indicated in the request shall not hinder the employee’s return to regular working hours after the Subsidy period.

2. the employer agrees

  • not to order any work to be carried out in irregular hours during the Subsidy period;
  • to pay wages for the individual development time;
  • that the amount of salary including the Subsidy shall total the employee’s absence pay during the subsidy period;
  • to preserve the headcount during the Subsidy period and for 1 more month (headcount retention obligation);
  • to report to the government office any changes in the conditions of the Subsidy or the period of shortened working hours within 2 working days.

With regard to claiming the Subsidy, the Government Decree sets forth the following exclusion criteria:

  • the employee has a payment obligation in connection with a subsidy reclaimed in a final decision by a state employment authority;
  • the employer does not comply with lawful employment relation conditions and/or does not provide evidence thereof;
  • the employer is under voluntary liquidation or liquidation ordered by a final resolution, or bankruptcy or other statutory proceedings ordered by a final resolution and aimed at its termination are underway;
  • as of 31 December 2019 the employer is considered a business in difficulty pursuant to Government Decree 37/2011 (III.22) on procedures relating to State aid measures as defined by EU competition law and on the regional aid map;
  • the employer does not show there is a direct and close connection between the economic reason for the employment under shortened working hours and the state of emergency, and does not provide reliable supporting documents to prove that maintaining the continuity of the employees’ business activities is in the interest of the national economy.

Furthermore, no Subsidy shall be granted for employment other than under an employment contract or employment as part of agency work.

Period of the Subsidy

The period of the Subsidy shall be no more than 3 months. The Subsidy may be granted for a period – defined in months – following the submission of the claim. The Subsidy shall not be paid for the duration of unpaid leave.

Rate of the Subsidy

The rate of the Subsidy is 70% of the monthly absence pay assessed as of 11 March 2020 – less personal income tax advances and contributions defined based on the general rules – corresponding to the 30, 40 or 50% reduction in working hours. There is a ceiling to the absence pay less taxes and contributions: the amount shall not exceed double the mandatory minimum wage less prevailing taxes and contributions at the time of submitting the claim, i.e. HUF 214,130 (roughly EUR 608).

Procedural issues with claiming the Subsidy

The Subsidy shall be granted at the joint request of the employer and the employee.

The claim for the Subsidy shall be submitted by the employer electronically using the form available on the website of the Hungarian Employment Service (not yet available) during the state of emergency, or within one month of the end of the state of emergency. The claim for the Subsidy shall be submitted at the competent government office for the place of employment.

Decisions of the government offices cannot be appealed, and they may not be challenged in court. If the claim is rejected, the employer and the same employee may resubmit it no more than one more time.

Following the expiry of the Subsidy period and 1 month after the end of the headcount retention period, new claims may be submitted only with employees who previously were not subsidised.

The Government Decree will take effect on 16 April 2020.

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