Simplified employment. Administrative obligations

For small and medium sized businesses, one of the biggest challenges is securing the right workforce. There are situations where additional labor is only needed for a few days, weeks, or for a seasonal period. In such cases, simplified employment, known in Hungary as EFO, can be an efficient and lawful solution. In this article, we explain how it works, what taxes apply, what risks may arise, and what to pay attention to in practice.

What is simplified employment?

Simplified employment is a special type of employment relationship that companies may establish for short term, casual, or seasonal work. Its legal framework is set out in Act LXXV of 2010 on Simplified Employment. The purpose of EFO is to allow businesses to hire labor quickly and with minimal administrative burden in a lawful manner. At the same time, it operates under strict rules that must always be observed and complied with.
Jogszabályi kereteit az egyszerűsített foglalkoztatásról szóló 2010. évi LXXV. törvény (EFO tv) biztosítja. Az EFO célja, hogy a vállalkozások gyorsan és adminisztráció kímélő módon tudjanak legális munkaerőhöz jutni, azonban ennek szigorú keretei is vannak, amiket mindenkor figyelni és betartani szükséges. 

Types of simplified employment

The main types of simplified employment are:

1. Casual work: A short term form of employment that may last for a maximum of 5 consecutive days, up to 15 days within a calendar month, and a total of no more than 90 days per calendar year. In the following sections, we focus exclusively on the rules of casual work. One worker may not be employed under EFO rules for more than 120 days per year.
2. Agricultural and tourism seasonal work: Linked to specific activities and may be carried out for a maximum of 120 days per year.

Key rules of casual work 

In addition to the time limits outlined above, meaning a maximum of 90 days per year, 15 days per month, and no more than 5 consecutive days, the employer must also ensure that the number of workers employed under EFO on any given calendar day does not exceed: 

• 1 person if the company has no full time employee 
• 2 persons if the company employs 1 to 5 employees
• 4 persons if the company employs 6 to 20 employees 
• 20% of the workforce if the company employs more than 20 employees

When calculating the maximum number of workers allowed under EFO, the average headcount of the previous half year must be taken into account. For example, if an employer had no employees from January to May, then hired 8 employees in June, the maximum number of EFO workers for the second half of the year would be 2 persons per day, meaning a total of 368 days of registration. 

Monitoring the maximum headcount is crucial. If this limit is exceeded, the employment relationship is reclassified as a standard employment relationship under the Labour Code, together with all related tax and contribution obligations. This includes personal income tax and social security contributions withheld from wages, as well as employer side social contribution tax or KIVA paid on top of the gross wage. 

Administration and registration

EFO is established based on a verbal agreement between the parties and becomes effective through registration alone. A written employment contract is generally not required. If the employer is not required to submit electronic tax filings, the template contract attached to the EFO Act must be completed and signed by the parties, and the employment relationship must still be registered. Registration must be completed before the start of work. This can be done via the Client Gateway using the Online Form Filling Application or the 25T1042E form, via mobile applications such as the EFO or EFO Pro app, or by phone by calling 185.

Public charges and taxation

A flat rate public charge is payable after simplified employment. This replaces social security contributions and social contribution tax. From 2 February 2025, the applicable amount for casual work is HUF 4,400 per person per day. The employee is not required to pay contributions or personal income tax if their daily income does not exceed the so called exempt threshold, which equals 130 percent of the minimum wage. If the income exceeds this limit, the employee becomes subject to personal income tax declaration and payment obligations. The portion below the exempt threshold does not need to be reported in the annual personal income tax return. 

The employer must include the paid EFO wages in the monthly Form 08 tax return, which must be submitted by the 12th day of the month following the relevant period.

What should you pay attention to?

Although EFO significantly simplifies employment, it also comes with limitations and risks:

• Daily and annual limits must be strictly observed.
• Failure to register results in severe consequences associated with illegal employment.
• Employees are not entitled to sick pay, paid leave, or severance pay.
• If daily working time exceeds 8 hours, overtime premiums under the Labour Code must be applied to wages, just as in standard employment.
• A company with certain types of tax debt exceeding HUF 300,000 may not employ workers under EFO rules until the tax debt is settled.