Overcoming HR Challenges When Starting a Business in Hungary: A Practical Guide for Entrepreneurs

Starting a business in Hungary offers many opportunities, thanks to its strategic location, skilled workforce, and business-friendly environment. However, managing human resources (HR) effectively is a crucial aspect of success. From recruitment and compliance to payroll management, new businesses must navigate several HR challenges to ensure smooth operations.

For entrepreneurs undergoing incorporation in Hungary, understanding HR complexities early on is essential to avoid legal issues, high turnover rates, or excessive administrative burdens. This guide explores the most common HR challenges and provides practical solutions to help business owners successfully build and manage their teams in Hungary.

Understanding Hungary’s HR Landscape

Before diving into specific HR challenges, it’s important to understand Hungary’s labor laws, employment regulations, and work culture. The Hungarian Labor Code governs employment relationships, covering contracts, wages, working hours, termination policies, and employee rights. Key institutions overseeing labor and employment include:

• The Ministry of Innovation and Technology – responsible for labor market policies.
• The National Employment Service (NFSZ) – assisting in job placement and workforce regulation.
• The Hungarian Tax Authority (NAV) – overseeing payroll taxes and social security contributions.

Additionally, Hungarian work culture values stability, professional development, and work-life balance, which businesses should consider when designing HR policies.

Key HR Challenges and Solutions

1. Hiring and Recruitment

Challenge:

Finding skilled employees when starting a company in Hungary can be difficult, particularly in industries like IT, engineering, and healthcare. The job market is competitive, and many Hungarian professionals seek opportunities abroad, making local recruitment a challenge.

Solution:

To attract top talent, businesses should:

• Use local job portals like Profession.hu and Jobline.hu.
• Leverage LinkedIn and recruitment agencies for executive searches.
• Partner with universities for internships and graduate hiring programs.
• Offer competitive salaries, benefits, and career growth opportunities.

By integrating these strategies into business planning, companies can build strong teams while minimizing recruitment struggles.

2. Work Permits and Immigration

Challenge:

Hiring non-EU workers requires a Hungarian work permit, which involves complex administrative procedures and legal compliance.

Solution:

To simplify the process:

• Employers should sponsor work permits and assist with legal documentation.
• Engage immigration lawyers to ensure compliance with Hungarian regulations.
• Understand the different visa types for skilled professionals and foreign investors.

Proper business planning includes budgeting time and resources for work permit applications to avoid delays in onboarding international employees.

3. Employment Contracts & Compliance

Challenge:

Ensuring contracts comply with Hungarian labor laws can be complex. Businesses must include clear terms on working conditions, wages, and benefits while adhering to legal requirements.

Solution:

• Use standard employment contracts that align with Hungarian labor regulations.
• Define clear probation periods (usually up to 3 months).
• Include terms on overtime, bonuses, and notice periods.
• Ensure employees receive statutory paid leave, sick leave, and social security benefits.

HR professionals or legal advisors should review contracts to prevent disputes and ensure compliance.

4. Payroll & Taxation

Challenge:

Managing payroll costs in Hungary is a significant challenge due to tax obligations, social security contributions, and compliance requirements. Businesses must correctly calculate salaries, deductions, and employer contributions.

Solution:

• Use payroll service providers to streamline calculations and tax filings.
• Stay updated with tax law changes to avoid penalties.
• Register employees with NAV (Hungarian Tax Authority) for social security and tax purposes.

By implementing payroll software and working with financial advisors, businesses can optimize payroll costs and ensure smooth salary disbursements.

5. Workplace Culture & Employee Retention

Challenge:

Retaining employees is challenging, especially in industries where professionals have multiple job offers. High turnover can disrupt operations and increase hiring costs.

Solution:

To enhance retention and job satisfaction:

• Provide training and career development opportunities.
• Offer competitive salaries, performance bonuses, and flexible benefits.
• Foster a positive work culture that encourages employee engagement.
• Implement hybrid or remote work policies, where feasible, to improve work-life balance.

When businesses invest in employee well-being, they create a more productive and loyal workforce, reducing long-term HR challenges.

Best Practices for HR Success

To build a strong HR foundation, businesses should follow these best practices:

• Utilize HR technology – Automate payroll, time tracking, and recruitment with modern HR software.
• Stay informed – Regularly monitor changes in labor laws and tax regulations to remain compliant.
• Develop an employer brand – Promote company culture and values to attract and retain top talent.
• Emphasize workplace flexibility – Allow remote work or flexible hours to accommodate employee needs.

By implementing these practices in business planning in Hungary, companies can avoid major HR roadblocks and achieve sustainable growth.

Wrapping up

Navigating HR challenges when starting a business in Hungary requires a solid understanding of labor laws, recruitment strategies, and payroll management. Entrepreneurs must be proactive in handling hiring processes, work permits, employment contracts, and payroll costs in Hungary to ensure compliance and efficiency.

By leveraging HR technology, legal expertise, and employee engagement strategies, businesses can overcome common HR challenges and build a strong, motivated workforce. If necessary, seeking professional HR consultancy can further simplify the process and support long-term success.

Whether you are in the early stages of company formation in Hungary or scaling up operations, a well-planned HR strategy is key to thriving in the Hungarian market.