Article

Articles 77 and 85

Description

An employee shall be entitled to severance pay if his/her employment relationship is terminated:

• by the employer;
• upon the dissolution of the employer without succession; or
• if during a transformation as a legal succession or a business transfer, the transferee employer is not covered by the labour code.

The entitlement to severance pay shall only apply upon the existence of an employment relationship with the employer for certain time lengths (specified below) at the time when the notice of dismissal is delivered or when the employer is terminated without having a legal successor. The regulation states that any period of at least 30 consecutive days for which the employee did not receive any wages (for example was on unpaid leave) does not count into the period for which entitlement for severance pay is considered.

The following exceptions apply:

• maternity and parental leave applies, as well as any leave of absence without pay for nursing or caring for a child. (“Parental leave” was added to the types of leave available to employees with an effect of 1 January 2023, under Article 77 of Labour Code)
• and unpaid leave of absence for the purpose of reserve military service for a period of no more than three months.

Severance pay shall be the sum of the absentee pay due for:

• one month, for up to three years of service;
• two months, for up to five years of service;
• three months, for up to 10 years of service;
• four months, for up to 15 years of service;
• five months, for up to 20 years of service; and
• six months, for up to 25 years of service.

The amount of severance pay shall be increased by 1-3 months’ absentee pay (as detailed in the labour code) if the employment relationship is terminated within the five-year period before the date when the employee reaches the age limit for old-age pension. There are slight differences to the timeline with amounts going up to eight months after 20 years of service if the worker is employed in the public sector (see Law XXXIII of 1992 on the Status of Civil Servants, Article 37(6)).

The employee shall not be entitled to receive severance pay if they are:

• a pensioner at the time when the notice of dismissal is delivered or if the employer terminated without succession;
• dismissed for reasons connected with his/her behaviour in relation to the employment relationship or on grounds other than health reasons, or
• employed on a fixed-term contract (except in some cases when an agreement is made otherwise).

Collective agreements can derogate from the above provisions on severance payments, also to the detriment of workers concerned (hence the collective agreement could set, at least in principle, lower severance pay than stipulated by legislation). There is no direct legislation regarding severance pay in collective dismissals.

Commentary

Caring for family members other than a child under unpaid leave does not create eligibility for severance pay. Temporary workers are also entitled to severance pay, but their employer is the temporary work agency and the payment is their responsibility.

Additional metadata

Cost covered by

Employer

Involved actors other than national government

Employer organisation Trade union Works council

Involvement (others)

None

Thresholds

Affected employees: No, applicable in all circumstances
Company size: No, applicable in all circumstances
Additional information: No, applicable in all circumstances

Sources

• 2012. évi I. törvény a munka törvénykönyvéről
• Employment protection law database of the OECD
• Law XXXIII of 1992 on the Status of Civil Servants
• Severance pay: these are the rules in 2023 - hrportal.hu