In this article, we will look at the cases and conditions under which it is possible to provide and pay wages in a currency other than the forint. In addition to the limitations and exception rules in the current legal provisions, our summary will also briefly describe the alternative options available to employers to pay wages in euro or compensate these employees in other ways in the absence of the above conditions.

General rules
The provisions on the remuneration of work and payment of wages are considered to be the mandatory provisions of the Labour Code, which all employers must comply with and may not derogate from, or may only derogate from to the extent permitted by law. According to Article 154(1) of the Labour Code, wages must be fixed and paid in forints, and neither the parties’ agreement nor a collective agreement may derogate from this rule. If the parties were to fix wages in euros in the employment contract, this part of the employment contract would be invalid and the rule that wages must be fixed and paid in forints would automatically apply.
Therefore, in the absence of a specific legal authorisation, it would not be possible for employees working in Hungary under Hungarian law to have their wages set in a currency other than forints, even if the parties had separately agreed to this in the employment contract and it would be preferable for the employee to have his wages paid in the foreign currency.

Exceptions
Derogations from the rule described above are only possible if the work is carried out abroad or if the law allows for such derogations. For example, if the employee works abroad, in whole or in part, or if the employee is a manager, the salary may be paid in another currency.

Foreign element in the employment relationship
Working abroad: if a Hungarian employer wishes to employ a worker outside Hungary, there is a foreign element in the employment relationship between the parties. If the place of work is not specified in the employment contract, the place of work is deemed to be the place where the employee habitually carries out his work. If the place of work is not specified in the employment contract, the general rules are that the place of work is the country from which the employee actually carries out his work. The general rule in Labour Code Article 154(1) provides that, in the case of working abroad, it is possible to determine and pay wages in a currency other than forints. Therefore, if the employee performs his work abroad – and if this is agreed with him – it is legally possible to pay him in euros.
In the case of a foreign national, the application of the law of another country: if an additional foreign element in the employment relationship can be demonstrated, it is possible for the parties to pay the salary in the currency of the employee’s nationality. If the national currency of a foreign national may be used in the case of a foreign national who has the right to work in the country of residence, the employer may use the national currency of the foreign national. According to Article 3(1) of the Labour Code, the provisions of this Act shall be applied with regard to the rules of private international law. The Rome I Regulation lays down the principle of the parties’ freedom of choice of law, i.e. where the employment relationship has a foreign element, the parties to the employment relationship are free to choose the law of the country to which they wish to apply.

Managerial employees
In the case of managerial employees, Article 209 of the Labour Code gives the right to derogate from the provisions of the entire Part Two of the Labour Code, including Article 154 of Part Two of the Labour Code, under which wages may be determined and paid in foreign currency. General managers and their deputies, as well as so-called qualified managers, are considered to be managers.
A general manager is the employer’s chief executive and his/her deputies, i.e. the chief executive, the managing director, the member of the board of directors, the head of a branch office and the deputy(s) of these persons with appropriate powers who have a significant influence on the operation and management of the employer.
In addition to the above, other employees who are classified as managerial employees are also considered to be managerial employees, provided that the following conditions are met:

– they hold a position of high importance or a position of high trust and

– their basic salary is seven times the prevailing minimum wage, and

– they accept that they qualify as a manager (i.e. this agreement is included in the employment contract).

Alternative solutions
If the conditions set out above do not apply to the employee concerned, the employer has the following alternative options.

An agency relationship instead of an employment relationship
Wages are determined and paid in HUF only for employment based on an employment relationship. If an agency-type relationship is established between the parties, they are not bound by the labour law rules described above, so they can set the consideration payable between them in any currency.

Remuneration linked to the exchange rate
Employers may decide to link the monthly wages of their employees to an exchange rate, either in euro or in another currency, and to adjust and reimburse the exchange rate fluctuations to their employees at certain intervals, for example quarterly. The rules for the correction can be set out in internal rules.

Employer’s assumption of conversion costs
If the employer transfers the employee’s salary to the employee’s foreign currency bank account, the employee bears the risk of any loss incurred as a result of the conversion and of the continuous variation in the amount credited by the bank due to the change in the prevailing exchange rate. However, the employer may assume these conversion costs, the conditions for which can be laid down in internal rules.

Tracking wage inflation in the form of a bonus or other benefit
Although a wage set in euros would currently be better for wage protection, it is the rule on wage protection, as described in point 2.1, that is preventing it. If the conditions for paying wages in euro are not met, the employer is entitled to compensate the employees concerned for wage inflation in the form of a bonus or other benefit – in forints.
In an individual case, it is possible to decide whether the legislation in force allows for the establishment and payment of wages in euros for each employee, subject to the provision of specific information on the employees concerned and their work. In this case, the BékésPartners team of experts will be happy to provide legal assistance.

The content of this post does not constitute legal or tax advice and does not create an engagement. In each case, detailed knowledge of the individual case is necessary to assess it and to find a tailor-made solution. If you have any questions, please do not hesitate to contact us at http://www.bekespartners.com/.