Co-funded by the European Union

Hungary reform on Labour Inspection

  • It introduced Flexibility in the sanctioning of infringements, among others;
  • The reform lacked proper consultation with the social partners, especially on the content of the regulatory Decrees.

On 1st March 2021, Act 135 of 2020 on “Services, Assistance and Inspection of Employment” entered into force in Hungary. The new act aims at widening the authority of the labour inspectorate in terms of labour law enforcement and fight against undeclared work. Under this Act, the Labour inspectorate becomes the “employment supervisory authority”.  

This new Act repeals Act 75 of 1996 on Labour Inspection. It mainly repeats the old Act provisions but at the same time introduces flexibility tools by focusing on framework rules, to be supplemented by government decrees. The decrees deal with issues such as wider control authority, sanctions and fines, control over subsidies and grants.

New provisions cover:

  • Flexibility in the sanctioning of infringements occurred more than one year prior to the inspection.
  • The obligation to impose fines for certain violations, without any option of using alternative and less strict sanctions;
  • The possibility to establish the existence of an employment relationship in case of undeclared work;
  • The ability to make inspections not only on employment relationships, but also on other forms of work, that include “self-employed individuals, employees working under service and supply contracts, personal contributors of companies and cooperatives and volunteers in the public interest”.

It also introduces some provisions on employment services, that nevertheless remain mainly regulated by Act 4 of 1991. It is still to be seen whether the regulatory Decrees will be able to achieve the legislators’ intentions, that aim at strengthening the instruments of active labour market policies.

The reform lacked proper consultation with the social partners, especially on the content of the regulatory Decrees.

Businesshungary relates the following: “Labour inspectorate is key to achieve predictable business environment and fair competition, thus tightening the rules is beneficial as long as it serves the aim of whitening the economy and the labour market. Proportionality is also important, meaning that the law has to make a difference between companies that make a mistake and those who regularly and systematically violate the rules and gain some competitive advantage over the others. The new rules seem to ignore the principle of proportionality, because the degree of the violation is considered only by the amount of the fine”. Moreover, “the legal framework must be accompanied by an effective structure of control and supervision. However, the present capacity of the supervisory authority does not seem to be sufficient to reach out all the companies existing in Hungary”.

VOSZ, the other employers' organisation member of the IOE, fully support the view of Businesshungary.