Annual leave - Calculation and extent of paid leave

In this article, we will review the basics of paid leave, including its extent and how it is calculated, as well as the rules applicable to requesting and administering it. We will also look at the legal framework for leave, some special cases, as well as frequently asked questions. We aim to provide a comprehensive overview of the subject to help both employees and employers better understand and manage paid leave.

The concept of paid leave

Paid leave allows employees to take time off work without losing pay. During this time, employees have the opportunity to rest, regenerate, as well as deal with personal or family matters. Paid leave promotes employees’ health and well-being, and helps to achieve work-life balance.

The rules on paid leave may vary from country to country and from workplace to workplace. For example, in EU Member States, labour laws and regulations set a minimum level of paid leave for employees, which is usually at least 20 working days per year. In addition, Member States may also have their own rules on paid leave, which can provide additional benefits for employees.

Labour laws in different countries often specify the conditions for entitlement to leave, for example depending on the length of employment or the number of hours worked. The laws also specify the extent of the leave and the conditions for using it, such as the procedure for requesting leave, the consultation with the employer, the way in which information is to be provided on leave, and how leave is authorised.

The legal framework for paid leave ensures that workers are treated fairly and equitably, and it protects them against abuses by employers. In individual workplaces, collective agreements or company rules may contain additional details on leave, which may also provide more favourable conditions for workers.

Length of annual leave

In Hungary, the extent of paid leave is regulated by the Labour Code, which sets out the minimum number of days of leave to which employees are entitled, as well as the method of calculating leave. According to the rules, employees are entitled to leave in each calendar year, consisting of basic and additional leave days, based on the time worked.

The statutory minimum:

The basic leave consists of 20 working days per year, which all workers are entitled to.

In addition, workers are entitled to additional leave days based on their age, as follows:

• from age 25, one
• from age 28, two
• from age 31, three
• from age 33, four
• from age 35, five
• from age 37, six
• from age 39, seven
• from age 40, eight
• from age 43, nine
• from age 45, ten additional leave days.

The exact number of leave days is determined on the basis of the starting date of employment, the worker’s age, marital status, as well as collective agreements or policies in place at the employer. It is important to ensure that workers are aware of the rules that apply to them, and that they agree with their employer in good time on the scheduling and use of their leave days.

Additional leave days after children

The number of additional leave for children depends on the number of children until the year they turn:

• after one child, 2 working days
• after two children: 4 working days
• after more than two children: 7 working days

It is important to note that additional leave days are not part of the ordinary annual leave. The employee may take additional leave days according to his/her needs, in agreement with the employer, and must notify the employer at least 15 days before the first day of the leave.

Both parents are entitled to the additional leave days for children.

In addition to the above, workers are also entitled to 44 working days’ of parental leave up to age three of their child.

Further information:

• Employees are entitled to two additional leave days per year for a child living with a disability.
• Additional leave is a statutory benefit, so the employer is obliged to grant it to eligible employees.
• The employee is under no obligation to take the additional leave days, but cannot unilaterally give it up either.
• The employer may regulate the way in which the additional leave is granted, but the employee’s needs must be taken into account.

What percentage of the salary is paid for periods of leave?

During paid leave, the employee is entitled to his or her full gross pay. This means that the employer must pay the employee his/her normal basic salary, as well as any supplements and benefits.

What is leave redemption?

Leave redemption means that the employer pays the employee for any unused leave days at the time when the employment ends.

As such, leave redemption is only compulsory at the end of the employment. This includes dismissal, resignation, termination with mutual agreement, retirement, as well as call-up for military or civilian service. Only untaken leave days accrued on a time-proportionate basis can be redeemed. Paternity leave, sick leave, study leave and unpaid leave may not be redeemed.  Since the employee is entitled to an absentee fee for the duration of the leave, it is also the amount equal to the absentee fee that is paid for its redemption. 
 

Important information:

• The employer must also pay social contribution tax on the amount of leave redemption paid.
• The employee is not obliged to accept leave redemption payment in lieu of the actual leave, but may also request that any unused leave days be issued before the end of the employment if the parties can agree on this.

What is paternity leave?

Paternity leave in Hungary is a benefit that a father receives after the birth or adoption of his child. At present, in 2024, the most important things to know about paternity leave are as follows:

• How long does paternity leave last? The father is entitled to a leave of 10 working days until the end of the second month following the birth of his child or the finalisation of the adoption decision.
• When can paternity leave be taken? The date on which paternity leave is taken is determined by the employee in agreement with the employer. It is also possible for the father to take the 10 days in two instalments.
• What payment is due during paternity leave? For the first 5 days of paternity leave, the employee is entitled to the full absentee fee, but for the remaining 5 days only 40% of the absence allowance is payable.
• Is it compulsory to take paternity leave? Taking paternity leave is not compulsory for the worker.
• Statutory background: The rules on paternity leave are laid down in the Labour Code and in Government Decree No 535/2022. (XII. 21.).

Unpaid leave - conditions and information

The conditions for taking unpaid leave are laid down in the Labour Code and the employment contract.

Important information:

How long can unpaid leave last? There is no precise definition, but in some cases the law provides for the granting of unpaid leave and its length, but it may also be requested in other cases, where the employer is free to decide whether to grant leave and is not obliged to do so. If it does, it can make it subject to conditions it sets itself.

How to apply for unpaid leave? Unpaid leave must be requested from the employer in writing, where employee must state the requested starting and ending dates of the unpaid leave and the reason for it.

What reasons can be used for requesting unpaid leave? Unpaid leave can be requested for any reason. The law provides that the employer must approve the request for unpaid leave for reasons of childcare, long-term care of a relative, as well as actual voluntary military service in the reserve forces. Leave without pay may also be granted for reasons other than those provided for by law. It can be requested, for example for the purpose of an extended trip abroad or to renovate a home. In this case, however, the employer is free to decide whether to approve the leave and is not obliged to grant it.

Pay during unpaid leave: During unpaid leave, the employee is not entitled to his/her salary. Other benefits, such as a cafeteria allowance or bonus, are not paid either.

Insurance status during unpaid leave: During unpaid leave, the employee is not considered insured under the relevant social security legislation.  The employee has the option to take out voluntary health insurance during unpaid leave.

Employment status during unpaid leave: The employment status of the worker is continuous also during any period of unpaid leave.

How can a payroll agency help manage in the administration of leaves?

A payroll agency can help a company manage and account paid leave in a number of ways. Let us consider what types of support they can provide in this area:

Ensuring legal compliance: A payroll agency can keep up to date with employment and tax legislation, ensuring that the company is compliant with the law in the accounting and administration of paid leave.

Leave calculation and record-keeping: A payroll agency can be responsible for calculating employees’ leave allowances, including basic leave, additional leave days and extra days based on age or family status. They keep accurate and up-to-date records of the leaves taken by employees.

Leave planning and scheduling: A payroll agency can help employers and employees schedule leave days in such a way as to reconcile the operational requirements of the company with the needs of the employees.

Managing financial calculations and payments: A payroll agency calculates the amount of pay due during periods of leave, and manages the calculation and payment of leave redemption amounts due at the end of a worker’s employment.

Advising and customer service: A payroll agency can advise company management and employees on the taking of leave days. They will help better understand the different types of leave and the conditions for taking them.

Data protection and security: A payroll agency will ensure the security and protection of employees’ personal and employment-related data.

If your business needs such assistance, the payroll team of Forvis Mazars is pleased to be at your service.

Read more about Forvis Mazars services: Payroll services