Currently, there are no regulations for EOR services in Hungary, while PEO services are regulated by the Labour Code and by a Government Decree on temporary employment and private recruitment agencies. According to the law, professional employer services are an activity whereby the lender temporarily transfers an employee who has an employment relationship with the lender for the purpose of temporary placement to the borrower for work in return for payment, provided that the borrower manages the work during the period of temporary placement. If an employer temporarily transfers an employee with whom it has an employment relationship to another organization in return for payment, it is considered by law as a professional employer organization and this kind of service cannot be provided in any other legal form.
An EOR company does not only perform various employment related administrative tasks for its clients, but also has an employment relationship with the employee for the benefit of its clients. By nature of its activities an EOR company does not exercise all the employer’s rights independently, but according to the requests of the clients. If the employer’s rights are exercised by a third party, it can be concluded that it is in fact a professional employer organization according to Hungarian law.
If PEO services are provided without official registration, it is mandatory to impose a fine for the breach of the Government Decree. The employment supervisory authority is also entitled to reclassify the legal relationship between the employee and the borrower and may conclude that the employment relationship is in fact with the organization that provides the actual employment of the employees (that is, with the client of the EOR company). The employee may also have a legal claim based on the fact that he/she is employed as a temporary worker, while on the basis of the requirement of equal treatment he/she would be entitled to better working conditions in the host organization than those granted by the EOR company.