Employment Contract Termination Rules in Hungary

Introduction

The termination of employment is one of the most heavily regulated areas of Hungarian labour law. Act I of 2012 on the Labour Code (Munka Törvénykönyve, hereinafter “Mt.”) sets out a detailed framework governing how, when, and under what conditions an employment relationship may come to an end. Both employers and employees must understand these rules to protect their rights and comply with their obligations.

This article provides a comprehensive overview of the grounds for termination, mandatory notice periods, severance pay entitlements, and the special protections afforded to certain categories of employees.

Types of Employment Termination

Hungarian labour law recognises several modes of terminating an employment relationship:

1. Mutual Agreement (Közös megegyezés)

The employer and employee may terminate the employment relationship at any time by mutual written agreement. This is the most straightforward method and avoids the procedural requirements of unilateral termination. However, courts have occasionally set aside mutual agreements where the employee was coerced, misled, or did not have adequate time to consider the proposal.

2. Termination by Notice (Felmondás)

Either party may terminate the employment contract by giving written notice. However, the rules differ significantly depending on who initiates the termination.

Employer’s notice: The employer must provide a reason for the termination. Valid reasons include:

• The employee’s conduct or performance (a munkavállaló magatartása vagy munkavégzése)
• The employer’s operational reasons (a munkáltató működésével összefüggő ok), such as restructuring, redundancy, or economic difficulties

The stated reason must be clear, true, and substantiated. If the employee challenges the termination in court, the employer bears the burden of proving the validity of the reason.

Employee’s notice: The employee may resign at any time without providing a reason during an indefinite-term employment relationship. For fixed-term contracts, however, the employee may only terminate by notice if the continuation of employment would cause unreasonable hardship.

3. Termination Without Notice (Azonnali hatályú felmondás)

Either party may terminate the employment relationship with immediate effect if the other party:

• Intentionally or through gross negligence breaches a material obligation arising from the employment relationship, or
• Otherwise engages in conduct that makes the continuation of the employment relationship impossible.

The right to terminate without notice must be exercised within 15 days of learning about the grounds for termination, and no later than one year from the occurrence of the underlying event (or, in the case of criminal conduct, until the statute of limitations has expired).

4. Expiry of Fixed-Term Contract

A fixed-term employment contract terminates automatically upon the expiry of the agreed term. No notice or reason is required. If the employee continues to work beyond the expiry date with the employer’s knowledge, the contract is deemed to have converted into an indefinite-term contract.

5. Termination During Probation

During the probationary period (próbaidő), which may last up to three months (six months under a collective agreement), either party may terminate the employment relationship with immediate effect and without stating a reason.

Notice Periods

Statutory Minimum

The statutory notice period is 30 days for both employer and employee. When terminated by the employer, this base period is extended according to the employee’s length of service:

Length of Service	Additional Notice
3 – 5 years	+ 5 days
5 – 8 years	+ 15 days
8 – 10 years	+ 20 days
10 – 15 years	+ 25 days
15 – 18 years	+ 30 days
18 – 20 years	+ 40 days
Over 20 years	+ 60 days

Thus, an employee with 22 years of service is entitled to a 90-day notice period. These periods may be extended (but not reduced) by the employment contract or a collective agreement. The maximum notice period may not exceed six months.

Exemption from Work During Notice

When the employer terminates the contract, the employee must be exempted from work for at least half of the notice period, with full pay. The employer determines the timing of the exemption, but at least half must be provided in a single continuous block if the employee requests it.

Severance Pay (Végkielégítés)

Entitlement

An employee is entitled to severance pay when the employment relationship is terminated by the employer by notice, provided the employee has been employed for at least three years. Severance pay is not due if the termination is based on the employee’s conduct or if the employee is entitled to a retirement pension at the time of termination.

Amount

The amount of severance pay depends on the length of employment:

Length of Service	Severance Pay
3 – 5 years	1 month’s absence pay
5 – 10 years	2 months’ absence pay
10 – 15 years	3 months’ absence pay
15 – 20 years	4 months’ absence pay
20 – 25 years	5 months’ absence pay
Over 25 years	6 months’ absence pay

If the employee is within five years of the statutory retirement age, the severance pay is increased by one to three additional months, depending on the category.

Protection Against Termination

Protected Periods (Felmondási védelem)

The employer may not give notice of termination during certain protected periods, including:

• Pregnancy and maternity leave
• Parental leave (szülési szabadság, gyermekgondozási szabadság)
• Sick leave (for the first 30 days of incapacity)
• Voluntary reserve military service
• Any period during which the employee is receiving rehabilitation benefits

These protections apply only to employer-initiated notice-based termination—they do not prevent termination by mutual agreement, expiry of a fixed term, or immediate-effect termination for cause.

Collective Redundancy

If the employer contemplates dismissing a significant number of employees within a 30-day period (the thresholds depend on the employer’s total workforce), the collective redundancy rules apply. The employer must engage in prior consultation with the works council or trade union, notify the employment authority, and observe a 30-day waiting period before any dismissals take effect.

Formal Requirements

Every termination—whether by notice or immediate effect—must be:

• In writing (írásba foglalás)
• Properly reasoned (when initiated by the employer or in the case of immediate-effect termination)
• Delivered to the other party in accordance with the rules of the Civil Code on declarations

Failure to comply with these formal requirements renders the termination unlawful.

Consequences of Unlawful Termination

An employee who believes their termination was unlawful may bring a claim before the labour court (munkaügyi bíróság) within 30 days of receiving the notice. If the court finds the termination unlawful, it may:

• Order reinstatement if the employee requests it and the court considers it feasible
• Award compensation in lieu of reinstatement—typically 12 months’ absence pay, but at least two months and at most a judicially determined amount
• Order payment of lost wages for the period between termination and the court decision (up to certain limits)

The employer bears the burden of proving the lawfulness of the termination, including the existence and truth of the stated reason.

Practical Advice for Employers

• Always document performance issues, warnings, and operational reasons before issuing a termination notice.
• Ensure the stated reason is specific, factual, and supported by evidence.
• Verify that the employee is not in a protected period.
• Calculate notice and severance correctly—errors can result in costly litigation.
• Consider a mutual agreement as an alternative to unilateral termination, often with a negotiated severance package.

Practical Advice for Employees

• Request a written explanation if you receive a termination notice that seems vague or unjustified.
• Seek legal advice promptly—the 30-day litigation deadline is strict and cannot be extended.
• Keep copies of your employment contract, pay slips, correspondence, and any performance reviews.
• If you are offered a mutual agreement, take time to review the terms and consult a lawyer before signing.

Conclusion

Hungarian employment termination law aims to balance the employer’s need for operational flexibility with the employee’s interest in job security. The detailed procedural requirements, mandatory notice periods, and severance pay rules reflect this balance. Whether you are an employer contemplating a dismissal or an employee facing one, understanding these rules is the first step toward protecting your legal position.

This article is for informational purposes only and does not constitute legal advice. For advice tailored to your specific situation, please contact our office.